AI transcript
0:00:03 The capitalist approach is messy, but you have dynamism on your side.
0:00:05 Let’s come back to the big picture thing.
0:00:07 Is America an aggregate a force for good in the world?
0:00:09 Is it important for the world that America succeed?
0:00:12 Is it important that American values, Western values are preeminent in the world?
0:00:16 Is it important that the world not devolve into a complete Soviet communism everywhere?
0:00:21 The other direction is literally fighting everything about our culture,
0:00:25 everything about our history, everything about our system.
0:00:31 And the fact that it has appeal is like a weird psychological defect some people have.
0:00:33 They just always want central control.
0:00:35 They always think it’s better.
0:00:36 And by the way, it routinely doesn’t work.
0:00:38 Like, it routinely fails because the world is too dynamic,
0:00:40 and that’s not nearly a fast enough iteration cycle.
0:00:44 The thing that people want is exactly what we named the category.
0:00:46 How do we build American dynamism?
0:00:49 How do we build Silicon Valley in our own country?
0:00:51 Geopolitically, we entered a new era.
0:00:58 We’re at this exciting moment in time where both the need and the demand for new technologies is greater than it’s ever been.
0:01:02 The creator of the concept of the five-year plan was, of course, Joseph Stalin.
0:01:07 It was literally the Soviet Union running as five-year plans.
0:01:08 I’ll tease Ben a little bit.
0:01:10 He comes from the People’s Republic of Berkeley.
0:01:16 The old model of World War II era, mass machinery and mass man to win wars like those days are long over.
0:01:22 This should play greatly to Americans’ benefit if we unleash our strength with flexibility, innovation, creativity, dynamism,
0:01:24 and apply that into the battlefield of the future.
0:01:26 Like, we really ought to win if we’re really able to do that.
0:01:31 For decades, Silicon Valley and Washington lived in different worlds.
0:01:33 Tech companies built consumer apps.
0:01:35 Defense contractors built weapon systems.
0:01:36 And the two rarely spoke.
0:01:38 But something shifted.
0:01:42 He claimed proof that cheap drones could take out $100 million tanks.
0:01:47 China spent 20 years building a manufacturing base while America exported its factories.
0:01:55 And suddenly, the companies defining the future, AI, robotics, autonomy, realized they couldn’t ignore the physical world anymore.
0:01:56 Mark and Ben saw this coming.
0:02:01 They had sold to the Pentagon back in the 90s when Netscape was building the early internet.
0:02:05 They watched Silicon Valley turn hostile to defense work in the 2010s.
0:02:11 And in 2020, when Catherine pitched them on creating a new category called American Dynamism, they knew the moment had arrived.
0:02:20 I’m joined today by A16Z co-founders Mark Andreessen and Ben Horowitz, along with American Dynamism GPs Catherine Boyle and David Ulovich,
0:02:28 to discuss not just defense tech, but the entire industrial base, energy, manufacturing, mining, and physical infrastructure that makes a country powerful.
0:02:37 This is the story of how Silicon Valley remember what it was built for and why the race to rebuild America’s industrial base might be the most important investment thesis of our time.
0:02:42 I thought we’d start with a bit of an opener.
0:02:48 I want to ask Ben and Mark to tell us about the moment when we got conviction that this was worth creating its own category fund around.
0:03:06 Yeah, well, I would say that, you know, Mark and I kind of always were of the view in an abstract sense that we had to integrate the American business and American defense back together because we were falling behind.
0:03:14 We kind of knew the companies that we were investing in, and we knew the companies that we were buying missiles and aircraft carriers from,
0:03:18 and they weren’t of the same caliber in terms of where they were on the technology curve.
0:03:25 And so we knew it was a kind of a national security problem for the country, but we didn’t have a plan.
0:03:36 And then, as I recall, David said, there’s this woman, Catherine Boyle, who I want to recruit, and she has this very, very good idea.
0:03:38 Can you guys talk to her about it?
0:03:44 And that’s when she said, look, we should call it American Dynamism, and we should build this thing.
0:03:48 And it was a very easy sell for us, I would just say.
0:03:50 Yeah, and maybe I could just take a step back.
0:03:56 So some of you on this call are too young to remember this, but there was an earlier era in Silicon Valley, and it actually wasn’t that long ago.
0:04:02 And Ben and I were both lucky enough and maybe of the right generation to be part of it, which was Silicon Valley and the United States.
0:04:10 Let’s say the mission of the United States as a country, and then sort of the submissions of not just economic and technological success, but also military success and intelligence success,
0:04:15 and our ability to propagate our way of life, not just in the country, but around the world.
0:04:18 There had actually been like a fairly tight degree of integration and cooperation.
0:04:26 And if you actually trace the history of Silicon Valley back, even before World War II, there was a lot of the original defense technology work that happened in Northern California, where we sit today.
0:04:34 And then for sure, from the 50s through to the, I would say to the 90s, it was just taken as a given that this was sort of inherently an alliance with the shared American mission.
0:04:43 And so, you know, many, many great American tech companies, including all the big names from the 50s to the 90s, all had very big government businesses, defense businesses, you know, were very important to the national mission.
0:04:47 And then Ben and I in the 90s, when we built our company, Netscape, like that was always front and center for us.
0:04:50 My first sales call to the Pentagon was in 1994.
0:04:53 I don’t think I actually owned a city yet, so 31 years ago.
0:04:56 And our company, Netscape, ended up being a major supplier of technology to the…
0:05:01 Yeah, actually, both Mark and I had for years top secret clearance because of those deals.
0:05:02 Yeah.
0:05:06 So we were working in the Pentagon and in related agencies on the civilian side also for a very long time.
0:05:08 And we just sort of considered it kind of natural.
0:05:10 And I’m really proud of the work that we did there.
0:05:12 And it turned out to be a very big part of our business also.
0:05:16 And then extended over time to also governments outside the U.S. that were American allies.
0:05:18 And so for us, this was always very natural.
0:05:22 And I think everything I’m saying is almost like non-controversial up until probably the 2000s.
0:05:29 And then basically for the last 15 or 20 years, by the way, for a variety of reasons, including reasons that people feel very strongly about, we could talk about for a long time.
0:05:35 But just a much greater degree of contention and escalating in some cases to just outright hostility kind of developed.
0:05:41 And I would say most directions from Silicon Valley, let’s say large components of Silicon Valley, not all, but significant companies for sure.
0:05:45 Hostility towards D.C. and hostility towards any sense of national mission, national purpose.
0:05:50 And quite frankly, that feeling was quickly reciprocated by Washington back to Silicon Valley.
0:05:54 And there’s plenty of people from Washington in the last 20 years who’ve made a point of how much they hate us.
0:05:59 To me, it felt like we entered this kind of de-evolutionary spiral over the course of the last 15 or 20 years.
0:06:06 And probably, Ben, I think maybe you’d agree, the peak hostility disconnection was maybe in the late 2010s, early 2020s.
0:06:16 Yeah, I think the Google Maven project was kind of a watershed moment where people had to take sides, just kind of intellectually.
0:06:24 When Google won a government contract for kind of, I think it was AI to be used in kind of drone technology or something like that.
0:06:30 And then they basically pulled out of the contract due to a protest from a bunch of their employees.
0:06:31 Yeah.
0:06:35 And not just, and Ben, I think you’d confirm, not just like a mild protest, but like visceral, emotional.
0:06:44 Oh, they all were like, yeah, it was like a revolt from, I remember Sundar described it to me, a revolt from the international AI community.
0:06:48 And so it was pretty wild and certainly unprecedented.
0:06:49 Yeah.
0:06:52 And so I think there’s sort of things sort of bottomed out there.
0:06:57 And then I think some of us, and obviously there are new companies that have played a big role here, but some of us like Ben and I who were involved in this in the old days,
0:07:02 it was kind of a chance for us to kind of take stock of where things were, how things had gotten that bad, what went wrong,
0:07:05 and then start to at least try to figure out kind of how to fix it.
0:07:11 And so anyway, so that’s why like I was so enthusiastic when David and then Catherine developed these ideas and developed this new mission for the firm.
0:07:15 I thought it was just like an absolutely fantastic idea at the start and still do.
0:07:16 But I just want to go through that.
0:07:18 There’s a back to the future component of it, right?
0:07:22 Which is, it is like what we’re doing and what others are doing in this space.
0:07:25 It is new and bold and exciting and different and very different than the norm five years ago.
0:07:27 And that’s all real.
0:07:32 But at the same time, there is a historical resonance, which is it’s also a return to the original values of Silicon Valley,
0:07:35 which is something I find to be just incredibly positive and important to be a part of.
0:07:37 Yeah, and two footnotes that I think are important.
0:07:41 One is it actually started with the universities.
0:07:47 So Professor Frank Terman and William Shockley, who were developing these technologies,
0:07:55 and to support the war effort basically encouraged their students to not pursue PhDs and spin out and build companies to support the country,
0:08:03 which is an ironic turn because those same universities kind of spawned the ideas, I would say, that led to their revolt at Google.
0:08:10 And then the other footnote is Google has definitely since Google slash Alphabet has reversed their position
0:08:13 and now do work with the U.S. government and the Defense Department.
0:08:15 So we’re in a happy place there.
0:08:23 And just to tie the threads together, can we spend just a couple minutes explaining what are some of the headline reasons that the hostility developed
0:08:27 so that we can then get back to the present and describe what changed?
0:08:32 I want to hear from Catherine, I think, in particular on this, because she was both an observer and a participant in it for the last, like, decade plus.
0:08:37 I don’t know, like, let’s start by saying there are, like, I would say serious and legitimate differences in philosophy and worldview.
0:08:41 I’m watching a lot of movies with my 10-year-old, and we watched the movie Real Genius last night.
0:08:44 It’s a movie in 1985, actually made by our good friend Brian Grazer.
0:08:46 It’s just, like, one of my favorite movies, an incredible movie.
0:08:54 But it was sort of an artifact of the post-Vietnam era in which, spoiler alert, the kids in the movie are going to basically a thinly disguised version of MIT,
0:08:58 and they’re working on lasers, and they discover to their enormous horror that they’re working on a weapon.
0:09:01 And the sort of assumption in the movie is if you’re working on a weapon, you’re evil.
0:09:06 And they don’t even, like, pause for a moment to ask the question of, well, actually, could this actually be, like, super helpful,
0:09:08 or how does this fit in the strategy or whatever?
0:09:12 And so it was, like, sort of very much of a moment post-Vietnam that the military was evil in general.
0:09:15 And so there’s been some of that in the ecosystem for a long time.
0:09:19 By the way, Ben mentioned Stanford, the pioneering role of Stanford in all of this.
0:09:26 Stanford was actually forced in the 1970s to divest all of their military R&D and any R&D that touched the military into something called the Stanford Research Institute.
0:09:33 So many top American universities forever, basically since Vietnam, have not allowed, like, ROTC or intelligence agency recruiting happening on campus.
0:09:37 And so there’s like a 60s kind of dimension of this post-Vietnam thing.
0:09:44 And then in the last 15 years, I think it just all got kind of wrapped up in the broader kind of national political drama of our time.
0:09:48 And basically people feeling like they have to take sides on all kinds of political issues.
0:09:54 And then I would say beyond that, feeling like political issues aren’t just political issues, they’re like fully moral issues, and that you’re immoral if you’re on the other side.
0:10:02 And so, by the way, there’s also like a post-Iraq component to it, which is, can we really trust the system that took us into Iraq, which obviously had big impact on our national politics.
0:10:07 And so that stuff all just kind of snowballed in the valley leading into what Ben described in the late 2010s.
0:10:10 And I think there’s a variety of different responses you could have to that.
0:10:15 One is you could say you believe that the post-Vietnam generation or the post-Iraq mentality is the correct mentality.
0:10:17 And there’s lots of points of views that you could have on that.
0:10:23 I just think like in the heat of the moment, I think it’s very easy to get wrapped up in like a specific politics or morality of a specific situation.
0:10:29 I would just come back to the kind of the big picture thing, right, which is, is America an aggregate a force for good in the world?
0:10:31 Is it important for the world that America succeed?
0:10:35 Is it important that, broadly speaking, American values, Western values are kind of preeminent in the world?
0:10:44 Is it important that the world not, you know, devolve into a, you know, totalitarian, you know, it was important during the, in the 20th century Cold War that the world not devolve into a complete Soviet communism everywhere.
0:10:50 You know, I don’t think any of us want to see a world in which, you know, we end up with kind of the same scenario with like Chinese communism.
0:10:57 And so I think you can just kind of have these kind of big, big, big picture views of the importance of the overall thing.
0:11:03 I think you can also just say you can have a lot of respect for the men, women in uniform, you know, who put their lives on the line every day, protecting and defending us.
0:11:11 And, you know, it’s, I think it’s a pretty reasonable stance to say that they deserve to be supported, you know, by their, by their, you know, fellow countrymen like us.
0:11:18 Yeah. And then you can just also have a view of like, yeah, I mean, look, as the cliche goes, we live in a society, right?
0:11:27 And part of the society is, is, is that, you know, the government is going to be, have certain capabilities and it’s going to be, you know, better if they’re better and worse, worse, worse if they’re worse.
0:11:36 And so, so I, anyway, I just think like those, that sort of broader view just kind of, I think got, was getting increasingly washed out by some very specific heated political topics.
0:11:42 I think, by the way, I think now is a good time for a lot of, you know, for a lot of us, for a lot of people, you know, really kind of take stock of this.
0:11:48 You know, it’s maybe some of the superheated, you know, kind of emotions in the last, you know, eight years, maybe are fading a little bit right now.
0:11:53 And, you know, some people are kind of saying, well, actually, we don’t need to think about what the next 30 years looks like.
0:11:54 And we want it to work in a different way.
0:12:00 I’ll add two points to that, because I think Mark’s point on culture plays a huge role in this.
0:12:05 But there’s two things I’ve noticed since moving to the Valley.
0:12:07 I moved to the Valley in 2014, but I moved from Washington, D.C.
0:12:13 And one of the things that I noticed when I moved is that if you are in Washington, D.C., you ride the metro.
0:12:15 The metro stops at the Pentagon.
0:12:18 Every time you ride the metro, you see men and women in uniform going to work.
0:12:25 So it is a daily part of life that national security issues, like when people talk about technology in Washington,
0:12:27 they’re talking about aerospace, they’re talking about defense.
0:12:30 I mean, they’re talking about the companies that they see every day the billboards for,
0:12:35 which are very different than the billboards you see on, you know, in Silicon Valley.
0:12:41 So I think that’s a huge part of it, is just culturally, people are very accustomed to national security missions
0:12:44 and needs and people in uniform in Washington, D.C.
0:12:46 And there’s none of that in Silicon Valley.
0:12:51 Like, you could go a decade in Silicon Valley without seeing a person in uniform.
0:12:52 And so I think that’s a part of it.
0:13:00 But to Mark’s point on culture, I’ve always said that I think the social network had probably the greatest influence of the 2010s
0:13:04 in terms of being a defining movie of what technology means.
0:13:10 And when you look at sort of the kind of Bob Noyce generation of working with your hands, building the physical world,
0:13:17 where those engineers came from, versus the story of a Harvard dorm room that inspired generations of college students
0:13:21 who were studying computer science in their dorm to come to Silicon Valley,
0:13:25 those are two very different populations and they symbolize two very different things.
0:13:34 And so what I think is interesting is probably, like, the 2010s were really solidified by this sort of Harvard-esque social network culture
0:13:42 that is totally different than the culture of people who are building, you know, satellites or building anything in the physical world.
0:13:48 And we really didn’t start talking about how those people are necessary for Silicon Valley technology
0:13:53 until Mark’s essay, it’s time to build, until 2010, until we didn’t have enough PPE for COVID.
0:13:59 And so I think it was really just sort of the kind of almost the logical 180 to what have we done here?
0:14:06 Like, we’re not all Harvard grads building in the application layer when we should be thinking about the things that we actually need in the physical world.
0:14:08 If I could just, Catherine, I think that’s a good point.
0:14:12 I’ll just say I’ll add one kind of personal component to that, which is Bob Noyce, of course, grew up in rural Iowa
0:14:16 and was sort of of that, you know, kind of World War II contemporaneous generation.
0:14:20 You know, he undoubtedly knew many servicemen and women.
0:14:24 You know, he undoubtedly knew many, you know, he and his family undoubtedly knew many soldiers who went to war and didn’t come back
0:14:26 and others who came back wounded.
0:14:29 And, you know, I grew up in rural Wisconsin.
0:14:32 I actually grew up in rural Wisconsin kind of post-Vietnam and, you know, kind of a very similar thing.
0:14:38 Like, if you look at where the sort of war fighters in the American military come from, it’s, you know, sort of the center of the country in a lot of cases.
0:14:44 And so if you grow up in one of those environments, it’s just like, yeah, it’s just like an integrated, you just realize that this is an integrated part of your society.
0:14:46 Yeah.
0:14:51 And then, yeah, maybe I come from a little bit more of that background and then I’ll tease Ben a little bit.
0:14:55 He comes from, of course, the polar opposite, the People’s Republic of Berkeley.
0:15:02 In which, I hate guessing, probably, the uniforms you saw people walking around in your youth were not camouflaged.
0:15:03 They were somewhat, something else.
0:15:07 That is definitely true.
0:15:19 Although, although, you know, I ended up, I ended up knowing a few people who did go to the, so, you know, probably because I played on the football team,
0:15:21 I ended up knowing a few people who did go to the service.
0:15:29 And, I mean, I think that’s one of the things that always struck me as incorrect.
0:15:37 I’ll just say about the kind of anti, you know, we’re not going to sell stuff to the U.S. military and so forth.
0:15:54 It’s like, well, so, here are friends of ours who are risking their lives to protect us and we’re not going to make sure they have the best, safest equipment and technology available.
0:15:58 Like, and that’s your moral position?
0:16:00 Like, that always struck me as very weird.
0:16:02 But, you know.
0:16:03 Yeah.
0:16:12 I remember a few months ago, Paul Graham was trying to critique Palantir, I think, for sort of involvement in some sort of military.
0:16:13 Nice, nice.
0:16:14 Yeah, yeah.
0:16:26 It’s just indicative of kind of, you know, web 2010s insults that don’t work anymore because the culture has changed so much such that, you know, within just a few years, Palmer could be, you know,
0:16:38 you know, negatively impacted or, you know, let go from Metta for sort of political contributions to the wrong side or presumably the wrong side and now is a hero for his work in saving American defense.
0:16:42 It’s just indicative of how much the culture has changed in the last few years.
0:16:50 Yeah, it turned out, I’ll just bash into counter-arguments for a moment, having been trying to be fair earlier, I’ll now be totally unfair.
0:16:54 Like, a lot of the arguments against, like, they’re very thinly substantive.
0:16:57 They’re emotional in nature and very thinly substantive.
0:17:08 And so my favorite story, Eric, of your example was there was a big protest against tech companies working with ICE early in the first term, in 2016, 2017.
0:17:18 And there was sort of this revolt where a bunch of tech CEOs kind of did this kind of very posturing thing where they said, of course, we’re never going to work with those formal people, you know, who are, you know, trying to deal with, like, all, you know, everything on the border.
0:17:28 And I remember, actually, a friend of mine was running one of those kind of, you know, at the time, one of the most, like, culturally advanced, technologically advanced, coolest tech companies in San Francisco.
0:17:34 And, you know, they had a contract, you know, their service was used by ICE along with, you know, thousands of other organizations.
0:17:37 And, you know, his employees did the big, you know, kind of outrage, how can we possibly do this?
0:17:45 And so he actually went out, this was, I think, 2017, he went out during the heat when the thing was at maximum level heat intensity of that time.
0:17:47 And he went out and actually got a former director.
0:17:58 Actually, he got a guy who had actually been in the Obama administration as basically the head of the border security of the Obama administration to basically come in and give an hour-long seminar at the company and just explain, like, here’s what’s actually involved in the border.
0:18:00 Here are all the things that make it complicated.
0:18:09 Here’s all the stuff involving, you know, not just, you know, not just people coming across, but also children and, you know, sex trafficking and, like, you know, drugs and, like, all the other aspects of it.
0:18:13 And he came in and did an hour-long talk and, you know, the entire company was invited.
0:18:15 And, you know, three people showed up.
0:18:17 Right.
0:18:22 And so, like, I think that, you know, that level of emotionality, like, it had its moment.
0:18:24 And I think it’s just over now.
0:18:31 And I think we and, you know, hopefully, you know, hopefully we and hopefully a lot of others are just kind of, you know, back to, you know, in a lot of ways, back to basics, back to fundamentals.
0:18:37 These missions actually really do, you know, independent of the political mood of the moment, these issues matter.
0:18:37 These people matter.
0:18:38 These organizations matter.
0:18:39 And they deserve to be supported.
0:18:41 Okay, cool.
0:18:45 We’ve heard Ben and Mark’s perspective on the origin of American dynamism.
0:18:48 Do you and Catherine, let’s hear it from your perspective.
0:18:55 When I joined the firm in 2018, you know, you have to remember what time that was, what era it was in Silicon Valley.
0:19:02 I think Silicon Valley lost its way, as we’ve discussed, in terms of focusing on defense, focusing on really hard problems.
0:19:04 You know, hardware was not in vogue.
0:19:08 The intersection of software and advanced hardware was not popular.
0:19:16 And about a year after I joined, Mark asked me if I wanted to meet Palmer Luckey, who is the founder of Anderil.
0:19:20 I think Mark was skeptical that our firm would be interested in a deal like that for a variety of reasons.
0:19:25 But I went down to Costa Mesa to their office.
0:19:29 They had just unveiled their new office, which is no longer their new office.
0:19:30 It’s now their old office.
0:19:34 And when I was there, you know, like we had fallen in love with the company.
0:19:35 We thought it was amazing what they were doing.
0:19:37 When I was there, actually, I met Catherine.
0:19:40 She wanted to lead the Series B when she was at General Catalyst.
0:19:42 I wanted to lead the Series B.
0:19:43 We ended up splitting it.
0:19:46 But it wasn’t the best first meeting.
0:19:47 I’ll put it that way.
0:19:48 That’s true.
0:19:48 That’s true.
0:19:51 I’ll let you decide how much of that you want to share.
0:19:58 But we basically started out, I think, with not knowing each other at all, competing to win a deal, having to split it.
0:20:01 I think one of the worst things I did was that I actually had not—
0:20:03 she had done so much work for the Series B.
0:20:05 She had done all the diligence work.
0:20:06 She had done notes.
0:20:08 She actually helped the company prepare for the Series B.
0:20:09 I had not done that work.
0:20:13 And I think to add insult to injury of having to split the deal, I then asked her for her notes.
0:20:18 So I could write our memo, which is really probably one of the more embarrassing—
0:20:21 I sent them because I’m a good soldier.
0:20:22 You are good.
0:20:22 Yeah.
0:20:25 It was a brutal way, I think, to meet.
0:20:26 But I respected Catherine.
0:20:27 That’s the important part.
0:20:29 The important part is I respected Catherine.
0:20:33 And we both thought Andrel was a great company.
0:20:39 A couple years later, and I then continued to follow all of Catherine’s writing.
0:20:44 She was really—she used different terminology at the time, but eventually she came up with the terminology of American dynamism.
0:20:47 I thought that was a perfect phrase.
0:20:53 I then, in 2021, I think, invested in Flock Safety.
0:20:57 That was at a time where Black Lives Matter was a big movement.
0:21:03 People thought the idea of funding public safety and supporting the police was not so cool in Silicon Valley.
0:21:08 But we knew that when we talked to people who actually were customers of Flock Safety and people in the communities, they loved it.
0:21:11 And I just thought this was the highest and best use of my time.
0:21:12 It was the time I wanted to spend.
0:21:22 At that point, Catherine—she was really writing more and more about this idea and the importance in investing in these areas, critical to the national interest.
0:21:29 And I reached out to her with Mark and Ben’s support and said, hey, I think we should join forces.
0:21:31 We should make this a full-fledged effort.
0:21:34 We will make this a long-term commitment.
0:21:35 We’ll raise money.
0:21:36 We’ll raise a fund.
0:21:37 The firm is totally behind it.
0:21:39 I think she didn’t believe me at first.
0:21:41 She can give her version of it.
0:21:48 But then she came around to it, and at the end of 2021, she joined the firm, and we launched the American Dynamics of Practice.
0:21:51 And it’s been, as they say, up and to the right ever since.
0:21:54 Can I give another part that we’ve never told?
0:21:54 Please.
0:21:56 Do you do that is actually—
0:21:57 It’s really for you to tell.
0:21:58 You can tell me.
0:22:01 We’ll cut it if it’s inappropriate.
0:22:07 But we’ll give another part of the story that we’ve never told, which is who the actual matchmaker was for DU and I.
0:22:11 Because until a single moment, we had always been competing.
0:22:17 And, you know, I had sort of secretly been like, er, I wish you would just stop looking at these companies.
0:22:18 And it actually is Flock Safety.
0:22:26 Garrett Langley called me very late, like 11.30 at night, right before his process was about to kick off.
0:22:28 And he said, I have terrible, terrible news.
0:22:30 Great news for me, but terrible news for you.
0:22:34 David flew out and wouldn’t let me leave the restaurant and made me sign a term sheet.
0:22:37 And I’m not going to be running a process anymore.
0:22:40 And I said, Garrett, how could you do this?
0:22:42 You know, I wasn’t like, how could you do this?
0:22:43 I was like, happy for you.
0:22:45 But I’m like, Garrett, you know, I wanted to be part of your process.
0:22:48 And he said, well, I think the right solution.
0:22:52 And I told David this, is that you guys should just join forces and you should join Andreessen Horowitz.
0:23:01 And then, I kid you not, two minutes later, David calls me and says, hey, like, we haven’t had a meal.
0:23:03 We should grab a meal.
0:23:13 So I sort of knew what was happening, but I am forever grateful, I think, for Garrett Langley kind of trying to smooth things over
0:23:15 and kind of thread the needle very gracefully for himself.
0:23:20 I’m saying, well, why don’t you just join Andreessen Horowitz and that way we can all work together.
0:23:22 He’s an amazing CEO.
0:23:26 There’s one other funny part about that fundraising round, which has never happened to me in any other.
0:23:28 This is just sort of a non sequitur.
0:23:35 But another investor who was really excited about that round and not excited about that phone call wrote me this crazy email.
0:23:42 I won’t say who it was, but one of his reasons about why he should then get into the round was that he had already printed out the term sheet.
0:23:45 And I was like, well, I also own a printer.
0:23:48 Like, what does printing out the term sheet have to do with anything?
0:23:57 Fort Garrett had some very upset people who were hanging around the hoop who didn’t fly out to Atlanta the day before he started,
0:24:01 which is a very strong reminder to all of us.
0:24:03 Get on the plane and fly out before the process starts.
0:24:04 Totally.
0:24:07 And don’t let them leave until the term sheet is signed.
0:24:09 I like that pro move to you.
0:24:13 So let’s segue into you started American Dynamism.
0:24:18 And I’m curious because people have this perception that, you know, hardware is very hard.
0:24:19 It’s very capital intensive.
0:24:21 Margins are worse.
0:24:24 It takes a long time to get returns if they ever do.
0:24:27 How should people think about this category from an investment perspective,
0:24:31 given some of the preconceived notions that people had about the category?
0:24:34 There’s a bunch of different ways to build a hardware company.
0:24:37 I think if you look at a lot of the American Dynamism companies,
0:24:40 at least the early sort of innings of where they started,
0:24:44 a lot of them were using off-the-shelf commodity hardware with really advanced software.
0:24:53 So Flock Safety was basically a camera, a cell phone camera in a box with power to it and an LTE connection.
0:24:58 If you look at some of the early Andral work, it was largely commodity optics, commodity hardware,
0:25:02 commodity, you know, parts that they were able to turn into things like the Sentry Tower.
0:25:04 And then over time, those things have gotten more sophisticated.
0:25:12 But a lot of the companies we invest in, their early versions are really more commodity hardware they’re able to put together.
0:25:18 And then I think the unique thing and the key thing is that we’re at this moment where you can then pair that with advanced software
0:25:22 that drives things like computer vision, autonomy, et cetera.
0:25:27 And I think that that is why this is the moment in time where hardware makes a lot more sense.
0:25:34 The other thing is that the customers that they’re serving, it’s not like you have to build your hardware for the Christmas gifting season
0:25:38 where you only have one shot to make 80% of your sales.
0:25:45 When you do government hardware or hardware for the Pentagon or across enterprises,
0:25:48 it’s a much different sales cycle and process.
0:25:53 You can better manage your inventory and your pacing and your hardware spend.
0:25:58 And there’s also just a lot more, I would say, equipment financing available for the very large-scale hardware projects.
0:26:01 And so it really is just a different dynamic.
0:26:04 And I think if you understand that and you spend time in these categories,
0:26:08 you recognize that this is not the same thing as making like a consumer electronics toy,
0:26:11 which is a really almost like a hits business.
0:26:15 Or, you know, if you have one major issue and recall, it destroys the company.
0:26:16 It’s not quite like that.
0:26:19 Steve, let’s go deeper on energy.
0:26:23 Where are you most excited or where are we thinking about it from an investment perspective?
0:26:25 Yeah, look, I’ve said this many times.
0:26:32 We, as a general society, as an economy, have an insatiable thirst for energy and for power.
0:26:35 And those are not exactly the same thing.
0:26:39 But we need power in order to run our AI compute loads.
0:26:43 We need baseload power, which means always-on power,
0:26:47 to run our electrical, our aging electrical grid.
0:26:50 That means we need generation, we need transmission, and we need storage.
0:26:55 And so, again, whether it’s electric vehicles, whether it’s AI compute,
0:26:57 it doesn’t really matter what the reason is.
0:27:02 We know that there is just absolute demand from the consumer side
0:27:05 to have more and more electricity in the system and more and more power generation.
0:27:11 And so I think what we look for is where are there just massive ways to create
0:27:18 and generate energy that is transposable, that is transmittable, that can be modular,
0:27:19 that can be mobile.
0:27:22 And so we’ve made two investments in the energy space.
0:27:24 Exowatt is one.
0:27:26 Radiant nuclear is the other.
0:27:31 We know that those are two power generation systems.
0:27:32 One uses the sun.
0:27:37 One uses nuclear energy to create reliable power systems.
0:27:42 And so we’re very excited about it, and we certainly, I think, would make more investments.
0:27:48 But the last thing I would say is that there’s been multiple studies that we’ve seen shared around over the years
0:27:53 that when you pour more and more energy into an economy, you get economic growth.
0:27:56 And that’s been true in all of modern history.
0:27:59 And I think that’s going to be true today as well.
0:28:00 Yeah.
0:28:03 Catherine, I want to segue to aerospace.
0:28:08 There’s a lot going on in terms of space manufacturing, hypersonics, responsive launch.
0:28:10 Where are we making bets?
0:28:12 Where are we most excited to make more?
0:28:13 Yeah.
0:28:18 So I think the thing that’s really changed about aerospace that I think we’re incredibly excited about
0:28:21 is it used to be that everyone had to vertically integrate.
0:28:26 And sort of space 1.0 was very much categorized with companies taking the SpaceX model.
0:28:28 You will build everything yourself.
0:28:31 It might take 10 years to get to space, and that’s okay.
0:28:33 That is not the case anymore.
0:28:38 We were one of the earliest investors in a company called Apex Space.
0:28:46 I believe they are the fastest company to get from clean sheet design to orbit in 13 months in history,
0:28:47 which is pretty incredible.
0:28:51 But they had a different view, which is that we only want to make the satellite bus.
0:28:56 And if we can figure out ways to make the satellite bus cheaper, more efficiently,
0:29:02 and work with all of the legacy primes and the new primes to put their payloads into space,
0:29:09 that will be far more efficient for these companies that are building different types of payloads.
0:29:11 And I think that thesis has been largely correct.
0:29:18 They’ve been able to work with some of the most kind of legendary, I would say, legacy companies,
0:29:20 but also the emerging ones.
0:29:23 Andrel flew on their first flight.
0:29:29 So I think there’s something to be said about sort of deconstructing the vertical integration process in space
0:29:33 that’s been very novel in space 2.0.
0:29:35 We’re also investors in Northwood space.
0:29:36 It’s building ground stations.
0:29:40 You know, that’s a problem that hasn’t been tackled in a very long time.
0:29:44 We do not have enough ground stations to get data back to Earth as quickly as we need to.
0:29:51 And given that low Earth orbit has just been, I would say, you know, saturated by payloads in the last several years,
0:29:57 particularly because the cost of launch has come down and because SpaceX has put 85 percent of all mass into orbit,
0:30:01 we do need more comms.
0:30:07 We do need an ability to be able to have communication and downlink from low Earth orbit in particular to ground stations.
0:30:11 So these companies, I think, are attacking very important parts of the problem,
0:30:17 but they’re also kind of deconstructing the problem of space, which used to be build it all yourself, build it in-house,
0:30:20 which was, of course, the reason why SpaceX has been so successful.
0:30:26 But we’re sort of seeing this unbundling with the emerging companies that are doing parts of the stack
0:30:32 that maybe SpaceX and some of the legacy players haven’t innovated in or don’t see as the priority.
0:30:33 That’s a good overview.
0:30:38 I want to segue to defense, which is basically you both know about.
0:30:40 Maybe, Catherine, we’ll start with you.
0:30:42 Some of the, where are we excited?
0:30:43 Where have we made bets?
0:30:45 Where are we looking to make more?
0:30:46 Or what have we seen change?
0:30:51 I mean, the thing that’s really exciting about defense is for the first time,
0:30:58 you have sort of this, I would say, almost a golden triangle of the customer is desperate and moving very fast.
0:31:01 And the customer isn’t just the Pentagon.
0:31:02 It’s also Congress.
0:31:08 Do you and I and Mark were just in Washington talking to senators and members of the House
0:31:10 who are very engaged on this year’s NDAA.
0:31:14 How do we fix some of the core problems with procurement?
0:31:20 And I think that, you know, I’ve never been so hopeful about these minor changes in procurement reform
0:31:24 having a dramatic impact on all of the defense ecosystem.
0:31:27 So not just, you know, not just our companies, not just even little tech,
0:31:31 but I think it will have a dramatic impact on improving research and development even in the primes.
0:31:35 So there’s something to be said of, you know, the last 10 years we’ve been saying the same thing
0:31:38 over and over and over again, which is we need more competition.
0:31:43 We need, you know, modern software and Silicon Valley engineering to be brought into the Pentagon.
0:31:46 And now you’re actually seeing it and you’re seeing everyone say the same thing.
0:31:49 But the other things that I think have really changed in the last 10 years,
0:31:55 and particularly since we started the AD fund, is one, the downstream capital requirement
0:31:59 that used to be sort of the thing that made investors very nervous, it’s there.
0:32:03 Downstream capital has never been more excited to invest in these hard tech companies,
0:32:05 American dynamism companies.
0:32:10 And so the sort of messy middle that used to exist where companies had to sort of float through
0:32:11 or hope that they would get contracts.
0:32:14 Now there’s capital to subsidize, which I think is really important.
0:32:21 And that’s led to so many different founders leaving the Andurals and the SpaceXes and the extraordinary,
0:32:25 you know, they’ve sort of graduated with the blessing of their teams.
0:32:28 And they’re building things that are novel in the physical world,
0:32:32 taking the methodology of how they learned manufacturing from SpaceX,
0:32:37 or taking the manufacturing methodologies they learned or pioneered at Anduril,
0:32:41 and, you know, and doing them in different ways, doing them for different things,
0:32:43 sometimes not even in defense.
0:32:47 I mean, I love pointing out another energy company that we invested in, Base Power,
0:32:54 you know, the founder, CTO of that company led manufacturing at Anduril for years.
0:33:00 And so they learn the process or build the process in-house in one area, in one sector,
0:33:04 and then they move to something that’s adjacent, but not necessarily the same.
0:33:11 And so I think defense is really benefiting from just years of people learning from the school of Elon Musk
0:33:15 and then building these new companies for very kind of, I would say, specific use cases.
0:33:19 And they’re finally sort of awake and saying, hey, we will write you a contract.
0:33:21 So I think it’s only going to get better.
0:33:25 I keep saying, I mean, yes, we’re early stage, but, and very optimistic.
0:33:27 I think there’s never been a better time to start a defense company.
0:33:32 I just think, I think that the floodgates are opening and we’re going to just see just an incredible pace of innovation
0:33:34 with startups that are starting today.
0:33:41 It’s, yeah, it’s amazing the founders that have emerged from those two companies, as you mentioned.
0:33:47 You, we did this episode a few weeks ago about how Apple built China and how the expertise that,
0:33:51 that people who went to work on Apple go and, you know, translate it into other industries.
0:33:56 And maybe there’ll be something someday around like how Anderle or SpaceX rebuilt America to some degree
0:34:01 in terms of all the expertise that was developed there and how they went on to go and build, you know, other tremendous companies.
0:34:06 Yeah. I mean, I do think that the legacy of SpaceX, yes, everything they’ve built and done is important,
0:34:12 but the manufacturing processes that people have learned at SpaceX is going to be carrying America forward for generations.
0:34:18 When you think how tens of thousands of people of engineers have left SpaceX and gone on to other companies
0:34:22 and pioneered new ways of building and the manufacturing process in particular is,
0:34:24 is what was novel and different.
0:34:28 The factory is the product, how, how Elon built across Tesla and SpaceX.
0:34:33 So I think the, the, in some ways it can’t be overstated just how important that company is for,
0:34:35 for a number of different domains.
0:34:39 Yeah. And, and a lot of people thought that the, the, the legacy incumbents,
0:34:45 sort of the, their lobbying arms were just so powerful that it’d be just very difficult for,
0:34:49 you know, for startups to break in against the, against the, the primes.
0:34:54 What, what, what changed, obviously, you know, the, sort of the need has been there for a while.
0:34:59 Did it just come to a breaking point at some point or, or what really sort of, you know, created this opportunity?
0:35:03 Well, we always say SpaceX and Palantir walk so that everyone else could run.
0:35:07 And I would, it’s maybe unfair to say that they walked, but both of them had to sue the government.
0:35:13 Um, um, so, so that, you know, those are, those are two early companies, extremely early, right?
0:35:17 These are the companies that were founded in 2002, 2003.
0:35:23 Um, so I think in some ways they had to do the very, very difficult work of educating the government,
0:35:24 educating themselves, right?
0:35:26 Explaining why it is so important.
0:35:31 Um, but I think, you know, that now 20 years on from, from those companies founding,
0:35:37 we just see an extraordinary amount of, I think, alignment, um, that we’ve never seen before.
0:35:39 One, because the, the kind of, you know, stakes have changed.
0:35:42 In 2002, no one was worried about China.
0:35:44 In 2012, no one was worried about China, right?
0:35:48 So there, there’s something that I think has changed in terms of near-peer adversaries as well,
0:35:50 that people are now waking up and saying,
0:35:53 okay, like, we, we, we, you know, we can’t let our own procurement process
0:35:58 be the thing that stops us from actually fielding these technologies and producing them en masse.
0:35:59 I think that’s right.
0:36:03 I think on the adversary basis, we now have a much healthier respect for China as an adversary,
0:36:06 particularly on their production capability.
0:36:08 But I think the product has also changed.
0:36:12 I think the war in Ukraine really, um, put a very, very bright light
0:36:18 on how our exquisite large platforms are not, uh, going to be the platforms for the fight of the future.
0:36:21 And we needed new, we needed new products.
0:36:25 You know, when, when Andrew talks about rebuilding the arsenal of democracy,
0:36:28 they’re talking about not doing it with new aircraft carriers.
0:36:32 They’re talking about with the tradable systems, um, with, you know, swarms of drones,
0:36:37 uh, with, with new kinds of autonomous, uh, submersibles and other vehicles.
0:36:40 And so it really is a different product.
0:36:43 And I think the government has woken up in, in many ways to that need.
0:36:46 And they are now working through the procurement reforms.
0:36:51 A lot of, a lot of the, the work that, uh, Catherine and I and Mark and, and, and Ben and others
0:36:55 do inside the firm in Washington is to really drive some of these reforms, which will benefit,
0:36:59 um, ultimately will benefit America, but will benefit all companies.
0:37:03 But, you know, in addition to the companies we work with, um, but the product has changed.
0:37:06 And I think the customer recognizes they need a different product, which is going to come
0:37:07 from, from a different place.
0:37:11 Is there anything more we want to say on, on, on Ukraine and how that sort of changed the
0:37:12 investment landscape?
0:37:15 Or did you sort of say the main thing you wanted to say?
0:37:20 You know, what, one other thing I would add is that, um, and, and you’ve seen this actually,
0:37:24 you know, when JD Vance went and gave a speech in Europe, I think at the Munich security conference,
0:37:28 he really said like, it’s time for Europe to step up and start spending money on defense
0:37:29 again.
0:37:34 Um, and, you know, while the reaction in the press was like negative, how could he do this?
0:37:37 How could you do this to our friend and our allies and, and, and like, whatever the reality
0:37:42 was like a lot of, a lot of the, uh, politicians in Europe said, okay, wait, wait a minute.
0:37:43 This is actually probably true.
0:37:49 And, uh, almost every major country in Europe has made a commitment to double or more their
0:37:52 spending, uh, their GDP level of spend on, on, on defense.
0:37:57 And that spend is ultimately going to go, there, there aren’t enough incumbents in Europe
0:38:00 to have, to have all that money go to companies in Europe.
0:38:05 So there’s a huge opportunity for, um, all their strongest ally, which is the United States
0:38:10 for the companies here to actually go and increase their business, uh, overseas.
0:38:12 And so I think there’s just broadly a ton of opportunity.
0:38:14 Um, and you’re going to see that.
0:38:19 And I think, look, the fight in the Ukraine obviously has, has caused the, uh, the, all the
0:38:24 countries in NATO and, you know, all of Western Europe to wake up and recognize that they have
0:38:26 to change their posture when it comes to defense.
0:38:29 The, we’ve been talking about energy.
0:38:29 We’ve been talking about aerospace.
0:38:31 We’ve been talking about defense.
0:38:35 What’s next in terms of where, where are we excited to invest or where are the opportunities?
0:38:36 Do you?
0:38:39 Yeah, well, I think a couple of things I would say.
0:38:45 One is that sometimes people think the categories that we invest in and are just totally disparate
0:38:46 and, and it’s like, oh, we like, we like them.
0:38:50 And so they think like, okay, yeah, it’s space, it’s defense, it’s energy.
0:38:55 But actually, um, these categories are often much more interrelated than people, people realize.
0:39:01 You cannot have strong national security without a reliable, uh, energy grid and electrical grid.
0:39:05 Um, you cannot have obviously strong national security without strong defense.
0:39:11 You can’t have that without strong communications, which requires space, uh, satellites and satellite
0:39:13 communications and space domain awareness.
0:39:16 Um, and so these things are much more interrelated than people realize.
0:39:21 Um, we obviously have other investments in areas that we say, as Catherine often puts it,
0:39:22 serve the national interest.
0:39:24 So we have investments in education.
0:39:30 We have a massive portfolio in public safety, um, that, you know, every definition of the
0:39:33 American dream that somebody would come up with would include the idea of living in a safe
0:39:34 community.
0:39:38 So we have a massive, um, I think we’re probably the largest public safety venture investors,
0:39:39 uh, in the country.
0:39:41 Um, if not, if not the world.
0:39:47 Um, and I think as you look to the future, I mean, everyone has their own view of what the
0:39:51 future will look like for American dynamism, but I think we, you’ll see us increasingly shift
0:39:52 left.
0:39:56 So that’s why we look at minerals and, uh, we look at critical, critical minerals and
0:39:56 mining.
0:40:01 Uh, we look at manufacturing and the supply chain and the criticality of the supply chain and
0:40:07 the ability to get the important, uh, precursor ingredients we need for manufacturing, um, in
0:40:08 the event of a conflict.
0:40:12 Uh, and so I think, I think those are some areas that I’m excited about.
0:40:13 Yeah.
0:40:17 I’ll echo that, you know, I, I joke that I just love production companies.
0:40:21 Um, and that, you know, you’re now actually seeing large companies say we’re moving back our
0:40:23 manufacturing back to the USA.
0:40:28 Um, I just think there’s never been a better time to, to really focus on components, um,
0:40:33 and to focus on sort of like the, the, like almost like the dumb parts, um, the dumb hardware
0:40:35 that’s needed for a war of mass.
0:40:40 And so I think we’re, we’re taking serious looks at a lot of companies that have an interesting
0:40:41 theses on how you do that in bulk.
0:40:46 Obviously Hadrian was an early company, um, you know, that, that really focused on how do
0:40:47 you build a factory of the future.
0:40:52 But I think a lot of learnings over the last several years of how you, how you really automate
0:40:57 factories to build for, um, you know, whether, whether it’s exquisite systems or sort of dumb
0:41:00 parts, all will be necessary in a war of mass.
0:41:02 And so I think we’re, we’re taking all of that very seriously.
0:41:06 You mentioned also education, which isn’t always a category that people, uh, you know,
0:41:08 uh, sort of tied to American dynamism.
0:41:10 Catherine, I know we’ve done Odyssey.
0:41:13 What has been a sort of our, our thesis in terms of where we’re excited there?
0:41:16 Well, what’s, what’s exciting about Odyssey, I’ll give a, an overview there.
0:41:20 That was an early education company that saw the sea change happening at the state level,
0:41:22 um, around education saving accounts.
0:41:27 Um, so in the same way that you have a health savings account through your employer that
0:41:32 you can then put forward towards healthcare of any kind, um, this was a view, um, by a lot
0:41:36 of states that, that people should be able to opt out of the public school system, particularly
0:41:40 parents that want to homeschool or that want to have sort of a hybrid, um, method of learning
0:41:41 for their children.
0:41:45 Um, and this became very popular during COVID, um, because it was sort of, there weren’t
0:41:48 enough schools, there weren’t enough, you know, a lot of people had moved around the country
0:41:52 and, and, and homeschooling and sort of alternative learning became very popular.
0:41:59 But now you’re seeing, you know, states like Texas pass a universal ESA where any parent can
0:42:03 opt their, their child out of, out of the, the public school system and receive cash from
0:42:03 the state.
0:42:08 And that cash has to be transferred and regulated somehow and ensured that that’s actually being
0:42:08 spent on education.
0:42:13 And so Odyssey is building the, the financial rails to do that tracking, to make sure that
0:42:17 parents get the, the cash that they deserve from these state programs, um, and can put it
0:42:22 forward to, to any program that is, you know, approved by, by the state, um, based on their
0:42:23 bylaws.
0:42:26 And I think you’re just seeing more and more experimentation with, with K through 12 education.
0:42:28 One, because it’s necessary, right?
0:42:33 There’s, there’s more and more, I would say, special needs kids or kids that have different,
0:42:37 um, learning capacities and people are realizing that one-on-one tutoring can support that.
0:42:42 Um, and so I think you’re, you’re seeing, you know, a variety of different, um, methods
0:42:46 of, of learning and they have to be, you know, supported by different types of technology.
0:42:51 Um, we’re also obviously looking at how AI and, and, and one-on-one tutoring can, can support
0:42:52 these initiatives.
0:42:57 I think we’re just going to see so many changes to K through 12 education, um, over the next
0:43:01 decade, um, enabled by not only technology, but also just this kind of, I would say this,
0:43:06 this sea change that happened because of COVID, um, which is realizing that, that parents are
0:43:09 sometimes best equipped to make the decisions about how their, how their children are going
0:43:10 to learn.
0:43:12 We’ve talked about the categories we’re excited about investing in.
0:43:17 Is, is there any, for AD entrepreneurs listening to this, are there any requests for startups
0:43:22 that you particularly want, want to see that people yet, uh, haven’t yet done, um, as much
0:43:24 or as well as they should have across any of these categories?
0:43:29 I have one, I feel like I have a broken record, um, with my request, which is offensive space.
0:43:33 Uh, I think everyone looks to the past conflict and says, oh, well, we look at what happened
0:43:35 in Ukraine and that’s what we should build.
0:43:40 Uh, I actually think there’s very few, um, lessons from Ukraine that are going to be relevant
0:43:41 in the future war.
0:43:45 candidly, I think that the future war, the infrastructure that we already have in low
0:43:48 earth orbit will be exceptionally important.
0:43:52 Um, and we have to figure out ways to protect what we’re building in low earth orbit in particular.
0:43:57 And so I think anything to do with offensive space, um, both on the software side and the
0:43:59 hardware side, we’re, we’re very excited about.
0:44:00 Yeah.
0:44:02 You’ve mentioned that the, how’d you phrase it?
0:44:03 It’s the war is not going to be about space.
0:44:05 It’s going to be in space or something.
0:44:06 Yes.
0:44:06 Yeah.
0:44:07 No, I, I, I very much believe that.
0:44:10 And it’s because we already have so much important infrastructure.
0:44:14 Like when, when, when we visited, um, I was fortunate enough to go to the, the border of
0:44:18 Ukraine with some, um, U S officials and, and, and operators on the ground.
0:44:22 And every time I talked to people on the ground and asked them, what’s the most important piece
0:44:23 of technology that you use?
0:44:24 They all said Starlink.
0:44:27 Um, and of course, Starlink is in low earth orbit.
0:44:32 It’s not, um, something that necessarily you would, you would need to, to target low earth
0:44:33 orbit and able to take out that infrastructure.
0:44:37 And so, you know, obviously SpaceX is a very, um, sophisticated company.
0:44:43 Um, but, but I think anything to do with offensive space capabilities that can shore up what the
0:44:47 U S government needs, given, given where the next conflict will be, uh, I think is extremely
0:44:47 important.
0:44:53 I want to zoom out and also talk about how we think about American dynamism in the context
0:44:54 of our international efforts.
0:44:58 Cause you mentioned, you know, andro for different, uh, different spaces, but also countries are trying
0:44:59 to build their own version of it.
0:45:02 And of course, andro is also, you know, uh, working internationally as well.
0:45:05 But, um, maybe, maybe Catherine, we’ll start with you.
0:45:10 How do you sort of think about, uh, American dynamism, but also, and I’ll pass it to Ben,
0:45:13 as we’re building our international efforts, uh, our American allies.
0:45:19 Well, I think, you know, Ben, Ben has always said every time and I’ll, I won’t put words
0:45:23 in your mouth, Ben, but every time that he travels, I mean, the, the thing that people
0:45:28 want is exactly what we named the category, which is how do we build American dynamism?
0:45:31 How do we build Silicon Valley in our own country, right?
0:45:33 Like how do, how do we build national resilience?
0:45:36 How do, how do we think about, you know, future of manufacturing?
0:45:40 What are the things that are going to supercharge our own, um, economy?
0:45:45 And I think the, the thing that, that by calling it American dynamism and by talking about how
0:45:49 important it is to be building in the physical world, I think we kind of captured a few things
0:45:51 that are really important to, to every nation state.
0:45:55 One is, you know, we always point to the fact that 25 years ago, if you looked at the market
0:46:02 cap, um, of the largest 10 companies in the world, 25 years ago, uh, three of the top 10
0:46:03 were American tech companies.
0:46:06 Now that is nine of the top 10, 25 years later.
0:46:13 So Silicon Valley has truly, I think, transformed with software, um, you know, the, the, the size
0:46:15 and scale of how large you can build these companies.
0:46:19 Many of the companies that are now in the top 10 in terms of, of market cap didn’t even exist
0:46:20 in 2000.
0:46:25 Um, so I think that’s something where other nations look at what Silicon Valley can build,
0:46:28 whether it’s hardware software, whether it’s, you know, companies that are building the physical
0:46:30 world and say, we want to bring this to our own country.
0:46:31 How do we do that?
0:46:36 And the spirit of American dynamism is recognizing that it’s not just, uh, you know, an economic
0:46:37 zone and a silo.
0:46:42 It’s not just, um, pure software, like the companies that are, that are really having the impact of
0:46:46 that scale are building the physical world and they’re interfacing with governments, not
0:46:48 only in the U S but they’re interfacing with governments around the world.
0:46:53 And in order to build, you know, many, many more of those companies, um, we, we have to
0:46:58 have sort of a game plan of how you interface with, with regulators, with governments, um,
0:46:59 and with the international community.
0:47:02 And Ben, what would you add to that?
0:47:10 Yeah, I think that, um, you know, geopolitically we, we’ve kind of entered a new era.
0:47:17 Uh, and so if you kind of go back, you know, post-World War II, we had kind of, um, bombed our
0:47:23 big manufacturing competitors, you know, Japan and, and Germany, uh, kind of out of existence
0:47:25 or out of the game for a while.
0:47:31 And America became the, the, just the dominant economic power, uh, in the world for, for decades.
0:47:38 And as a result, we could be, um, team America world police, uh, and just kind of, you know,
0:47:40 provide defense to everybody.
0:47:45 And our, our strategy was kind of like, it’s actually, not only do we not, you know, we don’t
0:47:49 need other countries to defend themselves that they were to do so, it might be dangerous.
0:47:54 And so we kind of, uh, stationed our troops all over the world and we built this massive
0:48:00 military, um, fast forward to 2025, we’re $38 trillion in debt.
0:48:08 Um, and, you know, there’s a very, uh, competitive superpower, um, economically in China, uh, who
0:48:14 has a, I would just say a very different idea about the way the world should work and a way
0:48:17 their society should work than, than we do.
0:48:23 And so now we’re in a position where allies matter a lot, um, and not only do allies matter,
0:48:30 but we need them to, uh, to be able to defend themselves and to work with us to kind of defend
0:48:38 our values, our kind of way of life, our view of freedom, um, and, you know, what it means
0:48:39 to kind of be a citizen.
0:48:47 And, you know, as a result of that, uh, you know, American dynamism does need to kind of extend
0:48:53 out beyond America to our allies because, you know, if they are providing their own defense,
0:48:58 um, and they are allied with us, then they need these same kinds of, uh, technologies and,
0:48:59 uh, and products.
0:49:04 And so, you know, it’s just part of the overall mission that I think we have to pursue.
0:49:09 It also makes the economics for these companies work better if there are kind of a larger market
0:49:09 for them.
0:49:11 going deeper on, on China.
0:49:16 It seems like a lot of the cultural embracing of American dynamism stems from some of the
0:49:20 realities that Catherine mentioned, like, like Ukraine, like COVID, and of course, sort of
0:49:25 this great power conflict with, with, with China and people realizing the urgency of, of, uh,
0:49:27 and need to, to prepare for it.
0:49:31 And it seems to inspire a lot, uh, you know, some of the American dynamism, um, focus and,
0:49:32 and, and where we invest.
0:49:38 So maybe let’s just briefly take stock on what are the areas in which, uh, they’re ahead.
0:49:43 What, what are our unique advantages and how does that inform, uh, sort of where we’re thinking
0:49:44 for, for American dynamism?
0:49:46 Catherine, do you want to take initial step?
0:49:48 Oh, yeah.
0:49:52 I mean, I thought the, the conversation that, that you all had in the last episode with, with
0:49:58 Brian and Chris about what does it mean to, to participate in wars of mass is one that Silicon
0:50:02 Valley really hadn’t thought about, uh, until very recently.
0:50:06 Um, you know, if, if, if you go to Washington, there’s all this talk now about what is, what
0:50:11 is known as a tritable systems, which are systems where, you know, you’re not spending millions
0:50:16 and millions of dollars building out exquisite systems that, that only are, are usable once
0:50:20 you’re, you’re building out, you know, very cheap drones, very cheap hardware, where if
0:50:22 you lose them, that’s okay.
0:50:26 And because the, and the reason why that is so important, um, is because I think a lot of
0:50:29 the, the learnings of Ukraine, um, if you have an exquisite system that was hundreds
0:50:33 of millions of dollars and it can be taken out with a thousand dollar drone, uh, that
0:50:38 changes the economics of war and it particularly changes the, the economics of a war of mass.
0:50:43 Um, so I, I’d encourage people to, to kind of understand, um, the sort of complexities
0:50:46 of, of why, you know, why it matters so much that we’ve exported our manufacturing, that we
0:50:50 can’t, uh, manufacture these tritable systems as cheaply and as quickly.
0:50:55 And in terms of, as, as, as many, um, as say, as say China could, but I’d say there’s, there’s
0:50:59 two also, there’s two really important things to take from the war in Ukraine, which is that
0:51:02 China has been supplying both sides of that war.
0:51:07 Um, when you look at sort of the drone warfare that is, that has come out of the trenches for
0:51:11 the last three years, you know, China is a, is a supplier in the same way that Russia is
0:51:13 a supplier to its own side.
0:51:18 But that means that their, their industrial bases have been built up in a way that the
0:51:21 U.S. industrial base hasn’t built up, um, in the past three years.
0:51:25 And that’s something that I think a lot of our American dynamism companies are very cognizant
0:51:29 of, um, that we’re, we’re at a disadvantage because we haven’t been supplying just-in-time
0:51:34 manufacturing to, to the Ukrainians in the way that, say, um, you know, Chinese parts, um,
0:51:35 have been.
0:51:38 And so that, that’s something we, we very much have to think about when we think about wars
0:51:42 of mass is how quickly can we, can we start investing in our manufacturing base so
0:51:47 that we can have this just-in-time manufacturing and these attributable systems, um, to compete
0:51:51 against a country that, that has been building for the last 20 years.
0:51:55 Mark, I, I’d like to hear your, your thoughts on, on, on manufacturing, because we were talking
0:52:01 offline a bit ago and about how, you know, people hope for the old manufacturing jobs back
0:52:05 and, and it, how it’s, uh, harder to, to bring those back, but there’s an opportunity
0:52:06 for, for more advanced manufacturing.
0:52:08 Why don’t you describe the opportunities you see it?
0:52:12 Yeah, so I grew, I grew up in, uh, sort of, uh, as you described as light manufacturing,
0:52:14 a different country, um, in Wisconsin.
0:52:18 So we were adjacent to, uh, Detroit, um, and we sort of viscerally experienced, you
0:52:22 know, the decline and fall of Detroit, um, you know, but we were, we were right in the
0:52:23 middle of it, but we were kind of around the edges.
0:52:27 Um, and so I’ve, you know, been thinking about this, you know, for, for, for a long time.
0:52:31 Um, look, I think the, the, the sort of, the sort of great offshoring of manufacturing that
0:52:34 happened over the last 40 years, you know, happened as a result of a, of a set of policy
0:52:38 issues, uh, set of policy decisions, like a set of explicit decisions that were made.
0:52:41 And we could, we could, we could spend a long time talking about, you know, those decisions,
0:52:44 but that, you know, it was, it was, it was a real set of decisions.
0:52:47 Um, there are a set of policy decisions that have to be made and, and, and are currently,
0:52:51 you know, some of them are in the works now, um, you know, to kind of, uh, to kind of reverse
0:52:51 that.
0:52:56 But, you know, kind of to your point, actually, I’ll quote Heroplinus, a man cannot, uh, step
0:53:01 into the same river twice, uh, because it is not the same river and he is not the same
0:53:01 man.
0:53:03 Um, right.
0:53:08 So what’s not going to like, even if you completely cleaned up all the regulatory stuff and legal
0:53:11 stuff, which I think we should, um, and you, you, you, you sort of corrected the incentives
0:53:12 that drove everything out.
0:53:15 I think what you’re just not going to get practically is you’re just, you’re not going to get the
0:53:18 old factories back and you’re not going to get the old jobs back in the, in the way that
0:53:20 they were 40 years ago when they were lost.
0:53:23 Um, and the reason you’re not going to get that is, it’s actually several reasons.
0:53:27 One is that the nature of the products themselves have changed and I’ll talk about that a little
0:53:28 bit.
0:53:32 Um, uh, and by the way, to the good that, you know, the, the things that are getting manufactured
0:53:37 in, in, in, in the, in the future decades are much more complex and sophisticated and technologically,
0:53:40 you know, kind of infused and powered than, than the things that, that, that used to get
0:53:40 manufactured.
0:53:42 So the products themselves have changed.
0:53:44 Um, the, the methods of manufacturing have changed.
0:53:48 So there’s, you know, a lot more, a lot more robotics automation now than there was 30 or
0:53:49 40 years ago.
0:53:51 And then the jobs themselves have changed.
0:53:53 Um, and you know, look, if you go into like, um, you know, if you go into like,
0:53:56 like a manufacturing plant in China and they’re, you know, assembling phones or whatever,
0:54:00 like you’re building bicycles, like you are going to see a lot of people, you know, standing
0:54:02 in an assembly line, doing the same thing over and over again for 10 hours.
0:54:06 Um, and there was a component of that to the, you know, manufacturing jobs that were lost,
0:54:10 you know, 40 years ago in the U S but like, you’re probably not going to get the bicycle
0:54:12 manufacturing plant back.
0:54:15 That’s going to build bicycles the way that they existed 40 years ago, where the plant’s
0:54:18 going to work the same way it worked 40 years ago and where the jobs are going to be the
0:54:19 same as they were 40 years ago.
0:54:23 And it’s just like, it’s just like the, the, the level, you know, it’s, one is it just, it’s
0:54:24 cheaper to do that overseas.
0:54:27 And then like that, that’s just that, that, that’s the backward looking view.
0:54:30 Like that, that’s just, that’s not necessarily the thing you want, you want to get.
0:54:33 What you would like in contrast, right?
0:54:34 Would be something much better.
0:54:37 And the better thing, let’s just take bicycles as an example.
0:54:39 What you actually want is you, you want to be making electric bikes.
0:54:41 You want to be, you want to be making e-bikes, right?
0:54:43 Which are much more sophisticated, right?
0:54:46 Physical artifacts that involve, you know, batteries and computers and chips.
0:54:50 And, you know, you might want to have all kinds of, you know, advanced capabilities in
0:54:52 the bike, just like people have now in cars and motorcycles.
0:54:56 Um, and, and then, um, you know, maybe, by the way, maybe a bike that balances itself,
0:54:56 right?
0:54:58 Like, you know, things like that, right?
0:55:03 Um, so like a new kind of product that’s much like more sophisticated, um, built in a
0:55:05 manufacturing plant that is more sophisticated, right?
0:55:09 And has a much, you know, greater degree of automation where you don’t have human beings
0:55:13 standing in line, you know, turning a screw, you know, turning the same screw every time
0:55:17 for 10 hours, but where what you have is a large number of jobs that are kind of called
0:55:18 them blue collar plus jobs.
0:55:22 And then, and then also, you know, white collar jobs and all the associated service jobs around
0:55:26 those, um, that are, that are building and maintaining that new kind of plant to build that
0:55:27 new kind of thing.
0:55:31 Um, and, and I think those jobs, and by the way, you can see this, you, if you visit
0:55:35 a Tesla fat, you know, you go visit a Tesla factory today, you know, you see this in action.
0:55:38 Like, you know, this is how the world’s leading manufacturers actually, actually do this.
0:55:39 Like this is actually happening.
0:55:44 And so I think what you can do is you can leap forward on the nature of the product you’re
0:55:44 building.
0:55:47 You can leap forward on the nature of the plants that you’re building and you can, you can
0:55:49 leap forward and actually create much better jobs, right?
0:55:53 Higher paying jobs, higher skill jobs, jobs that are frankly a lot more pleasant, that
0:55:54 are a lot more interesting.
0:55:57 And so I think you want to have like the futuristic outlook on this.
0:56:01 And then if you pair that with the regulatory reforms and, you know, you, you solve all the
0:56:05 issues around energy prices and net for resources and everything else that need to be solved.
0:56:07 Like, I think that’s the formula.
0:56:12 Um, and by the way, if we don’t do that, all of those things are going to get made in China,
0:56:16 which does mean over time, not just phones being made in China and not just drones being made
0:56:20 in China, but also cars, um, and also, um, uh, uh, and also, uh, robots.
0:56:24 Um, you know, the, you know, the great industry of the future that we can spend a long time
0:56:25 talking about is going to be, is going to be robots, right?
0:56:30 AI in mechanical form, uh, which is going to be, you know, I think the biggest industry that’s
0:56:30 ever been built.
0:56:34 And, you know, right now by default, China set up to do that, you know, like what an amazing
0:56:38 story would be for America in the 21st century, which is we re-industrialized not to build
0:56:40 the products of the past, but to build the products in the future.
0:56:42 And I, and I think that’s the opportunity.
0:56:44 Let’s go deeper there.
0:56:48 Uh, I want to ask you the same question I asked Catherine about our unique strengths relative
0:56:51 to, to their unique strengths, because I heard you say this framing in another conversation,
0:56:56 which I really liked, which is, you know, are we going to win by being more like us or more
0:56:56 like them?
0:56:59 So why don’t you, uh, flesh that a little bit, Marco?
0:57:00 Yeah, so we actually had this fight.
0:57:03 This fight actually happened during the, during the first Cold War with the Soviet Union.
0:57:07 Um, and there was just this raging debate that started in the, you know, 1920s, but like
0:57:10 was fully raging in the 50s, 60s, 70s, including when I was growing up,
0:57:16 which is, you know, basically, you know, democracy or dictatorship, um, and then, uh, uh, free
0:57:21 markets or, uh, you know, state-directed capitalism, um, you know, or, or sort of state-directed
0:57:21 production.
0:57:26 Um, and, and, you know, this was a very real debate, and one of the sort of little fun facts
0:57:29 of how kind of scurrily everything got in the 20th century was American, common American
0:57:35 undergraduate textbooks, economics textbooks, into the 1980s would stated as fact that communism
0:57:39 was the superior economic system to capitalism, and they, they would have these charts of projected
0:57:43 growth rates, and they would show that it’s purely inevitable, uh, that communism was going
0:57:45 to outperform capitalism because it was a better organized system, right?
0:57:47 It had, it had top-down controls.
0:57:50 It didn’t have all this messy inefficiency of, of, of free market capitalism.
0:57:54 Um, and so, you know, they, you know, a lot of sort of economic experts in the U.S., including
0:57:58 ones with like big newspaper columns and like big media footprints, you know, were basically
0:58:02 selling the siren song of, of, of, of communism all the way through the late 80s, all through
0:58:02 the late 80s.
0:58:06 And, and the reason I say that is like that, that, that debate was actually happening all
0:58:10 through that period, which is, right, are, are you better off having a Soviet-style system
0:58:14 where the state directs production, and if the state decides that you need to build tanks
0:58:18 or planes or cars or anything else, like they’re going to direct it, that’s going to happen,
0:58:22 it’s going to happen with maximum sort of centralized efficiency, it’s going to happen with like
0:58:26 entirety of national, you know, the national resources lined up against it, like everything
0:58:30 orchestrated, you know, in, in the right way to be able to maximize production, um, or
0:58:34 are you going to have the American system, which, you know, has the aspects of, you know,
0:58:38 communism here and there, uh, you know, but it’s much more, you know, the pro-argument, much
0:58:42 more dynamic, much more flexible, um, so are you going to have an American system, are you
0:58:45 going to have a higher degree of sort of independent action on the part of individual
0:58:49 capitalists, independent, you know, independent companies, independent technologists, are you
0:58:52 going to be inventing a much broader range of new technologies, are you going to be
0:58:55 deploying those technologies in much more creative ways, um, or, you know, are you
0:58:58 going to be just like much, much faster on the innovation curve because you’ve unleashed
0:59:02 the, the sort of inherent creativity of all your people rather than just like ordering
0:59:03 them to all stand in the line together.
0:59:07 Um, and then, you know, the capitalist approach is messy, right?
0:59:10 And, you know, it has boom-bust cycles and it, you know, it has companies go out of business
0:59:13 and there’s like, you know, sometimes there’s too much competition and, you know, profits go
0:59:17 to zero and like, you know, you, you get in all these kind of crazy, crazy, crazy things,
0:59:19 but you have, you have dynamism on your side, right?
0:59:22 You, you, you’ve got, you’ve got, you’ve got, you’ve got freedom, exploration, creativity,
0:59:28 innovation, uh, uh, uh, free market competition, um, and, and dynamism on your side.
0:59:33 Um, I think that question was asked and answered in the 20th century quite definitively.
0:59:40 Um, you know, it is back today, um, you know, the new, you know, the upcoming new mayor of,
0:59:44 you know, of, uh, New York city, uh, you know, is proposing government run grocery stores,
0:59:44 right?
0:59:47 Cause they’re, you know, like it’s the exact same argument is back.
0:59:51 And, and there are, you know, people in, you know, people in positions of great power,
0:59:53 uh, you know, who still want to have this argument.
0:59:54 Uh, I think it’s long settled.
0:59:55 It does seem to be back.
0:59:57 Um, it is coming back.
0:59:58 And I think it’s fundamentally the same thing.
1:00:02 And by the way, like, it’s not that the centralized approach doesn’t have certain advantages.
1:00:05 Like if you want to pump out, you know, 20 million tanks or something, or if you want
1:00:09 to pump out, you know, a billion phones, like there is something to a top-down centralized
1:00:10 approach, right?
1:00:13 I mean, you know, every company within itself is it, is it, you know, as a form of a dictatorship
1:00:14 that does that.
1:00:17 And so like, you know, there is some advantage, you know, to China at being able to kind of
1:00:19 direct all the national resources.
1:00:23 And there is something frustrating being on the American side where like, in theory, you
1:00:25 all share the same mission, but in practice, you’re too busy beating each other’s brains
1:00:30 out, you know, to, you know, to, to ever get to the, get to the, um, you know, in
1:00:31 competition, never get to the shared purpose.
1:00:35 Having said that, like, I think we went in Cold War I by doing it our way.
1:00:37 I think we went in Cold War II by doing it our way.
1:00:42 Um, every time somebody stands up and says we need to get to be more like China, I always
1:00:45 ask the counter question, you know, where we need like more state control, you know, more
1:00:48 top-down, more direction, uh, more planning and all these things.
1:00:51 You know, I always just ask the opposite question, which is, well, no, actually, like, what if
1:00:52 we take the opposite approach?
1:00:55 What if we become more like us, right?
1:00:59 And what if, what if we lean even harder into innovation and even harder into creativity and even
1:01:00 harder into entrepreneurship?
1:01:03 And isn’t there so much more that we could do if we, if we, if we got to be more like
1:01:03 us?
1:01:06 And obviously, I think that’s what we should be doing.
1:01:08 It is interesting that that, that debate is back though.
1:01:12 Mark sort of defined the Chinese system, but he also sort of defined one of the major problems
1:01:17 with procurement, which is that the, the Department of War makes its decisions about what weapons
1:01:21 it’s going to buy on five-year cycles, 10-year production cycles, right?
1:01:25 And it’s very difficult to, to correct the ship because of the way that we’ve structured
1:01:29 our procurement process going back to, going back to the 60s and the 70s.
1:01:33 So I think there is something about the, you know, if you look at the last 25 years, the
1:01:38 second American century has been a story of American dynamism, innovation, creativity, and
1:01:43 how on a global stage that has actually led us from three companies in the top 10 to nine
1:01:45 companies in the top 10 that are tech companies.
1:01:47 But the Department of Defense really hasn’t benefited from that.
1:01:52 It’s the exact same companies that were, that were founded in, some founded in world, just
1:01:57 after World War I, solidified their dominance in World War II, and then, you know, mergers
1:02:01 in the 1990s post the Cold War with this view that we’re post-war, we don’t actually have to
1:02:02 worry about things anymore.
1:02:09 So there really is sort of, I think, a Soviet-style procurement system that’s still at work inside
1:02:12 of the Department of War, and there’s many good people in Washington trying to change that
1:02:16 to allow for this American dynamism to actually flow into the places that it needs to exist.
1:02:20 So it’s actually just a historical tweak, which is, if you, I don’t know about DOD, but if
1:02:22 you work with big companies a lot, you know, one of the things you see is they have, they
1:02:23 often have five-year plans.
1:02:26 They have five-year planning cycles, five-year strategies.
1:02:29 And actually, you know, the creator of the concept of the five-year plan was, of course,
1:02:30 Joseph Stalin.
1:02:35 It was literally, it was literally the Soviet Union run as five-year plans.
1:02:41 And actually, in the, between the 1920s and 1950s, that idea actually mainstreamed itself
1:02:44 into Western society and into Western business and has stuck there ever since.
1:02:46 And by the way, it routinely doesn’t work.
1:02:48 Like, it, like, routinely fails because the world is too dynamic.
1:02:52 And, you know, that’s, that’s not nearly a fast enough, you know, iteration cycle.
1:02:54 And yet people still stick to the five-year plan thing.
1:02:57 And it’s just, it’s like this, it’s like the, you know, it’s like Soviet communism out, you
1:03:01 know, the hand coming out of the grave, you know, kind of still strangling our ability
1:03:03 to actually, you know, advance and be able to, you know, get our, get our jobs done.
1:03:05 Yeah.
1:03:09 And look, like, just to double underline what Catherine said, right, the battlefield itself
1:03:10 is changing, right?
1:03:14 And so one of the things that you see, for example, in the, in the Russia-Ukraine conflict is an
1:03:18 incredibly high rate of iteration of the battlefield techniques and use of technology on the battlefield.
1:03:22 You know, I mean, I don’t know why they have Catherine a five-day plan or something, you
1:03:26 know, in the Ukrainian military in terms of how fast they adopt new technology and adapt
1:03:26 what they have.
1:03:28 And, and that’s what they need to be able to fight.
1:03:31 And if they didn’t have that approach, you know, they would have lost a long time ago.
1:03:35 And, and, and by the way, the Russians are, you know, are trying to match them on that.
1:03:40 And so, you know, the, the, the old model of World War II era, you know, just simply mass,
1:03:44 you know, mass machinery and mass men to win wars, like those days are long over.
1:03:48 You know, even, even when you have like this very kind of contentious, you know, even the
1:03:51 modern version of French warfare, it’s still, you still have this very rapid iterative cycle
1:03:51 time.
1:03:57 And again, this should play greatly to America’s benefit if we unleash our strength, which is
1:04:02 if we take our strength of flexibility, innovation, creativity, dynamism, and apply that into the
1:04:05 battlefield of the future, like we really ought to win if we’re really able to do that.
1:04:05 Yeah.
1:04:14 I would just add to Mark’s thinking that going the other direction for the U.S. is literally
1:04:20 fighting our, everything about our culture, everything about our history, everything about
1:04:21 our system.
1:04:28 And the fact that it has appeal is like, I think like a weird psychological defect that
1:04:34 some people have where they’re just, they just always want central control and they always
1:04:34 think it’s better.
1:04:40 And this is, you know, a great investing strategy is to, if you see a company with a five-year
1:04:43 plan, short it and it works every time.
1:04:46 And yet they still do it.
1:04:51 And I, it just comes, it really has no basis in anything.
1:04:56 We saw this actually weirdly in networking, you know, Mark and David and I all come from the
1:04:56 networking field.
1:05:03 And when decentralized networks and packet switching came, you know, people fought it to the death.
1:05:10 Even after Len Kleinrock like mathematically proved it worked, like people would still say it would
1:05:13 never work because you couldn’t control it and this and that and the third.
1:05:19 And, you know, of course history has, has proven them all wrong, but you know, it’s not logical.
1:05:25 It is just like some kind of brain defect that they have in their psychology where they can’t
1:05:31 even, you know, visualize the fact that a system could work well that’s decentralized.
1:05:34 Well, I think we, we see this over and over again.
1:05:38 I mean, I, I even think about, you know, there was like a, I’m curious what Mark thinks, but
1:05:42 like when I think about private warp speed, to me, that was like promoting capitalism and
1:05:43 it’s best.
1:05:47 We said like, you know, any company that creates a vaccine, like, like we will distribute it, the
1:05:48 government will distribute it.
1:05:53 And then, so there’s no role for government, but they really stepped aside and let the private
1:05:56 companies come up with the vaccine, which happened much faster.
1:06:00 And we had, you know, depending on how you count, we had three working vaccines and a record-breaking
1:06:01 time.
1:06:03 And if you look at what China did, they, they did not have that.
1:06:07 And they were unsuccessful because they weren’t able to lean on creativity and ingenuity.
1:06:12 I think when we look at defense, you know, some of the defense reforms that we want to see
1:06:17 happen are things that actually push more toward entrepreneurship, not on past performance, but like,
1:06:18 what can you do for me today?
1:06:20 What can you deliver today?
1:06:25 Can we, can we put out the demand signals and then have you actually deliver it against,
1:06:25 against those?
1:06:28 Not look at what you did 10 years ago, 20 years ago.
1:06:34 You know, the idea that they’re, the government currently puts out RSPs that, that have a criteria
1:06:35 of what have you delivered in the past?
1:06:40 No matter if it was over budget or over time, but just what, what have you done in the past
1:06:43 doesn’t, doesn’t lend toward leaning towards startups.
1:06:48 And so some of the changes we’re pushing for, I think will benefit all companies and certainly
1:06:53 will benefit America and actually lean more toward that idea of entrepreneurship and to
1:06:54 what we’re best at.
1:06:59 Yeah, and even kind of better, or an equally good example of that is, you know, the whole
1:07:08 chip industry in the U.S. kind of came out of the race to get to the moon, where the U.S.
1:07:13 government specified, look, if you build a chip with these characteristics, we’ll buy it.
1:07:19 And so the government is, can set rules, can create incentives, can do a lot of good things,
1:07:25 but centrally controlling everything tends not to work so well, at least for us.
1:07:31 So segwaying more, more concretely into some American dynamism, investment theses, do you,
1:07:35 why don’t you share a couple of the areas we’re particularly excited about or opportunities
1:07:36 we’re looking at?
1:07:39 Yeah, I’ll, I’ll start and then maybe Catherine can jump in.
1:07:41 I think energy is a great one.
1:07:44 We, you know, you can sort of zoom in at any level you want.
1:07:48 At a macro level, you know, we’ve just seen throughout history, when you pour energy into
1:07:52 a system, you get just tremendous economic output, economic growth.
1:07:58 If you look at where, where we are today, not even looking forward, we have this insatiable
1:08:03 thirst for, for energy, whether it’s for AI compute, or whether it’s for people switching to electric
1:08:07 vehicles, or even moving to systems that are just electrified.
1:08:12 I mean, even the entire Department of War has multiple initiatives about moving toward electrification.
1:08:19 And so that just has this, this huge consequence of creating opportunities for power generation,
1:08:21 power transmission, power storage.
1:08:25 And the question is, are there going to be opportunities that we think are venture scale there?
1:08:26 We think there are.
1:08:30 We’ve invested in nuclear power companies, a company called Radiant Nuclear.
1:08:33 We’ve invested in Exilat.
1:08:36 We’ve looked at lots of battery technology companies.
1:08:39 And we might just think there’s great opportunities here.
1:08:44 But I mean, even just pragmatically, you know, we have three companies now that are on China’s
1:08:48 unreliable entities list, which is an amazingly named list.
1:08:51 But they’re forbidden now from buying batteries from China.
1:08:56 So it’s like, if you care about the defense industrial base, if you care about anything that requires
1:09:00 a battery, even consumer electronics, like you need to have battery capability in the United
1:09:04 States and or amongst our allies, you need to have there’s a whole bunch of things you need.
1:09:08 And so we just think there’s exciting opportunities there on the energy side.
1:09:15 In the same vein, if you start, if you continue to shift left, you look at critical minerals and
1:09:20 whether it’s magnets, whether it’s motors, whether it’s copper from manufacturing, whether
1:09:27 it’s steel, there’s all these areas where, you know, software that are massive, massive economic
1:09:29 spend centers.
1:09:35 I mean, trillions and trillions of dollars are spent in mining, in construction, in manufacturing,
1:09:42 where software has really not looked into these areas, like nobody’s figured out, can you really
1:09:45 apply advanced algorithms to figure out how to do mining better?
1:09:49 And while that sounds like a quote that would be like, you know, memeable, like, why that
1:09:51 sounds so stupid, it’s actually not stupid.
1:09:55 There’s pressure, there’s temperature, there’s a lot of work that goes into mining, not just
1:09:57 in site selection, but actually in the process.
1:10:03 And these are areas where I think we now see incredible talent shifting their eyes toward these
1:10:07 areas, and, you know, we just think it’s a great opportunity, and it will ultimately be good for
1:10:07 America.
1:10:12 If we go back to sort of our early investments, you know, again, investments like Anduril and
1:10:17 Shield AI, where we led the Series A in 2016, we’ve been around this space for a very long time.
1:10:22 But those early companies, they had no other choice but to be what’s known as the prime.
1:10:27 They had to compete against the legacy incumbents, they had to try to get their own contracts,
1:10:29 and working with the Department of War.
1:10:32 And it was an uphill battle for them, as they were the first.
1:10:36 But what we’re seeing now from our companies, which, you know, I always refer to them as
1:10:40 sort of Defense 2.0, are the ones that really started around 2021, 2022.
1:10:43 These companies are happy to work with the existing legacy primes.
1:10:48 I’d also say that a lot of the industrial base is kind of waking up and recognizing that they
1:10:52 need to bring software, they need to bring the best and brightest engineers from Silicon
1:10:55 Valley into what they’re offering government, and they’re already on contracts.
1:11:00 So one of the things that we’ve seen, at least in the kind of second cohort that’s come through
1:11:07 American Dynamism Fund 1, is that these companies can grow so much faster, and they have a much
1:11:10 richer customer set that they’re supporting because of that.
1:11:14 So I think that’s something that’s sometimes lost on people, is just how is it possible that
1:11:17 these companies can really be working with the government this quickly?
1:11:21 And one, it’s because you have a government now that understands why they need to bring these
1:11:27 companies from Silicon Valley or other places that really understand next-gen engineering.
1:11:32 But the real reason is everyone’s sort of woken up to the opportunity, and there’s a lot of
1:11:37 partnerships that are happening among the legacy and the new players, and they’re reaching, I
1:11:41 would say, extraordinary heights much earlier in their trajectory than the previous generation
1:11:43 of space and defense companies in 1.0.
1:11:50 I’d also say a lot of these founders are coming from some of these version 1.0 companies,
1:11:55 so they’ve seen what success looks like in these areas, at least at some level.
1:11:59 I mean, if you come out of SpaceX and you were there for, you know, six, seven, eight years,
1:12:04 and you saw how SpaceX got built, like, you have a huge head start in starting the next American
1:12:05 Dynamism company.
1:12:11 To that, you mentioned some winners in the portfolio and, you know, others like Ceronics
1:12:14 and Apex and Base and Flock and many others.
1:12:19 As they’ve emerged, what can we, and maybe gearing towards closing here, what can you say about
1:12:23 the founders and the types of founders that are building these companies?
1:12:29 Maybe what’s interesting about sort of them culturally or philosophically or their backgrounds
1:12:33 or what their understanding that maybe others don’t fully appreciate?
1:12:34 Catherine, what would you say?
1:12:38 Well, I’d say, you know, what we’ve always pointed to is that these companies are built
1:12:39 across America.
1:12:41 So, Ceronic is based in Austin.
1:12:42 Flock is based in Atlanta.
1:12:48 And if you look at the founders, it’s not your typical, again, to go back to the Bob Noyce
1:12:53 Harvard dorm room comparison, it’s not your typical, you know, software engineer coming out of a
1:12:54 college dorm.
1:12:58 Like, these are people, you know, in the case of Dino at Ceronic, you know, he served in the
1:13:04 Navy SEALs, enlisted for 11 years before going back to school and then founding companies
1:13:05 and learning private equity, right?
1:13:10 So, there’s something about being entrenched in what the customer needs that I think is
1:13:13 very specific to American dynamism.
1:13:17 A lot of the best founders, you know, they’ve either sold to the government before, you know,
1:13:19 many of them have clearances before they even start their company.
1:13:25 They understand how to really speak the language of the customer, which I think is very important
1:13:25 for this category.
1:13:29 It’s something that we always, you know, really look for when we’re investing in new companies
1:13:32 is how deeply does this founder understand the customer?
1:13:36 And it’s very hard to understand the customer if you’ve never served, if you’ve never worked
1:13:37 inside of government.
1:13:42 And so, I’d say that’s actually something we very much test for across these categories
1:13:44 is how deeply do you understand who you’re selling to?
1:13:50 Maybe just gearing forward, you know, we’ve covered the past and present of American dynamism.
1:13:53 What can you tell us about what we’re looking forward to?
1:14:00 Yeah, I think we’re in this exciting moment in time where both the need and the demand
1:14:08 for new technologies, whether it’s in public safety or in the Department of War or anywhere
1:14:11 else in the government or just anywhere across the United States, is greater than it’s ever
1:14:12 been.
1:14:14 We’re also at this major transformation moment.
1:14:18 You know, Mark mentioned, I think, robotics is AI personified in physical form.
1:14:21 I think it’s going to be extremely exciting.
1:14:22 I think it’s a lot closer than people think.
1:14:28 You know, if you’ve been in San Francisco, gotten in a Waymo, you already know that autonomy
1:14:32 and self-driving cars is absolutely going to be, like, the way forward.
1:14:36 We just see that there’s, we’re just sort of, you know, entering this incredible moment
1:14:43 in time where new technology is meeting these very, very legacy in old categories.
1:14:45 And I’m very excited about where it’s going.
1:14:50 We see more and more founders entering the area across all these different domains.
1:14:57 And, you know, for us, to me, it’s just like this, we’re just in the early innings of America,
1:15:02 sort of on a major comeback when it comes to introducing new technology into these key areas.
1:15:03 I think it’s pretty exciting.
1:15:06 That sounds like a great place to wrap.
1:15:09 This is a great conversation on the history and philosophy and the past, present, future
1:15:10 of American dynamism.
1:15:16 Thanks for listening to this episode of the A16Z podcast.
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0:00:05 Let’s come back to the big picture thing.
0:00:07 Is America an aggregate a force for good in the world?
0:00:09 Is it important for the world that America succeed?
0:00:12 Is it important that American values, Western values are preeminent in the world?
0:00:16 Is it important that the world not devolve into a complete Soviet communism everywhere?
0:00:21 The other direction is literally fighting everything about our culture,
0:00:25 everything about our history, everything about our system.
0:00:31 And the fact that it has appeal is like a weird psychological defect some people have.
0:00:33 They just always want central control.
0:00:35 They always think it’s better.
0:00:36 And by the way, it routinely doesn’t work.
0:00:38 Like, it routinely fails because the world is too dynamic,
0:00:40 and that’s not nearly a fast enough iteration cycle.
0:00:44 The thing that people want is exactly what we named the category.
0:00:46 How do we build American dynamism?
0:00:49 How do we build Silicon Valley in our own country?
0:00:51 Geopolitically, we entered a new era.
0:00:58 We’re at this exciting moment in time where both the need and the demand for new technologies is greater than it’s ever been.
0:01:02 The creator of the concept of the five-year plan was, of course, Joseph Stalin.
0:01:07 It was literally the Soviet Union running as five-year plans.
0:01:08 I’ll tease Ben a little bit.
0:01:10 He comes from the People’s Republic of Berkeley.
0:01:16 The old model of World War II era, mass machinery and mass man to win wars like those days are long over.
0:01:22 This should play greatly to Americans’ benefit if we unleash our strength with flexibility, innovation, creativity, dynamism,
0:01:24 and apply that into the battlefield of the future.
0:01:26 Like, we really ought to win if we’re really able to do that.
0:01:31 For decades, Silicon Valley and Washington lived in different worlds.
0:01:33 Tech companies built consumer apps.
0:01:35 Defense contractors built weapon systems.
0:01:36 And the two rarely spoke.
0:01:38 But something shifted.
0:01:42 He claimed proof that cheap drones could take out $100 million tanks.
0:01:47 China spent 20 years building a manufacturing base while America exported its factories.
0:01:55 And suddenly, the companies defining the future, AI, robotics, autonomy, realized they couldn’t ignore the physical world anymore.
0:01:56 Mark and Ben saw this coming.
0:02:01 They had sold to the Pentagon back in the 90s when Netscape was building the early internet.
0:02:05 They watched Silicon Valley turn hostile to defense work in the 2010s.
0:02:11 And in 2020, when Catherine pitched them on creating a new category called American Dynamism, they knew the moment had arrived.
0:02:20 I’m joined today by A16Z co-founders Mark Andreessen and Ben Horowitz, along with American Dynamism GPs Catherine Boyle and David Ulovich,
0:02:28 to discuss not just defense tech, but the entire industrial base, energy, manufacturing, mining, and physical infrastructure that makes a country powerful.
0:02:37 This is the story of how Silicon Valley remember what it was built for and why the race to rebuild America’s industrial base might be the most important investment thesis of our time.
0:02:42 I thought we’d start with a bit of an opener.
0:02:48 I want to ask Ben and Mark to tell us about the moment when we got conviction that this was worth creating its own category fund around.
0:03:06 Yeah, well, I would say that, you know, Mark and I kind of always were of the view in an abstract sense that we had to integrate the American business and American defense back together because we were falling behind.
0:03:14 We kind of knew the companies that we were investing in, and we knew the companies that we were buying missiles and aircraft carriers from,
0:03:18 and they weren’t of the same caliber in terms of where they were on the technology curve.
0:03:25 And so we knew it was a kind of a national security problem for the country, but we didn’t have a plan.
0:03:36 And then, as I recall, David said, there’s this woman, Catherine Boyle, who I want to recruit, and she has this very, very good idea.
0:03:38 Can you guys talk to her about it?
0:03:44 And that’s when she said, look, we should call it American Dynamism, and we should build this thing.
0:03:48 And it was a very easy sell for us, I would just say.
0:03:50 Yeah, and maybe I could just take a step back.
0:03:56 So some of you on this call are too young to remember this, but there was an earlier era in Silicon Valley, and it actually wasn’t that long ago.
0:04:02 And Ben and I were both lucky enough and maybe of the right generation to be part of it, which was Silicon Valley and the United States.
0:04:10 Let’s say the mission of the United States as a country, and then sort of the submissions of not just economic and technological success, but also military success and intelligence success,
0:04:15 and our ability to propagate our way of life, not just in the country, but around the world.
0:04:18 There had actually been like a fairly tight degree of integration and cooperation.
0:04:26 And if you actually trace the history of Silicon Valley back, even before World War II, there was a lot of the original defense technology work that happened in Northern California, where we sit today.
0:04:34 And then for sure, from the 50s through to the, I would say to the 90s, it was just taken as a given that this was sort of inherently an alliance with the shared American mission.
0:04:43 And so, you know, many, many great American tech companies, including all the big names from the 50s to the 90s, all had very big government businesses, defense businesses, you know, were very important to the national mission.
0:04:47 And then Ben and I in the 90s, when we built our company, Netscape, like that was always front and center for us.
0:04:50 My first sales call to the Pentagon was in 1994.
0:04:53 I don’t think I actually owned a city yet, so 31 years ago.
0:04:56 And our company, Netscape, ended up being a major supplier of technology to the…
0:05:01 Yeah, actually, both Mark and I had for years top secret clearance because of those deals.
0:05:02 Yeah.
0:05:06 So we were working in the Pentagon and in related agencies on the civilian side also for a very long time.
0:05:08 And we just sort of considered it kind of natural.
0:05:10 And I’m really proud of the work that we did there.
0:05:12 And it turned out to be a very big part of our business also.
0:05:16 And then extended over time to also governments outside the U.S. that were American allies.
0:05:18 And so for us, this was always very natural.
0:05:22 And I think everything I’m saying is almost like non-controversial up until probably the 2000s.
0:05:29 And then basically for the last 15 or 20 years, by the way, for a variety of reasons, including reasons that people feel very strongly about, we could talk about for a long time.
0:05:35 But just a much greater degree of contention and escalating in some cases to just outright hostility kind of developed.
0:05:41 And I would say most directions from Silicon Valley, let’s say large components of Silicon Valley, not all, but significant companies for sure.
0:05:45 Hostility towards D.C. and hostility towards any sense of national mission, national purpose.
0:05:50 And quite frankly, that feeling was quickly reciprocated by Washington back to Silicon Valley.
0:05:54 And there’s plenty of people from Washington in the last 20 years who’ve made a point of how much they hate us.
0:05:59 To me, it felt like we entered this kind of de-evolutionary spiral over the course of the last 15 or 20 years.
0:06:06 And probably, Ben, I think maybe you’d agree, the peak hostility disconnection was maybe in the late 2010s, early 2020s.
0:06:16 Yeah, I think the Google Maven project was kind of a watershed moment where people had to take sides, just kind of intellectually.
0:06:24 When Google won a government contract for kind of, I think it was AI to be used in kind of drone technology or something like that.
0:06:30 And then they basically pulled out of the contract due to a protest from a bunch of their employees.
0:06:31 Yeah.
0:06:35 And not just, and Ben, I think you’d confirm, not just like a mild protest, but like visceral, emotional.
0:06:44 Oh, they all were like, yeah, it was like a revolt from, I remember Sundar described it to me, a revolt from the international AI community.
0:06:48 And so it was pretty wild and certainly unprecedented.
0:06:49 Yeah.
0:06:52 And so I think there’s sort of things sort of bottomed out there.
0:06:57 And then I think some of us, and obviously there are new companies that have played a big role here, but some of us like Ben and I who were involved in this in the old days,
0:07:02 it was kind of a chance for us to kind of take stock of where things were, how things had gotten that bad, what went wrong,
0:07:05 and then start to at least try to figure out kind of how to fix it.
0:07:11 And so anyway, so that’s why like I was so enthusiastic when David and then Catherine developed these ideas and developed this new mission for the firm.
0:07:15 I thought it was just like an absolutely fantastic idea at the start and still do.
0:07:16 But I just want to go through that.
0:07:18 There’s a back to the future component of it, right?
0:07:22 Which is, it is like what we’re doing and what others are doing in this space.
0:07:25 It is new and bold and exciting and different and very different than the norm five years ago.
0:07:27 And that’s all real.
0:07:32 But at the same time, there is a historical resonance, which is it’s also a return to the original values of Silicon Valley,
0:07:35 which is something I find to be just incredibly positive and important to be a part of.
0:07:37 Yeah, and two footnotes that I think are important.
0:07:41 One is it actually started with the universities.
0:07:47 So Professor Frank Terman and William Shockley, who were developing these technologies,
0:07:55 and to support the war effort basically encouraged their students to not pursue PhDs and spin out and build companies to support the country,
0:08:03 which is an ironic turn because those same universities kind of spawned the ideas, I would say, that led to their revolt at Google.
0:08:10 And then the other footnote is Google has definitely since Google slash Alphabet has reversed their position
0:08:13 and now do work with the U.S. government and the Defense Department.
0:08:15 So we’re in a happy place there.
0:08:23 And just to tie the threads together, can we spend just a couple minutes explaining what are some of the headline reasons that the hostility developed
0:08:27 so that we can then get back to the present and describe what changed?
0:08:32 I want to hear from Catherine, I think, in particular on this, because she was both an observer and a participant in it for the last, like, decade plus.
0:08:37 I don’t know, like, let’s start by saying there are, like, I would say serious and legitimate differences in philosophy and worldview.
0:08:41 I’m watching a lot of movies with my 10-year-old, and we watched the movie Real Genius last night.
0:08:44 It’s a movie in 1985, actually made by our good friend Brian Grazer.
0:08:46 It’s just, like, one of my favorite movies, an incredible movie.
0:08:54 But it was sort of an artifact of the post-Vietnam era in which, spoiler alert, the kids in the movie are going to basically a thinly disguised version of MIT,
0:08:58 and they’re working on lasers, and they discover to their enormous horror that they’re working on a weapon.
0:09:01 And the sort of assumption in the movie is if you’re working on a weapon, you’re evil.
0:09:06 And they don’t even, like, pause for a moment to ask the question of, well, actually, could this actually be, like, super helpful,
0:09:08 or how does this fit in the strategy or whatever?
0:09:12 And so it was, like, sort of very much of a moment post-Vietnam that the military was evil in general.
0:09:15 And so there’s been some of that in the ecosystem for a long time.
0:09:19 By the way, Ben mentioned Stanford, the pioneering role of Stanford in all of this.
0:09:26 Stanford was actually forced in the 1970s to divest all of their military R&D and any R&D that touched the military into something called the Stanford Research Institute.
0:09:33 So many top American universities forever, basically since Vietnam, have not allowed, like, ROTC or intelligence agency recruiting happening on campus.
0:09:37 And so there’s like a 60s kind of dimension of this post-Vietnam thing.
0:09:44 And then in the last 15 years, I think it just all got kind of wrapped up in the broader kind of national political drama of our time.
0:09:48 And basically people feeling like they have to take sides on all kinds of political issues.
0:09:54 And then I would say beyond that, feeling like political issues aren’t just political issues, they’re like fully moral issues, and that you’re immoral if you’re on the other side.
0:10:02 And so, by the way, there’s also like a post-Iraq component to it, which is, can we really trust the system that took us into Iraq, which obviously had big impact on our national politics.
0:10:07 And so that stuff all just kind of snowballed in the valley leading into what Ben described in the late 2010s.
0:10:10 And I think there’s a variety of different responses you could have to that.
0:10:15 One is you could say you believe that the post-Vietnam generation or the post-Iraq mentality is the correct mentality.
0:10:17 And there’s lots of points of views that you could have on that.
0:10:23 I just think like in the heat of the moment, I think it’s very easy to get wrapped up in like a specific politics or morality of a specific situation.
0:10:29 I would just come back to the kind of the big picture thing, right, which is, is America an aggregate a force for good in the world?
0:10:31 Is it important for the world that America succeed?
0:10:35 Is it important that, broadly speaking, American values, Western values are kind of preeminent in the world?
0:10:44 Is it important that the world not, you know, devolve into a, you know, totalitarian, you know, it was important during the, in the 20th century Cold War that the world not devolve into a complete Soviet communism everywhere.
0:10:50 You know, I don’t think any of us want to see a world in which, you know, we end up with kind of the same scenario with like Chinese communism.
0:10:57 And so I think you can just kind of have these kind of big, big, big picture views of the importance of the overall thing.
0:11:03 I think you can also just say you can have a lot of respect for the men, women in uniform, you know, who put their lives on the line every day, protecting and defending us.
0:11:11 And, you know, it’s, I think it’s a pretty reasonable stance to say that they deserve to be supported, you know, by their, by their, you know, fellow countrymen like us.
0:11:18 Yeah. And then you can just also have a view of like, yeah, I mean, look, as the cliche goes, we live in a society, right?
0:11:27 And part of the society is, is, is that, you know, the government is going to be, have certain capabilities and it’s going to be, you know, better if they’re better and worse, worse, worse if they’re worse.
0:11:36 And so, so I, anyway, I just think like those, that sort of broader view just kind of, I think got, was getting increasingly washed out by some very specific heated political topics.
0:11:42 I think, by the way, I think now is a good time for a lot of, you know, for a lot of us, for a lot of people, you know, really kind of take stock of this.
0:11:48 You know, it’s maybe some of the superheated, you know, kind of emotions in the last, you know, eight years, maybe are fading a little bit right now.
0:11:53 And, you know, some people are kind of saying, well, actually, we don’t need to think about what the next 30 years looks like.
0:11:54 And we want it to work in a different way.
0:12:00 I’ll add two points to that, because I think Mark’s point on culture plays a huge role in this.
0:12:05 But there’s two things I’ve noticed since moving to the Valley.
0:12:07 I moved to the Valley in 2014, but I moved from Washington, D.C.
0:12:13 And one of the things that I noticed when I moved is that if you are in Washington, D.C., you ride the metro.
0:12:15 The metro stops at the Pentagon.
0:12:18 Every time you ride the metro, you see men and women in uniform going to work.
0:12:25 So it is a daily part of life that national security issues, like when people talk about technology in Washington,
0:12:27 they’re talking about aerospace, they’re talking about defense.
0:12:30 I mean, they’re talking about the companies that they see every day the billboards for,
0:12:35 which are very different than the billboards you see on, you know, in Silicon Valley.
0:12:41 So I think that’s a huge part of it, is just culturally, people are very accustomed to national security missions
0:12:44 and needs and people in uniform in Washington, D.C.
0:12:46 And there’s none of that in Silicon Valley.
0:12:51 Like, you could go a decade in Silicon Valley without seeing a person in uniform.
0:12:52 And so I think that’s a part of it.
0:13:00 But to Mark’s point on culture, I’ve always said that I think the social network had probably the greatest influence of the 2010s
0:13:04 in terms of being a defining movie of what technology means.
0:13:10 And when you look at sort of the kind of Bob Noyce generation of working with your hands, building the physical world,
0:13:17 where those engineers came from, versus the story of a Harvard dorm room that inspired generations of college students
0:13:21 who were studying computer science in their dorm to come to Silicon Valley,
0:13:25 those are two very different populations and they symbolize two very different things.
0:13:34 And so what I think is interesting is probably, like, the 2010s were really solidified by this sort of Harvard-esque social network culture
0:13:42 that is totally different than the culture of people who are building, you know, satellites or building anything in the physical world.
0:13:48 And we really didn’t start talking about how those people are necessary for Silicon Valley technology
0:13:53 until Mark’s essay, it’s time to build, until 2010, until we didn’t have enough PPE for COVID.
0:13:59 And so I think it was really just sort of the kind of almost the logical 180 to what have we done here?
0:14:06 Like, we’re not all Harvard grads building in the application layer when we should be thinking about the things that we actually need in the physical world.
0:14:08 If I could just, Catherine, I think that’s a good point.
0:14:12 I’ll just say I’ll add one kind of personal component to that, which is Bob Noyce, of course, grew up in rural Iowa
0:14:16 and was sort of of that, you know, kind of World War II contemporaneous generation.
0:14:20 You know, he undoubtedly knew many servicemen and women.
0:14:24 You know, he undoubtedly knew many, you know, he and his family undoubtedly knew many soldiers who went to war and didn’t come back
0:14:26 and others who came back wounded.
0:14:29 And, you know, I grew up in rural Wisconsin.
0:14:32 I actually grew up in rural Wisconsin kind of post-Vietnam and, you know, kind of a very similar thing.
0:14:38 Like, if you look at where the sort of war fighters in the American military come from, it’s, you know, sort of the center of the country in a lot of cases.
0:14:44 And so if you grow up in one of those environments, it’s just like, yeah, it’s just like an integrated, you just realize that this is an integrated part of your society.
0:14:46 Yeah.
0:14:51 And then, yeah, maybe I come from a little bit more of that background and then I’ll tease Ben a little bit.
0:14:55 He comes from, of course, the polar opposite, the People’s Republic of Berkeley.
0:15:02 In which, I hate guessing, probably, the uniforms you saw people walking around in your youth were not camouflaged.
0:15:03 They were somewhat, something else.
0:15:07 That is definitely true.
0:15:19 Although, although, you know, I ended up, I ended up knowing a few people who did go to the, so, you know, probably because I played on the football team,
0:15:21 I ended up knowing a few people who did go to the service.
0:15:29 And, I mean, I think that’s one of the things that always struck me as incorrect.
0:15:37 I’ll just say about the kind of anti, you know, we’re not going to sell stuff to the U.S. military and so forth.
0:15:54 It’s like, well, so, here are friends of ours who are risking their lives to protect us and we’re not going to make sure they have the best, safest equipment and technology available.
0:15:58 Like, and that’s your moral position?
0:16:00 Like, that always struck me as very weird.
0:16:02 But, you know.
0:16:03 Yeah.
0:16:12 I remember a few months ago, Paul Graham was trying to critique Palantir, I think, for sort of involvement in some sort of military.
0:16:13 Nice, nice.
0:16:14 Yeah, yeah.
0:16:26 It’s just indicative of kind of, you know, web 2010s insults that don’t work anymore because the culture has changed so much such that, you know, within just a few years, Palmer could be, you know,
0:16:38 you know, negatively impacted or, you know, let go from Metta for sort of political contributions to the wrong side or presumably the wrong side and now is a hero for his work in saving American defense.
0:16:42 It’s just indicative of how much the culture has changed in the last few years.
0:16:50 Yeah, it turned out, I’ll just bash into counter-arguments for a moment, having been trying to be fair earlier, I’ll now be totally unfair.
0:16:54 Like, a lot of the arguments against, like, they’re very thinly substantive.
0:16:57 They’re emotional in nature and very thinly substantive.
0:17:08 And so my favorite story, Eric, of your example was there was a big protest against tech companies working with ICE early in the first term, in 2016, 2017.
0:17:18 And there was sort of this revolt where a bunch of tech CEOs kind of did this kind of very posturing thing where they said, of course, we’re never going to work with those formal people, you know, who are, you know, trying to deal with, like, all, you know, everything on the border.
0:17:28 And I remember, actually, a friend of mine was running one of those kind of, you know, at the time, one of the most, like, culturally advanced, technologically advanced, coolest tech companies in San Francisco.
0:17:34 And, you know, they had a contract, you know, their service was used by ICE along with, you know, thousands of other organizations.
0:17:37 And, you know, his employees did the big, you know, kind of outrage, how can we possibly do this?
0:17:45 And so he actually went out, this was, I think, 2017, he went out during the heat when the thing was at maximum level heat intensity of that time.
0:17:47 And he went out and actually got a former director.
0:17:58 Actually, he got a guy who had actually been in the Obama administration as basically the head of the border security of the Obama administration to basically come in and give an hour-long seminar at the company and just explain, like, here’s what’s actually involved in the border.
0:18:00 Here are all the things that make it complicated.
0:18:09 Here’s all the stuff involving, you know, not just, you know, not just people coming across, but also children and, you know, sex trafficking and, like, you know, drugs and, like, all the other aspects of it.
0:18:13 And he came in and did an hour-long talk and, you know, the entire company was invited.
0:18:15 And, you know, three people showed up.
0:18:17 Right.
0:18:22 And so, like, I think that, you know, that level of emotionality, like, it had its moment.
0:18:24 And I think it’s just over now.
0:18:31 And I think we and, you know, hopefully, you know, hopefully we and hopefully a lot of others are just kind of, you know, back to, you know, in a lot of ways, back to basics, back to fundamentals.
0:18:37 These missions actually really do, you know, independent of the political mood of the moment, these issues matter.
0:18:37 These people matter.
0:18:38 These organizations matter.
0:18:39 And they deserve to be supported.
0:18:41 Okay, cool.
0:18:45 We’ve heard Ben and Mark’s perspective on the origin of American dynamism.
0:18:48 Do you and Catherine, let’s hear it from your perspective.
0:18:55 When I joined the firm in 2018, you know, you have to remember what time that was, what era it was in Silicon Valley.
0:19:02 I think Silicon Valley lost its way, as we’ve discussed, in terms of focusing on defense, focusing on really hard problems.
0:19:04 You know, hardware was not in vogue.
0:19:08 The intersection of software and advanced hardware was not popular.
0:19:16 And about a year after I joined, Mark asked me if I wanted to meet Palmer Luckey, who is the founder of Anderil.
0:19:20 I think Mark was skeptical that our firm would be interested in a deal like that for a variety of reasons.
0:19:25 But I went down to Costa Mesa to their office.
0:19:29 They had just unveiled their new office, which is no longer their new office.
0:19:30 It’s now their old office.
0:19:34 And when I was there, you know, like we had fallen in love with the company.
0:19:35 We thought it was amazing what they were doing.
0:19:37 When I was there, actually, I met Catherine.
0:19:40 She wanted to lead the Series B when she was at General Catalyst.
0:19:42 I wanted to lead the Series B.
0:19:43 We ended up splitting it.
0:19:46 But it wasn’t the best first meeting.
0:19:47 I’ll put it that way.
0:19:48 That’s true.
0:19:48 That’s true.
0:19:51 I’ll let you decide how much of that you want to share.
0:19:58 But we basically started out, I think, with not knowing each other at all, competing to win a deal, having to split it.
0:20:01 I think one of the worst things I did was that I actually had not—
0:20:03 she had done so much work for the Series B.
0:20:05 She had done all the diligence work.
0:20:06 She had done notes.
0:20:08 She actually helped the company prepare for the Series B.
0:20:09 I had not done that work.
0:20:13 And I think to add insult to injury of having to split the deal, I then asked her for her notes.
0:20:18 So I could write our memo, which is really probably one of the more embarrassing—
0:20:21 I sent them because I’m a good soldier.
0:20:22 You are good.
0:20:22 Yeah.
0:20:25 It was a brutal way, I think, to meet.
0:20:26 But I respected Catherine.
0:20:27 That’s the important part.
0:20:29 The important part is I respected Catherine.
0:20:33 And we both thought Andrel was a great company.
0:20:39 A couple years later, and I then continued to follow all of Catherine’s writing.
0:20:44 She was really—she used different terminology at the time, but eventually she came up with the terminology of American dynamism.
0:20:47 I thought that was a perfect phrase.
0:20:53 I then, in 2021, I think, invested in Flock Safety.
0:20:57 That was at a time where Black Lives Matter was a big movement.
0:21:03 People thought the idea of funding public safety and supporting the police was not so cool in Silicon Valley.
0:21:08 But we knew that when we talked to people who actually were customers of Flock Safety and people in the communities, they loved it.
0:21:11 And I just thought this was the highest and best use of my time.
0:21:12 It was the time I wanted to spend.
0:21:22 At that point, Catherine—she was really writing more and more about this idea and the importance in investing in these areas, critical to the national interest.
0:21:29 And I reached out to her with Mark and Ben’s support and said, hey, I think we should join forces.
0:21:31 We should make this a full-fledged effort.
0:21:34 We will make this a long-term commitment.
0:21:35 We’ll raise money.
0:21:36 We’ll raise a fund.
0:21:37 The firm is totally behind it.
0:21:39 I think she didn’t believe me at first.
0:21:41 She can give her version of it.
0:21:48 But then she came around to it, and at the end of 2021, she joined the firm, and we launched the American Dynamics of Practice.
0:21:51 And it’s been, as they say, up and to the right ever since.
0:21:54 Can I give another part that we’ve never told?
0:21:54 Please.
0:21:56 Do you do that is actually—
0:21:57 It’s really for you to tell.
0:21:58 You can tell me.
0:22:01 We’ll cut it if it’s inappropriate.
0:22:07 But we’ll give another part of the story that we’ve never told, which is who the actual matchmaker was for DU and I.
0:22:11 Because until a single moment, we had always been competing.
0:22:17 And, you know, I had sort of secretly been like, er, I wish you would just stop looking at these companies.
0:22:18 And it actually is Flock Safety.
0:22:26 Garrett Langley called me very late, like 11.30 at night, right before his process was about to kick off.
0:22:28 And he said, I have terrible, terrible news.
0:22:30 Great news for me, but terrible news for you.
0:22:34 David flew out and wouldn’t let me leave the restaurant and made me sign a term sheet.
0:22:37 And I’m not going to be running a process anymore.
0:22:40 And I said, Garrett, how could you do this?
0:22:42 You know, I wasn’t like, how could you do this?
0:22:43 I was like, happy for you.
0:22:45 But I’m like, Garrett, you know, I wanted to be part of your process.
0:22:48 And he said, well, I think the right solution.
0:22:52 And I told David this, is that you guys should just join forces and you should join Andreessen Horowitz.
0:23:01 And then, I kid you not, two minutes later, David calls me and says, hey, like, we haven’t had a meal.
0:23:03 We should grab a meal.
0:23:13 So I sort of knew what was happening, but I am forever grateful, I think, for Garrett Langley kind of trying to smooth things over
0:23:15 and kind of thread the needle very gracefully for himself.
0:23:20 I’m saying, well, why don’t you just join Andreessen Horowitz and that way we can all work together.
0:23:22 He’s an amazing CEO.
0:23:26 There’s one other funny part about that fundraising round, which has never happened to me in any other.
0:23:28 This is just sort of a non sequitur.
0:23:35 But another investor who was really excited about that round and not excited about that phone call wrote me this crazy email.
0:23:42 I won’t say who it was, but one of his reasons about why he should then get into the round was that he had already printed out the term sheet.
0:23:45 And I was like, well, I also own a printer.
0:23:48 Like, what does printing out the term sheet have to do with anything?
0:23:57 Fort Garrett had some very upset people who were hanging around the hoop who didn’t fly out to Atlanta the day before he started,
0:24:01 which is a very strong reminder to all of us.
0:24:03 Get on the plane and fly out before the process starts.
0:24:04 Totally.
0:24:07 And don’t let them leave until the term sheet is signed.
0:24:09 I like that pro move to you.
0:24:13 So let’s segue into you started American Dynamism.
0:24:18 And I’m curious because people have this perception that, you know, hardware is very hard.
0:24:19 It’s very capital intensive.
0:24:21 Margins are worse.
0:24:24 It takes a long time to get returns if they ever do.
0:24:27 How should people think about this category from an investment perspective,
0:24:31 given some of the preconceived notions that people had about the category?
0:24:34 There’s a bunch of different ways to build a hardware company.
0:24:37 I think if you look at a lot of the American Dynamism companies,
0:24:40 at least the early sort of innings of where they started,
0:24:44 a lot of them were using off-the-shelf commodity hardware with really advanced software.
0:24:53 So Flock Safety was basically a camera, a cell phone camera in a box with power to it and an LTE connection.
0:24:58 If you look at some of the early Andral work, it was largely commodity optics, commodity hardware,
0:25:02 commodity, you know, parts that they were able to turn into things like the Sentry Tower.
0:25:04 And then over time, those things have gotten more sophisticated.
0:25:12 But a lot of the companies we invest in, their early versions are really more commodity hardware they’re able to put together.
0:25:18 And then I think the unique thing and the key thing is that we’re at this moment where you can then pair that with advanced software
0:25:22 that drives things like computer vision, autonomy, et cetera.
0:25:27 And I think that that is why this is the moment in time where hardware makes a lot more sense.
0:25:34 The other thing is that the customers that they’re serving, it’s not like you have to build your hardware for the Christmas gifting season
0:25:38 where you only have one shot to make 80% of your sales.
0:25:45 When you do government hardware or hardware for the Pentagon or across enterprises,
0:25:48 it’s a much different sales cycle and process.
0:25:53 You can better manage your inventory and your pacing and your hardware spend.
0:25:58 And there’s also just a lot more, I would say, equipment financing available for the very large-scale hardware projects.
0:26:01 And so it really is just a different dynamic.
0:26:04 And I think if you understand that and you spend time in these categories,
0:26:08 you recognize that this is not the same thing as making like a consumer electronics toy,
0:26:11 which is a really almost like a hits business.
0:26:15 Or, you know, if you have one major issue and recall, it destroys the company.
0:26:16 It’s not quite like that.
0:26:19 Steve, let’s go deeper on energy.
0:26:23 Where are you most excited or where are we thinking about it from an investment perspective?
0:26:25 Yeah, look, I’ve said this many times.
0:26:32 We, as a general society, as an economy, have an insatiable thirst for energy and for power.
0:26:35 And those are not exactly the same thing.
0:26:39 But we need power in order to run our AI compute loads.
0:26:43 We need baseload power, which means always-on power,
0:26:47 to run our electrical, our aging electrical grid.
0:26:50 That means we need generation, we need transmission, and we need storage.
0:26:55 And so, again, whether it’s electric vehicles, whether it’s AI compute,
0:26:57 it doesn’t really matter what the reason is.
0:27:02 We know that there is just absolute demand from the consumer side
0:27:05 to have more and more electricity in the system and more and more power generation.
0:27:11 And so I think what we look for is where are there just massive ways to create
0:27:18 and generate energy that is transposable, that is transmittable, that can be modular,
0:27:19 that can be mobile.
0:27:22 And so we’ve made two investments in the energy space.
0:27:24 Exowatt is one.
0:27:26 Radiant nuclear is the other.
0:27:31 We know that those are two power generation systems.
0:27:32 One uses the sun.
0:27:37 One uses nuclear energy to create reliable power systems.
0:27:42 And so we’re very excited about it, and we certainly, I think, would make more investments.
0:27:48 But the last thing I would say is that there’s been multiple studies that we’ve seen shared around over the years
0:27:53 that when you pour more and more energy into an economy, you get economic growth.
0:27:56 And that’s been true in all of modern history.
0:27:59 And I think that’s going to be true today as well.
0:28:00 Yeah.
0:28:03 Catherine, I want to segue to aerospace.
0:28:08 There’s a lot going on in terms of space manufacturing, hypersonics, responsive launch.
0:28:10 Where are we making bets?
0:28:12 Where are we most excited to make more?
0:28:13 Yeah.
0:28:18 So I think the thing that’s really changed about aerospace that I think we’re incredibly excited about
0:28:21 is it used to be that everyone had to vertically integrate.
0:28:26 And sort of space 1.0 was very much categorized with companies taking the SpaceX model.
0:28:28 You will build everything yourself.
0:28:31 It might take 10 years to get to space, and that’s okay.
0:28:33 That is not the case anymore.
0:28:38 We were one of the earliest investors in a company called Apex Space.
0:28:46 I believe they are the fastest company to get from clean sheet design to orbit in 13 months in history,
0:28:47 which is pretty incredible.
0:28:51 But they had a different view, which is that we only want to make the satellite bus.
0:28:56 And if we can figure out ways to make the satellite bus cheaper, more efficiently,
0:29:02 and work with all of the legacy primes and the new primes to put their payloads into space,
0:29:09 that will be far more efficient for these companies that are building different types of payloads.
0:29:11 And I think that thesis has been largely correct.
0:29:18 They’ve been able to work with some of the most kind of legendary, I would say, legacy companies,
0:29:20 but also the emerging ones.
0:29:23 Andrel flew on their first flight.
0:29:29 So I think there’s something to be said about sort of deconstructing the vertical integration process in space
0:29:33 that’s been very novel in space 2.0.
0:29:35 We’re also investors in Northwood space.
0:29:36 It’s building ground stations.
0:29:40 You know, that’s a problem that hasn’t been tackled in a very long time.
0:29:44 We do not have enough ground stations to get data back to Earth as quickly as we need to.
0:29:51 And given that low Earth orbit has just been, I would say, you know, saturated by payloads in the last several years,
0:29:57 particularly because the cost of launch has come down and because SpaceX has put 85 percent of all mass into orbit,
0:30:01 we do need more comms.
0:30:07 We do need an ability to be able to have communication and downlink from low Earth orbit in particular to ground stations.
0:30:11 So these companies, I think, are attacking very important parts of the problem,
0:30:17 but they’re also kind of deconstructing the problem of space, which used to be build it all yourself, build it in-house,
0:30:20 which was, of course, the reason why SpaceX has been so successful.
0:30:26 But we’re sort of seeing this unbundling with the emerging companies that are doing parts of the stack
0:30:32 that maybe SpaceX and some of the legacy players haven’t innovated in or don’t see as the priority.
0:30:33 That’s a good overview.
0:30:38 I want to segue to defense, which is basically you both know about.
0:30:40 Maybe, Catherine, we’ll start with you.
0:30:42 Some of the, where are we excited?
0:30:43 Where have we made bets?
0:30:45 Where are we looking to make more?
0:30:46 Or what have we seen change?
0:30:51 I mean, the thing that’s really exciting about defense is for the first time,
0:30:58 you have sort of this, I would say, almost a golden triangle of the customer is desperate and moving very fast.
0:31:01 And the customer isn’t just the Pentagon.
0:31:02 It’s also Congress.
0:31:08 Do you and I and Mark were just in Washington talking to senators and members of the House
0:31:10 who are very engaged on this year’s NDAA.
0:31:14 How do we fix some of the core problems with procurement?
0:31:20 And I think that, you know, I’ve never been so hopeful about these minor changes in procurement reform
0:31:24 having a dramatic impact on all of the defense ecosystem.
0:31:27 So not just, you know, not just our companies, not just even little tech,
0:31:31 but I think it will have a dramatic impact on improving research and development even in the primes.
0:31:35 So there’s something to be said of, you know, the last 10 years we’ve been saying the same thing
0:31:38 over and over and over again, which is we need more competition.
0:31:43 We need, you know, modern software and Silicon Valley engineering to be brought into the Pentagon.
0:31:46 And now you’re actually seeing it and you’re seeing everyone say the same thing.
0:31:49 But the other things that I think have really changed in the last 10 years,
0:31:55 and particularly since we started the AD fund, is one, the downstream capital requirement
0:31:59 that used to be sort of the thing that made investors very nervous, it’s there.
0:32:03 Downstream capital has never been more excited to invest in these hard tech companies,
0:32:05 American dynamism companies.
0:32:10 And so the sort of messy middle that used to exist where companies had to sort of float through
0:32:11 or hope that they would get contracts.
0:32:14 Now there’s capital to subsidize, which I think is really important.
0:32:21 And that’s led to so many different founders leaving the Andurals and the SpaceXes and the extraordinary,
0:32:25 you know, they’ve sort of graduated with the blessing of their teams.
0:32:28 And they’re building things that are novel in the physical world,
0:32:32 taking the methodology of how they learned manufacturing from SpaceX,
0:32:37 or taking the manufacturing methodologies they learned or pioneered at Anduril,
0:32:41 and, you know, and doing them in different ways, doing them for different things,
0:32:43 sometimes not even in defense.
0:32:47 I mean, I love pointing out another energy company that we invested in, Base Power,
0:32:54 you know, the founder, CTO of that company led manufacturing at Anduril for years.
0:33:00 And so they learn the process or build the process in-house in one area, in one sector,
0:33:04 and then they move to something that’s adjacent, but not necessarily the same.
0:33:11 And so I think defense is really benefiting from just years of people learning from the school of Elon Musk
0:33:15 and then building these new companies for very kind of, I would say, specific use cases.
0:33:19 And they’re finally sort of awake and saying, hey, we will write you a contract.
0:33:21 So I think it’s only going to get better.
0:33:25 I keep saying, I mean, yes, we’re early stage, but, and very optimistic.
0:33:27 I think there’s never been a better time to start a defense company.
0:33:32 I just think, I think that the floodgates are opening and we’re going to just see just an incredible pace of innovation
0:33:34 with startups that are starting today.
0:33:41 It’s, yeah, it’s amazing the founders that have emerged from those two companies, as you mentioned.
0:33:47 You, we did this episode a few weeks ago about how Apple built China and how the expertise that,
0:33:51 that people who went to work on Apple go and, you know, translate it into other industries.
0:33:56 And maybe there’ll be something someday around like how Anderle or SpaceX rebuilt America to some degree
0:34:01 in terms of all the expertise that was developed there and how they went on to go and build, you know, other tremendous companies.
0:34:06 Yeah. I mean, I do think that the legacy of SpaceX, yes, everything they’ve built and done is important,
0:34:12 but the manufacturing processes that people have learned at SpaceX is going to be carrying America forward for generations.
0:34:18 When you think how tens of thousands of people of engineers have left SpaceX and gone on to other companies
0:34:22 and pioneered new ways of building and the manufacturing process in particular is,
0:34:24 is what was novel and different.
0:34:28 The factory is the product, how, how Elon built across Tesla and SpaceX.
0:34:33 So I think the, the, in some ways it can’t be overstated just how important that company is for,
0:34:35 for a number of different domains.
0:34:39 Yeah. And, and a lot of people thought that the, the, the legacy incumbents,
0:34:45 sort of the, their lobbying arms were just so powerful that it’d be just very difficult for,
0:34:49 you know, for startups to break in against the, against the, the primes.
0:34:54 What, what, what changed, obviously, you know, the, sort of the need has been there for a while.
0:34:59 Did it just come to a breaking point at some point or, or what really sort of, you know, created this opportunity?
0:35:03 Well, we always say SpaceX and Palantir walk so that everyone else could run.
0:35:07 And I would, it’s maybe unfair to say that they walked, but both of them had to sue the government.
0:35:13 Um, um, so, so that, you know, those are, those are two early companies, extremely early, right?
0:35:17 These are the companies that were founded in 2002, 2003.
0:35:23 Um, so I think in some ways they had to do the very, very difficult work of educating the government,
0:35:24 educating themselves, right?
0:35:26 Explaining why it is so important.
0:35:31 Um, but I think, you know, that now 20 years on from, from those companies founding,
0:35:37 we just see an extraordinary amount of, I think, alignment, um, that we’ve never seen before.
0:35:39 One, because the, the kind of, you know, stakes have changed.
0:35:42 In 2002, no one was worried about China.
0:35:44 In 2012, no one was worried about China, right?
0:35:48 So there, there’s something that I think has changed in terms of near-peer adversaries as well,
0:35:50 that people are now waking up and saying,
0:35:53 okay, like, we, we, we, you know, we can’t let our own procurement process
0:35:58 be the thing that stops us from actually fielding these technologies and producing them en masse.
0:35:59 I think that’s right.
0:36:03 I think on the adversary basis, we now have a much healthier respect for China as an adversary,
0:36:06 particularly on their production capability.
0:36:08 But I think the product has also changed.
0:36:12 I think the war in Ukraine really, um, put a very, very bright light
0:36:18 on how our exquisite large platforms are not, uh, going to be the platforms for the fight of the future.
0:36:21 And we needed new, we needed new products.
0:36:25 You know, when, when Andrew talks about rebuilding the arsenal of democracy,
0:36:28 they’re talking about not doing it with new aircraft carriers.
0:36:32 They’re talking about with the tradable systems, um, with, you know, swarms of drones,
0:36:37 uh, with, with new kinds of autonomous, uh, submersibles and other vehicles.
0:36:40 And so it really is a different product.
0:36:43 And I think the government has woken up in, in many ways to that need.
0:36:46 And they are now working through the procurement reforms.
0:36:51 A lot of, a lot of the, the work that, uh, Catherine and I and Mark and, and, and Ben and others
0:36:55 do inside the firm in Washington is to really drive some of these reforms, which will benefit,
0:36:59 um, ultimately will benefit America, but will benefit all companies.
0:37:03 But, you know, in addition to the companies we work with, um, but the product has changed.
0:37:06 And I think the customer recognizes they need a different product, which is going to come
0:37:07 from, from a different place.
0:37:11 Is there anything more we want to say on, on, on Ukraine and how that sort of changed the
0:37:12 investment landscape?
0:37:15 Or did you sort of say the main thing you wanted to say?
0:37:20 You know, what, one other thing I would add is that, um, and, and you’ve seen this actually,
0:37:24 you know, when JD Vance went and gave a speech in Europe, I think at the Munich security conference,
0:37:28 he really said like, it’s time for Europe to step up and start spending money on defense
0:37:29 again.
0:37:34 Um, and, you know, while the reaction in the press was like negative, how could he do this?
0:37:37 How could you do this to our friend and our allies and, and, and like, whatever the reality
0:37:42 was like a lot of, a lot of the, uh, politicians in Europe said, okay, wait, wait a minute.
0:37:43 This is actually probably true.
0:37:49 And, uh, almost every major country in Europe has made a commitment to double or more their
0:37:52 spending, uh, their GDP level of spend on, on, on defense.
0:37:57 And that spend is ultimately going to go, there, there aren’t enough incumbents in Europe
0:38:00 to have, to have all that money go to companies in Europe.
0:38:05 So there’s a huge opportunity for, um, all their strongest ally, which is the United States
0:38:10 for the companies here to actually go and increase their business, uh, overseas.
0:38:12 And so I think there’s just broadly a ton of opportunity.
0:38:14 Um, and you’re going to see that.
0:38:19 And I think, look, the fight in the Ukraine obviously has, has caused the, uh, the, all the
0:38:24 countries in NATO and, you know, all of Western Europe to wake up and recognize that they have
0:38:26 to change their posture when it comes to defense.
0:38:29 The, we’ve been talking about energy.
0:38:29 We’ve been talking about aerospace.
0:38:31 We’ve been talking about defense.
0:38:35 What’s next in terms of where, where are we excited to invest or where are the opportunities?
0:38:36 Do you?
0:38:39 Yeah, well, I think a couple of things I would say.
0:38:45 One is that sometimes people think the categories that we invest in and are just totally disparate
0:38:46 and, and it’s like, oh, we like, we like them.
0:38:50 And so they think like, okay, yeah, it’s space, it’s defense, it’s energy.
0:38:55 But actually, um, these categories are often much more interrelated than people, people realize.
0:39:01 You cannot have strong national security without a reliable, uh, energy grid and electrical grid.
0:39:05 Um, you cannot have obviously strong national security without strong defense.
0:39:11 You can’t have that without strong communications, which requires space, uh, satellites and satellite
0:39:13 communications and space domain awareness.
0:39:16 Um, and so these things are much more interrelated than people realize.
0:39:21 Um, we obviously have other investments in areas that we say, as Catherine often puts it,
0:39:22 serve the national interest.
0:39:24 So we have investments in education.
0:39:30 We have a massive portfolio in public safety, um, that, you know, every definition of the
0:39:33 American dream that somebody would come up with would include the idea of living in a safe
0:39:34 community.
0:39:38 So we have a massive, um, I think we’re probably the largest public safety venture investors,
0:39:39 uh, in the country.
0:39:41 Um, if not, if not the world.
0:39:47 Um, and I think as you look to the future, I mean, everyone has their own view of what the
0:39:51 future will look like for American dynamism, but I think we, you’ll see us increasingly shift
0:39:52 left.
0:39:56 So that’s why we look at minerals and, uh, we look at critical, critical minerals and
0:39:56 mining.
0:40:01 Uh, we look at manufacturing and the supply chain and the criticality of the supply chain and
0:40:07 the ability to get the important, uh, precursor ingredients we need for manufacturing, um, in
0:40:08 the event of a conflict.
0:40:12 Uh, and so I think, I think those are some areas that I’m excited about.
0:40:13 Yeah.
0:40:17 I’ll echo that, you know, I, I joke that I just love production companies.
0:40:21 Um, and that, you know, you’re now actually seeing large companies say we’re moving back our
0:40:23 manufacturing back to the USA.
0:40:28 Um, I just think there’s never been a better time to, to really focus on components, um,
0:40:33 and to focus on sort of like the, the, like almost like the dumb parts, um, the dumb hardware
0:40:35 that’s needed for a war of mass.
0:40:40 And so I think we’re, we’re taking serious looks at a lot of companies that have an interesting
0:40:41 theses on how you do that in bulk.
0:40:46 Obviously Hadrian was an early company, um, you know, that, that really focused on how do
0:40:47 you build a factory of the future.
0:40:52 But I think a lot of learnings over the last several years of how you, how you really automate
0:40:57 factories to build for, um, you know, whether, whether it’s exquisite systems or sort of dumb
0:41:00 parts, all will be necessary in a war of mass.
0:41:02 And so I think we’re, we’re taking all of that very seriously.
0:41:06 You mentioned also education, which isn’t always a category that people, uh, you know,
0:41:08 uh, sort of tied to American dynamism.
0:41:10 Catherine, I know we’ve done Odyssey.
0:41:13 What has been a sort of our, our thesis in terms of where we’re excited there?
0:41:16 Well, what’s, what’s exciting about Odyssey, I’ll give a, an overview there.
0:41:20 That was an early education company that saw the sea change happening at the state level,
0:41:22 um, around education saving accounts.
0:41:27 Um, so in the same way that you have a health savings account through your employer that
0:41:32 you can then put forward towards healthcare of any kind, um, this was a view, um, by a lot
0:41:36 of states that, that people should be able to opt out of the public school system, particularly
0:41:40 parents that want to homeschool or that want to have sort of a hybrid, um, method of learning
0:41:41 for their children.
0:41:45 Um, and this became very popular during COVID, um, because it was sort of, there weren’t
0:41:48 enough schools, there weren’t enough, you know, a lot of people had moved around the country
0:41:52 and, and, and homeschooling and sort of alternative learning became very popular.
0:41:59 But now you’re seeing, you know, states like Texas pass a universal ESA where any parent can
0:42:03 opt their, their child out of, out of the, the public school system and receive cash from
0:42:03 the state.
0:42:08 And that cash has to be transferred and regulated somehow and ensured that that’s actually being
0:42:08 spent on education.
0:42:13 And so Odyssey is building the, the financial rails to do that tracking, to make sure that
0:42:17 parents get the, the cash that they deserve from these state programs, um, and can put it
0:42:22 forward to, to any program that is, you know, approved by, by the state, um, based on their
0:42:23 bylaws.
0:42:26 And I think you’re just seeing more and more experimentation with, with K through 12 education.
0:42:28 One, because it’s necessary, right?
0:42:33 There’s, there’s more and more, I would say, special needs kids or kids that have different,
0:42:37 um, learning capacities and people are realizing that one-on-one tutoring can support that.
0:42:42 Um, and so I think you’re, you’re seeing, you know, a variety of different, um, methods
0:42:46 of, of learning and they have to be, you know, supported by different types of technology.
0:42:51 Um, we’re also obviously looking at how AI and, and, and one-on-one tutoring can, can support
0:42:52 these initiatives.
0:42:57 I think we’re just going to see so many changes to K through 12 education, um, over the next
0:43:01 decade, um, enabled by not only technology, but also just this kind of, I would say this,
0:43:06 this sea change that happened because of COVID, um, which is realizing that, that parents are
0:43:09 sometimes best equipped to make the decisions about how their, how their children are going
0:43:10 to learn.
0:43:12 We’ve talked about the categories we’re excited about investing in.
0:43:17 Is, is there any, for AD entrepreneurs listening to this, are there any requests for startups
0:43:22 that you particularly want, want to see that people yet, uh, haven’t yet done, um, as much
0:43:24 or as well as they should have across any of these categories?
0:43:29 I have one, I feel like I have a broken record, um, with my request, which is offensive space.
0:43:33 Uh, I think everyone looks to the past conflict and says, oh, well, we look at what happened
0:43:35 in Ukraine and that’s what we should build.
0:43:40 Uh, I actually think there’s very few, um, lessons from Ukraine that are going to be relevant
0:43:41 in the future war.
0:43:45 candidly, I think that the future war, the infrastructure that we already have in low
0:43:48 earth orbit will be exceptionally important.
0:43:52 Um, and we have to figure out ways to protect what we’re building in low earth orbit in particular.
0:43:57 And so I think anything to do with offensive space, um, both on the software side and the
0:43:59 hardware side, we’re, we’re very excited about.
0:44:00 Yeah.
0:44:02 You’ve mentioned that the, how’d you phrase it?
0:44:03 It’s the war is not going to be about space.
0:44:05 It’s going to be in space or something.
0:44:06 Yes.
0:44:06 Yeah.
0:44:07 No, I, I, I very much believe that.
0:44:10 And it’s because we already have so much important infrastructure.
0:44:14 Like when, when, when we visited, um, I was fortunate enough to go to the, the border of
0:44:18 Ukraine with some, um, U S officials and, and, and operators on the ground.
0:44:22 And every time I talked to people on the ground and asked them, what’s the most important piece
0:44:23 of technology that you use?
0:44:24 They all said Starlink.
0:44:27 Um, and of course, Starlink is in low earth orbit.
0:44:32 It’s not, um, something that necessarily you would, you would need to, to target low earth
0:44:33 orbit and able to take out that infrastructure.
0:44:37 And so, you know, obviously SpaceX is a very, um, sophisticated company.
0:44:43 Um, but, but I think anything to do with offensive space capabilities that can shore up what the
0:44:47 U S government needs, given, given where the next conflict will be, uh, I think is extremely
0:44:47 important.
0:44:53 I want to zoom out and also talk about how we think about American dynamism in the context
0:44:54 of our international efforts.
0:44:58 Cause you mentioned, you know, andro for different, uh, different spaces, but also countries are trying
0:44:59 to build their own version of it.
0:45:02 And of course, andro is also, you know, uh, working internationally as well.
0:45:05 But, um, maybe, maybe Catherine, we’ll start with you.
0:45:10 How do you sort of think about, uh, American dynamism, but also, and I’ll pass it to Ben,
0:45:13 as we’re building our international efforts, uh, our American allies.
0:45:19 Well, I think, you know, Ben, Ben has always said every time and I’ll, I won’t put words
0:45:23 in your mouth, Ben, but every time that he travels, I mean, the, the thing that people
0:45:28 want is exactly what we named the category, which is how do we build American dynamism?
0:45:31 How do we build Silicon Valley in our own country, right?
0:45:33 Like how do, how do we build national resilience?
0:45:36 How do, how do we think about, you know, future of manufacturing?
0:45:40 What are the things that are going to supercharge our own, um, economy?
0:45:45 And I think the, the thing that, that by calling it American dynamism and by talking about how
0:45:49 important it is to be building in the physical world, I think we kind of captured a few things
0:45:51 that are really important to, to every nation state.
0:45:55 One is, you know, we always point to the fact that 25 years ago, if you looked at the market
0:46:02 cap, um, of the largest 10 companies in the world, 25 years ago, uh, three of the top 10
0:46:03 were American tech companies.
0:46:06 Now that is nine of the top 10, 25 years later.
0:46:13 So Silicon Valley has truly, I think, transformed with software, um, you know, the, the, the size
0:46:15 and scale of how large you can build these companies.
0:46:19 Many of the companies that are now in the top 10 in terms of, of market cap didn’t even exist
0:46:20 in 2000.
0:46:25 Um, so I think that’s something where other nations look at what Silicon Valley can build,
0:46:28 whether it’s hardware software, whether it’s, you know, companies that are building the physical
0:46:30 world and say, we want to bring this to our own country.
0:46:31 How do we do that?
0:46:36 And the spirit of American dynamism is recognizing that it’s not just, uh, you know, an economic
0:46:37 zone and a silo.
0:46:42 It’s not just, um, pure software, like the companies that are, that are really having the impact of
0:46:46 that scale are building the physical world and they’re interfacing with governments, not
0:46:48 only in the U S but they’re interfacing with governments around the world.
0:46:53 And in order to build, you know, many, many more of those companies, um, we, we have to
0:46:58 have sort of a game plan of how you interface with, with regulators, with governments, um,
0:46:59 and with the international community.
0:47:02 And Ben, what would you add to that?
0:47:10 Yeah, I think that, um, you know, geopolitically we, we’ve kind of entered a new era.
0:47:17 Uh, and so if you kind of go back, you know, post-World War II, we had kind of, um, bombed our
0:47:23 big manufacturing competitors, you know, Japan and, and Germany, uh, kind of out of existence
0:47:25 or out of the game for a while.
0:47:31 And America became the, the, just the dominant economic power, uh, in the world for, for decades.
0:47:38 And as a result, we could be, um, team America world police, uh, and just kind of, you know,
0:47:40 provide defense to everybody.
0:47:45 And our, our strategy was kind of like, it’s actually, not only do we not, you know, we don’t
0:47:49 need other countries to defend themselves that they were to do so, it might be dangerous.
0:47:54 And so we kind of, uh, stationed our troops all over the world and we built this massive
0:48:00 military, um, fast forward to 2025, we’re $38 trillion in debt.
0:48:08 Um, and, you know, there’s a very, uh, competitive superpower, um, economically in China, uh, who
0:48:14 has a, I would just say a very different idea about the way the world should work and a way
0:48:17 their society should work than, than we do.
0:48:23 And so now we’re in a position where allies matter a lot, um, and not only do allies matter,
0:48:30 but we need them to, uh, to be able to defend themselves and to work with us to kind of defend
0:48:38 our values, our kind of way of life, our view of freedom, um, and, you know, what it means
0:48:39 to kind of be a citizen.
0:48:47 And, you know, as a result of that, uh, you know, American dynamism does need to kind of extend
0:48:53 out beyond America to our allies because, you know, if they are providing their own defense,
0:48:58 um, and they are allied with us, then they need these same kinds of, uh, technologies and,
0:48:59 uh, and products.
0:49:04 And so, you know, it’s just part of the overall mission that I think we have to pursue.
0:49:09 It also makes the economics for these companies work better if there are kind of a larger market
0:49:09 for them.
0:49:11 going deeper on, on China.
0:49:16 It seems like a lot of the cultural embracing of American dynamism stems from some of the
0:49:20 realities that Catherine mentioned, like, like Ukraine, like COVID, and of course, sort of
0:49:25 this great power conflict with, with, with China and people realizing the urgency of, of, uh,
0:49:27 and need to, to prepare for it.
0:49:31 And it seems to inspire a lot, uh, you know, some of the American dynamism, um, focus and,
0:49:32 and, and where we invest.
0:49:38 So maybe let’s just briefly take stock on what are the areas in which, uh, they’re ahead.
0:49:43 What, what are our unique advantages and how does that inform, uh, sort of where we’re thinking
0:49:44 for, for American dynamism?
0:49:46 Catherine, do you want to take initial step?
0:49:48 Oh, yeah.
0:49:52 I mean, I thought the, the conversation that, that you all had in the last episode with, with
0:49:58 Brian and Chris about what does it mean to, to participate in wars of mass is one that Silicon
0:50:02 Valley really hadn’t thought about, uh, until very recently.
0:50:06 Um, you know, if, if, if you go to Washington, there’s all this talk now about what is, what
0:50:11 is known as a tritable systems, which are systems where, you know, you’re not spending millions
0:50:16 and millions of dollars building out exquisite systems that, that only are, are usable once
0:50:20 you’re, you’re building out, you know, very cheap drones, very cheap hardware, where if
0:50:22 you lose them, that’s okay.
0:50:26 And because the, and the reason why that is so important, um, is because I think a lot of
0:50:29 the, the learnings of Ukraine, um, if you have an exquisite system that was hundreds
0:50:33 of millions of dollars and it can be taken out with a thousand dollar drone, uh, that
0:50:38 changes the economics of war and it particularly changes the, the economics of a war of mass.
0:50:43 Um, so I, I’d encourage people to, to kind of understand, um, the sort of complexities
0:50:46 of, of why, you know, why it matters so much that we’ve exported our manufacturing, that we
0:50:50 can’t, uh, manufacture these tritable systems as cheaply and as quickly.
0:50:55 And in terms of, as, as, as many, um, as say, as say China could, but I’d say there’s, there’s
0:50:59 two also, there’s two really important things to take from the war in Ukraine, which is that
0:51:02 China has been supplying both sides of that war.
0:51:07 Um, when you look at sort of the drone warfare that is, that has come out of the trenches for
0:51:11 the last three years, you know, China is a, is a supplier in the same way that Russia is
0:51:13 a supplier to its own side.
0:51:18 But that means that their, their industrial bases have been built up in a way that the
0:51:21 U.S. industrial base hasn’t built up, um, in the past three years.
0:51:25 And that’s something that I think a lot of our American dynamism companies are very cognizant
0:51:29 of, um, that we’re, we’re at a disadvantage because we haven’t been supplying just-in-time
0:51:34 manufacturing to, to the Ukrainians in the way that, say, um, you know, Chinese parts, um,
0:51:35 have been.
0:51:38 And so that, that’s something we, we very much have to think about when we think about wars
0:51:42 of mass is how quickly can we, can we start investing in our manufacturing base so
0:51:47 that we can have this just-in-time manufacturing and these attributable systems, um, to compete
0:51:51 against a country that, that has been building for the last 20 years.
0:51:55 Mark, I, I’d like to hear your, your thoughts on, on, on manufacturing, because we were talking
0:52:01 offline a bit ago and about how, you know, people hope for the old manufacturing jobs back
0:52:05 and, and it, how it’s, uh, harder to, to bring those back, but there’s an opportunity
0:52:06 for, for more advanced manufacturing.
0:52:08 Why don’t you describe the opportunities you see it?
0:52:12 Yeah, so I grew, I grew up in, uh, sort of, uh, as you described as light manufacturing,
0:52:14 a different country, um, in Wisconsin.
0:52:18 So we were adjacent to, uh, Detroit, um, and we sort of viscerally experienced, you
0:52:22 know, the decline and fall of Detroit, um, you know, but we were, we were right in the
0:52:23 middle of it, but we were kind of around the edges.
0:52:27 Um, and so I’ve, you know, been thinking about this, you know, for, for, for a long time.
0:52:31 Um, look, I think the, the, the sort of, the sort of great offshoring of manufacturing that
0:52:34 happened over the last 40 years, you know, happened as a result of a, of a set of policy
0:52:38 issues, uh, set of policy decisions, like a set of explicit decisions that were made.
0:52:41 And we could, we could, we could spend a long time talking about, you know, those decisions,
0:52:44 but that, you know, it was, it was, it was a real set of decisions.
0:52:47 Um, there are a set of policy decisions that have to be made and, and, and are currently,
0:52:51 you know, some of them are in the works now, um, you know, to kind of, uh, to kind of reverse
0:52:51 that.
0:52:56 But, you know, kind of to your point, actually, I’ll quote Heroplinus, a man cannot, uh, step
0:53:01 into the same river twice, uh, because it is not the same river and he is not the same
0:53:01 man.
0:53:03 Um, right.
0:53:08 So what’s not going to like, even if you completely cleaned up all the regulatory stuff and legal
0:53:11 stuff, which I think we should, um, and you, you, you, you sort of corrected the incentives
0:53:12 that drove everything out.
0:53:15 I think what you’re just not going to get practically is you’re just, you’re not going to get the
0:53:18 old factories back and you’re not going to get the old jobs back in the, in the way that
0:53:20 they were 40 years ago when they were lost.
0:53:23 Um, and the reason you’re not going to get that is, it’s actually several reasons.
0:53:27 One is that the nature of the products themselves have changed and I’ll talk about that a little
0:53:28 bit.
0:53:32 Um, uh, and by the way, to the good that, you know, the, the things that are getting manufactured
0:53:37 in, in, in, in the, in the future decades are much more complex and sophisticated and technologically,
0:53:40 you know, kind of infused and powered than, than the things that, that, that used to get
0:53:40 manufactured.
0:53:42 So the products themselves have changed.
0:53:44 Um, the, the methods of manufacturing have changed.
0:53:48 So there’s, you know, a lot more, a lot more robotics automation now than there was 30 or
0:53:49 40 years ago.
0:53:51 And then the jobs themselves have changed.
0:53:53 Um, and you know, look, if you go into like, um, you know, if you go into like,
0:53:56 like a manufacturing plant in China and they’re, you know, assembling phones or whatever,
0:54:00 like you’re building bicycles, like you are going to see a lot of people, you know, standing
0:54:02 in an assembly line, doing the same thing over and over again for 10 hours.
0:54:06 Um, and there was a component of that to the, you know, manufacturing jobs that were lost,
0:54:10 you know, 40 years ago in the U S but like, you’re probably not going to get the bicycle
0:54:12 manufacturing plant back.
0:54:15 That’s going to build bicycles the way that they existed 40 years ago, where the plant’s
0:54:18 going to work the same way it worked 40 years ago and where the jobs are going to be the
0:54:19 same as they were 40 years ago.
0:54:23 And it’s just like, it’s just like the, the, the level, you know, it’s, one is it just, it’s
0:54:24 cheaper to do that overseas.
0:54:27 And then like that, that’s just that, that, that’s the backward looking view.
0:54:30 Like that, that’s just, that’s not necessarily the thing you want, you want to get.
0:54:33 What you would like in contrast, right?
0:54:34 Would be something much better.
0:54:37 And the better thing, let’s just take bicycles as an example.
0:54:39 What you actually want is you, you want to be making electric bikes.
0:54:41 You want to be, you want to be making e-bikes, right?
0:54:43 Which are much more sophisticated, right?
0:54:46 Physical artifacts that involve, you know, batteries and computers and chips.
0:54:50 And, you know, you might want to have all kinds of, you know, advanced capabilities in
0:54:52 the bike, just like people have now in cars and motorcycles.
0:54:56 Um, and, and then, um, you know, maybe, by the way, maybe a bike that balances itself,
0:54:56 right?
0:54:58 Like, you know, things like that, right?
0:55:03 Um, so like a new kind of product that’s much like more sophisticated, um, built in a
0:55:05 manufacturing plant that is more sophisticated, right?
0:55:09 And has a much, you know, greater degree of automation where you don’t have human beings
0:55:13 standing in line, you know, turning a screw, you know, turning the same screw every time
0:55:17 for 10 hours, but where what you have is a large number of jobs that are kind of called
0:55:18 them blue collar plus jobs.
0:55:22 And then, and then also, you know, white collar jobs and all the associated service jobs around
0:55:26 those, um, that are, that are building and maintaining that new kind of plant to build that
0:55:27 new kind of thing.
0:55:31 Um, and, and I think those jobs, and by the way, you can see this, you, if you visit
0:55:35 a Tesla fat, you know, you go visit a Tesla factory today, you know, you see this in action.
0:55:38 Like, you know, this is how the world’s leading manufacturers actually, actually do this.
0:55:39 Like this is actually happening.
0:55:44 And so I think what you can do is you can leap forward on the nature of the product you’re
0:55:44 building.
0:55:47 You can leap forward on the nature of the plants that you’re building and you can, you can
0:55:49 leap forward and actually create much better jobs, right?
0:55:53 Higher paying jobs, higher skill jobs, jobs that are frankly a lot more pleasant, that
0:55:54 are a lot more interesting.
0:55:57 And so I think you want to have like the futuristic outlook on this.
0:56:01 And then if you pair that with the regulatory reforms and, you know, you, you solve all the
0:56:05 issues around energy prices and net for resources and everything else that need to be solved.
0:56:07 Like, I think that’s the formula.
0:56:12 Um, and by the way, if we don’t do that, all of those things are going to get made in China,
0:56:16 which does mean over time, not just phones being made in China and not just drones being made
0:56:20 in China, but also cars, um, and also, um, uh, uh, and also, uh, robots.
0:56:24 Um, you know, the, you know, the great industry of the future that we can spend a long time
0:56:25 talking about is going to be, is going to be robots, right?
0:56:30 AI in mechanical form, uh, which is going to be, you know, I think the biggest industry that’s
0:56:30 ever been built.
0:56:34 And, you know, right now by default, China set up to do that, you know, like what an amazing
0:56:38 story would be for America in the 21st century, which is we re-industrialized not to build
0:56:40 the products of the past, but to build the products in the future.
0:56:42 And I, and I think that’s the opportunity.
0:56:44 Let’s go deeper there.
0:56:48 Uh, I want to ask you the same question I asked Catherine about our unique strengths relative
0:56:51 to, to their unique strengths, because I heard you say this framing in another conversation,
0:56:56 which I really liked, which is, you know, are we going to win by being more like us or more
0:56:56 like them?
0:56:59 So why don’t you, uh, flesh that a little bit, Marco?
0:57:00 Yeah, so we actually had this fight.
0:57:03 This fight actually happened during the, during the first Cold War with the Soviet Union.
0:57:07 Um, and there was just this raging debate that started in the, you know, 1920s, but like
0:57:10 was fully raging in the 50s, 60s, 70s, including when I was growing up,
0:57:16 which is, you know, basically, you know, democracy or dictatorship, um, and then, uh, uh, free
0:57:21 markets or, uh, you know, state-directed capitalism, um, you know, or, or sort of state-directed
0:57:21 production.
0:57:26 Um, and, and, you know, this was a very real debate, and one of the sort of little fun facts
0:57:29 of how kind of scurrily everything got in the 20th century was American, common American
0:57:35 undergraduate textbooks, economics textbooks, into the 1980s would stated as fact that communism
0:57:39 was the superior economic system to capitalism, and they, they would have these charts of projected
0:57:43 growth rates, and they would show that it’s purely inevitable, uh, that communism was going
0:57:45 to outperform capitalism because it was a better organized system, right?
0:57:47 It had, it had top-down controls.
0:57:50 It didn’t have all this messy inefficiency of, of, of free market capitalism.
0:57:54 Um, and so, you know, they, you know, a lot of sort of economic experts in the U.S., including
0:57:58 ones with like big newspaper columns and like big media footprints, you know, were basically
0:58:02 selling the siren song of, of, of, of communism all the way through the late 80s, all through
0:58:02 the late 80s.
0:58:06 And, and the reason I say that is like that, that, that debate was actually happening all
0:58:10 through that period, which is, right, are, are you better off having a Soviet-style system
0:58:14 where the state directs production, and if the state decides that you need to build tanks
0:58:18 or planes or cars or anything else, like they’re going to direct it, that’s going to happen,
0:58:22 it’s going to happen with maximum sort of centralized efficiency, it’s going to happen with like
0:58:26 entirety of national, you know, the national resources lined up against it, like everything
0:58:30 orchestrated, you know, in, in the right way to be able to maximize production, um, or
0:58:34 are you going to have the American system, which, you know, has the aspects of, you know,
0:58:38 communism here and there, uh, you know, but it’s much more, you know, the pro-argument, much
0:58:42 more dynamic, much more flexible, um, so are you going to have an American system, are you
0:58:45 going to have a higher degree of sort of independent action on the part of individual
0:58:49 capitalists, independent, you know, independent companies, independent technologists, are you
0:58:52 going to be inventing a much broader range of new technologies, are you going to be
0:58:55 deploying those technologies in much more creative ways, um, or, you know, are you
0:58:58 going to be just like much, much faster on the innovation curve because you’ve unleashed
0:59:02 the, the sort of inherent creativity of all your people rather than just like ordering
0:59:03 them to all stand in the line together.
0:59:07 Um, and then, you know, the capitalist approach is messy, right?
0:59:10 And, you know, it has boom-bust cycles and it, you know, it has companies go out of business
0:59:13 and there’s like, you know, sometimes there’s too much competition and, you know, profits go
0:59:17 to zero and like, you know, you, you get in all these kind of crazy, crazy, crazy things,
0:59:19 but you have, you have dynamism on your side, right?
0:59:22 You, you, you’ve got, you’ve got, you’ve got, you’ve got freedom, exploration, creativity,
0:59:28 innovation, uh, uh, uh, free market competition, um, and, and dynamism on your side.
0:59:33 Um, I think that question was asked and answered in the 20th century quite definitively.
0:59:40 Um, you know, it is back today, um, you know, the new, you know, the upcoming new mayor of,
0:59:44 you know, of, uh, New York city, uh, you know, is proposing government run grocery stores,
0:59:44 right?
0:59:47 Cause they’re, you know, like it’s the exact same argument is back.
0:59:51 And, and there are, you know, people in, you know, people in positions of great power,
0:59:53 uh, you know, who still want to have this argument.
0:59:54 Uh, I think it’s long settled.
0:59:55 It does seem to be back.
0:59:57 Um, it is coming back.
0:59:58 And I think it’s fundamentally the same thing.
1:00:02 And by the way, like, it’s not that the centralized approach doesn’t have certain advantages.
1:00:05 Like if you want to pump out, you know, 20 million tanks or something, or if you want
1:00:09 to pump out, you know, a billion phones, like there is something to a top-down centralized
1:00:10 approach, right?
1:00:13 I mean, you know, every company within itself is it, is it, you know, as a form of a dictatorship
1:00:14 that does that.
1:00:17 And so like, you know, there is some advantage, you know, to China at being able to kind of
1:00:19 direct all the national resources.
1:00:23 And there is something frustrating being on the American side where like, in theory, you
1:00:25 all share the same mission, but in practice, you’re too busy beating each other’s brains
1:00:30 out, you know, to, you know, to, to ever get to the, get to the, um, you know, in
1:00:31 competition, never get to the shared purpose.
1:00:35 Having said that, like, I think we went in Cold War I by doing it our way.
1:00:37 I think we went in Cold War II by doing it our way.
1:00:42 Um, every time somebody stands up and says we need to get to be more like China, I always
1:00:45 ask the counter question, you know, where we need like more state control, you know, more
1:00:48 top-down, more direction, uh, more planning and all these things.
1:00:51 You know, I always just ask the opposite question, which is, well, no, actually, like, what if
1:00:52 we take the opposite approach?
1:00:55 What if we become more like us, right?
1:00:59 And what if, what if we lean even harder into innovation and even harder into creativity and even
1:01:00 harder into entrepreneurship?
1:01:03 And isn’t there so much more that we could do if we, if we, if we got to be more like
1:01:03 us?
1:01:06 And obviously, I think that’s what we should be doing.
1:01:08 It is interesting that that, that debate is back though.
1:01:12 Mark sort of defined the Chinese system, but he also sort of defined one of the major problems
1:01:17 with procurement, which is that the, the Department of War makes its decisions about what weapons
1:01:21 it’s going to buy on five-year cycles, 10-year production cycles, right?
1:01:25 And it’s very difficult to, to correct the ship because of the way that we’ve structured
1:01:29 our procurement process going back to, going back to the 60s and the 70s.
1:01:33 So I think there is something about the, you know, if you look at the last 25 years, the
1:01:38 second American century has been a story of American dynamism, innovation, creativity, and
1:01:43 how on a global stage that has actually led us from three companies in the top 10 to nine
1:01:45 companies in the top 10 that are tech companies.
1:01:47 But the Department of Defense really hasn’t benefited from that.
1:01:52 It’s the exact same companies that were, that were founded in, some founded in world, just
1:01:57 after World War I, solidified their dominance in World War II, and then, you know, mergers
1:02:01 in the 1990s post the Cold War with this view that we’re post-war, we don’t actually have to
1:02:02 worry about things anymore.
1:02:09 So there really is sort of, I think, a Soviet-style procurement system that’s still at work inside
1:02:12 of the Department of War, and there’s many good people in Washington trying to change that
1:02:16 to allow for this American dynamism to actually flow into the places that it needs to exist.
1:02:20 So it’s actually just a historical tweak, which is, if you, I don’t know about DOD, but if
1:02:22 you work with big companies a lot, you know, one of the things you see is they have, they
1:02:23 often have five-year plans.
1:02:26 They have five-year planning cycles, five-year strategies.
1:02:29 And actually, you know, the creator of the concept of the five-year plan was, of course,
1:02:30 Joseph Stalin.
1:02:35 It was literally, it was literally the Soviet Union run as five-year plans.
1:02:41 And actually, in the, between the 1920s and 1950s, that idea actually mainstreamed itself
1:02:44 into Western society and into Western business and has stuck there ever since.
1:02:46 And by the way, it routinely doesn’t work.
1:02:48 Like, it, like, routinely fails because the world is too dynamic.
1:02:52 And, you know, that’s, that’s not nearly a fast enough, you know, iteration cycle.
1:02:54 And yet people still stick to the five-year plan thing.
1:02:57 And it’s just, it’s like this, it’s like the, you know, it’s like Soviet communism out, you
1:03:01 know, the hand coming out of the grave, you know, kind of still strangling our ability
1:03:03 to actually, you know, advance and be able to, you know, get our, get our jobs done.
1:03:05 Yeah.
1:03:09 And look, like, just to double underline what Catherine said, right, the battlefield itself
1:03:10 is changing, right?
1:03:14 And so one of the things that you see, for example, in the, in the Russia-Ukraine conflict is an
1:03:18 incredibly high rate of iteration of the battlefield techniques and use of technology on the battlefield.
1:03:22 You know, I mean, I don’t know why they have Catherine a five-day plan or something, you
1:03:26 know, in the Ukrainian military in terms of how fast they adopt new technology and adapt
1:03:26 what they have.
1:03:28 And, and that’s what they need to be able to fight.
1:03:31 And if they didn’t have that approach, you know, they would have lost a long time ago.
1:03:35 And, and, and by the way, the Russians are, you know, are trying to match them on that.
1:03:40 And so, you know, the, the, the old model of World War II era, you know, just simply mass,
1:03:44 you know, mass machinery and mass men to win wars, like those days are long over.
1:03:48 You know, even, even when you have like this very kind of contentious, you know, even the
1:03:51 modern version of French warfare, it’s still, you still have this very rapid iterative cycle
1:03:51 time.
1:03:57 And again, this should play greatly to America’s benefit if we unleash our strength, which is
1:04:02 if we take our strength of flexibility, innovation, creativity, dynamism, and apply that into the
1:04:05 battlefield of the future, like we really ought to win if we’re really able to do that.
1:04:05 Yeah.
1:04:14 I would just add to Mark’s thinking that going the other direction for the U.S. is literally
1:04:20 fighting our, everything about our culture, everything about our history, everything about
1:04:21 our system.
1:04:28 And the fact that it has appeal is like, I think like a weird psychological defect that
1:04:34 some people have where they’re just, they just always want central control and they always
1:04:34 think it’s better.
1:04:40 And this is, you know, a great investing strategy is to, if you see a company with a five-year
1:04:43 plan, short it and it works every time.
1:04:46 And yet they still do it.
1:04:51 And I, it just comes, it really has no basis in anything.
1:04:56 We saw this actually weirdly in networking, you know, Mark and David and I all come from the
1:04:56 networking field.
1:05:03 And when decentralized networks and packet switching came, you know, people fought it to the death.
1:05:10 Even after Len Kleinrock like mathematically proved it worked, like people would still say it would
1:05:13 never work because you couldn’t control it and this and that and the third.
1:05:19 And, you know, of course history has, has proven them all wrong, but you know, it’s not logical.
1:05:25 It is just like some kind of brain defect that they have in their psychology where they can’t
1:05:31 even, you know, visualize the fact that a system could work well that’s decentralized.
1:05:34 Well, I think we, we see this over and over again.
1:05:38 I mean, I, I even think about, you know, there was like a, I’m curious what Mark thinks, but
1:05:42 like when I think about private warp speed, to me, that was like promoting capitalism and
1:05:43 it’s best.
1:05:47 We said like, you know, any company that creates a vaccine, like, like we will distribute it, the
1:05:48 government will distribute it.
1:05:53 And then, so there’s no role for government, but they really stepped aside and let the private
1:05:56 companies come up with the vaccine, which happened much faster.
1:06:00 And we had, you know, depending on how you count, we had three working vaccines and a record-breaking
1:06:01 time.
1:06:03 And if you look at what China did, they, they did not have that.
1:06:07 And they were unsuccessful because they weren’t able to lean on creativity and ingenuity.
1:06:12 I think when we look at defense, you know, some of the defense reforms that we want to see
1:06:17 happen are things that actually push more toward entrepreneurship, not on past performance, but like,
1:06:18 what can you do for me today?
1:06:20 What can you deliver today?
1:06:25 Can we, can we put out the demand signals and then have you actually deliver it against,
1:06:25 against those?
1:06:28 Not look at what you did 10 years ago, 20 years ago.
1:06:34 You know, the idea that they’re, the government currently puts out RSPs that, that have a criteria
1:06:35 of what have you delivered in the past?
1:06:40 No matter if it was over budget or over time, but just what, what have you done in the past
1:06:43 doesn’t, doesn’t lend toward leaning towards startups.
1:06:48 And so some of the changes we’re pushing for, I think will benefit all companies and certainly
1:06:53 will benefit America and actually lean more toward that idea of entrepreneurship and to
1:06:54 what we’re best at.
1:06:59 Yeah, and even kind of better, or an equally good example of that is, you know, the whole
1:07:08 chip industry in the U.S. kind of came out of the race to get to the moon, where the U.S.
1:07:13 government specified, look, if you build a chip with these characteristics, we’ll buy it.
1:07:19 And so the government is, can set rules, can create incentives, can do a lot of good things,
1:07:25 but centrally controlling everything tends not to work so well, at least for us.
1:07:31 So segwaying more, more concretely into some American dynamism, investment theses, do you,
1:07:35 why don’t you share a couple of the areas we’re particularly excited about or opportunities
1:07:36 we’re looking at?
1:07:39 Yeah, I’ll, I’ll start and then maybe Catherine can jump in.
1:07:41 I think energy is a great one.
1:07:44 We, you know, you can sort of zoom in at any level you want.
1:07:48 At a macro level, you know, we’ve just seen throughout history, when you pour energy into
1:07:52 a system, you get just tremendous economic output, economic growth.
1:07:58 If you look at where, where we are today, not even looking forward, we have this insatiable
1:08:03 thirst for, for energy, whether it’s for AI compute, or whether it’s for people switching to electric
1:08:07 vehicles, or even moving to systems that are just electrified.
1:08:12 I mean, even the entire Department of War has multiple initiatives about moving toward electrification.
1:08:19 And so that just has this, this huge consequence of creating opportunities for power generation,
1:08:21 power transmission, power storage.
1:08:25 And the question is, are there going to be opportunities that we think are venture scale there?
1:08:26 We think there are.
1:08:30 We’ve invested in nuclear power companies, a company called Radiant Nuclear.
1:08:33 We’ve invested in Exilat.
1:08:36 We’ve looked at lots of battery technology companies.
1:08:39 And we might just think there’s great opportunities here.
1:08:44 But I mean, even just pragmatically, you know, we have three companies now that are on China’s
1:08:48 unreliable entities list, which is an amazingly named list.
1:08:51 But they’re forbidden now from buying batteries from China.
1:08:56 So it’s like, if you care about the defense industrial base, if you care about anything that requires
1:09:00 a battery, even consumer electronics, like you need to have battery capability in the United
1:09:04 States and or amongst our allies, you need to have there’s a whole bunch of things you need.
1:09:08 And so we just think there’s exciting opportunities there on the energy side.
1:09:15 In the same vein, if you start, if you continue to shift left, you look at critical minerals and
1:09:20 whether it’s magnets, whether it’s motors, whether it’s copper from manufacturing, whether
1:09:27 it’s steel, there’s all these areas where, you know, software that are massive, massive economic
1:09:29 spend centers.
1:09:35 I mean, trillions and trillions of dollars are spent in mining, in construction, in manufacturing,
1:09:42 where software has really not looked into these areas, like nobody’s figured out, can you really
1:09:45 apply advanced algorithms to figure out how to do mining better?
1:09:49 And while that sounds like a quote that would be like, you know, memeable, like, why that
1:09:51 sounds so stupid, it’s actually not stupid.
1:09:55 There’s pressure, there’s temperature, there’s a lot of work that goes into mining, not just
1:09:57 in site selection, but actually in the process.
1:10:03 And these are areas where I think we now see incredible talent shifting their eyes toward these
1:10:07 areas, and, you know, we just think it’s a great opportunity, and it will ultimately be good for
1:10:07 America.
1:10:12 If we go back to sort of our early investments, you know, again, investments like Anduril and
1:10:17 Shield AI, where we led the Series A in 2016, we’ve been around this space for a very long time.
1:10:22 But those early companies, they had no other choice but to be what’s known as the prime.
1:10:27 They had to compete against the legacy incumbents, they had to try to get their own contracts,
1:10:29 and working with the Department of War.
1:10:32 And it was an uphill battle for them, as they were the first.
1:10:36 But what we’re seeing now from our companies, which, you know, I always refer to them as
1:10:40 sort of Defense 2.0, are the ones that really started around 2021, 2022.
1:10:43 These companies are happy to work with the existing legacy primes.
1:10:48 I’d also say that a lot of the industrial base is kind of waking up and recognizing that they
1:10:52 need to bring software, they need to bring the best and brightest engineers from Silicon
1:10:55 Valley into what they’re offering government, and they’re already on contracts.
1:11:00 So one of the things that we’ve seen, at least in the kind of second cohort that’s come through
1:11:07 American Dynamism Fund 1, is that these companies can grow so much faster, and they have a much
1:11:10 richer customer set that they’re supporting because of that.
1:11:14 So I think that’s something that’s sometimes lost on people, is just how is it possible that
1:11:17 these companies can really be working with the government this quickly?
1:11:21 And one, it’s because you have a government now that understands why they need to bring these
1:11:27 companies from Silicon Valley or other places that really understand next-gen engineering.
1:11:32 But the real reason is everyone’s sort of woken up to the opportunity, and there’s a lot of
1:11:37 partnerships that are happening among the legacy and the new players, and they’re reaching, I
1:11:41 would say, extraordinary heights much earlier in their trajectory than the previous generation
1:11:43 of space and defense companies in 1.0.
1:11:50 I’d also say a lot of these founders are coming from some of these version 1.0 companies,
1:11:55 so they’ve seen what success looks like in these areas, at least at some level.
1:11:59 I mean, if you come out of SpaceX and you were there for, you know, six, seven, eight years,
1:12:04 and you saw how SpaceX got built, like, you have a huge head start in starting the next American
1:12:05 Dynamism company.
1:12:11 To that, you mentioned some winners in the portfolio and, you know, others like Ceronics
1:12:14 and Apex and Base and Flock and many others.
1:12:19 As they’ve emerged, what can we, and maybe gearing towards closing here, what can you say about
1:12:23 the founders and the types of founders that are building these companies?
1:12:29 Maybe what’s interesting about sort of them culturally or philosophically or their backgrounds
1:12:33 or what their understanding that maybe others don’t fully appreciate?
1:12:34 Catherine, what would you say?
1:12:38 Well, I’d say, you know, what we’ve always pointed to is that these companies are built
1:12:39 across America.
1:12:41 So, Ceronic is based in Austin.
1:12:42 Flock is based in Atlanta.
1:12:48 And if you look at the founders, it’s not your typical, again, to go back to the Bob Noyce
1:12:53 Harvard dorm room comparison, it’s not your typical, you know, software engineer coming out of a
1:12:54 college dorm.
1:12:58 Like, these are people, you know, in the case of Dino at Ceronic, you know, he served in the
1:13:04 Navy SEALs, enlisted for 11 years before going back to school and then founding companies
1:13:05 and learning private equity, right?
1:13:10 So, there’s something about being entrenched in what the customer needs that I think is
1:13:13 very specific to American dynamism.
1:13:17 A lot of the best founders, you know, they’ve either sold to the government before, you know,
1:13:19 many of them have clearances before they even start their company.
1:13:25 They understand how to really speak the language of the customer, which I think is very important
1:13:25 for this category.
1:13:29 It’s something that we always, you know, really look for when we’re investing in new companies
1:13:32 is how deeply does this founder understand the customer?
1:13:36 And it’s very hard to understand the customer if you’ve never served, if you’ve never worked
1:13:37 inside of government.
1:13:42 And so, I’d say that’s actually something we very much test for across these categories
1:13:44 is how deeply do you understand who you’re selling to?
1:13:50 Maybe just gearing forward, you know, we’ve covered the past and present of American dynamism.
1:13:53 What can you tell us about what we’re looking forward to?
1:14:00 Yeah, I think we’re in this exciting moment in time where both the need and the demand
1:14:08 for new technologies, whether it’s in public safety or in the Department of War or anywhere
1:14:11 else in the government or just anywhere across the United States, is greater than it’s ever
1:14:12 been.
1:14:14 We’re also at this major transformation moment.
1:14:18 You know, Mark mentioned, I think, robotics is AI personified in physical form.
1:14:21 I think it’s going to be extremely exciting.
1:14:22 I think it’s a lot closer than people think.
1:14:28 You know, if you’ve been in San Francisco, gotten in a Waymo, you already know that autonomy
1:14:32 and self-driving cars is absolutely going to be, like, the way forward.
1:14:36 We just see that there’s, we’re just sort of, you know, entering this incredible moment
1:14:43 in time where new technology is meeting these very, very legacy in old categories.
1:14:45 And I’m very excited about where it’s going.
1:14:50 We see more and more founders entering the area across all these different domains.
1:14:57 And, you know, for us, to me, it’s just like this, we’re just in the early innings of America,
1:15:02 sort of on a major comeback when it comes to introducing new technology into these key areas.
1:15:03 I think it’s pretty exciting.
1:15:06 That sounds like a great place to wrap.
1:15:09 This is a great conversation on the history and philosophy and the past, present, future
1:15:10 of American dynamism.
1:15:16 Thanks for listening to this episode of the A16Z podcast.
1:15:21 If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review,
1:15:23 and share it with your friends and family.
1:15:27 For more episodes, go to YouTube, Apple Podcasts, and Spotify.
1:15:33 Follow us on X at A16Z, and subscribe to our Substack at a16z.substack.com.
1:15:36 Thanks again for listening, and I’ll see you in the next episode.
1:15:42 As a reminder, the content here is for informational purposes only, should not be taken as legal
1:15:46 business, tax, or investment advice, or be used to evaluate any investment or security,
1:15:51 and is not directed at any investors or potential investors in any A16Z fund.
1:15:55 Please note that A16Z and its affiliates may also maintain investments in the companies
1:15:56 discussed in this podcast.
1:16:03 For more details, including a link to our investments, please see a16z.com forward slash disclosures.
Palmer Luckey got fired from Meta for backing the wrong candidate—now he’s the hero saving American defense, and that shift tells you everything about how fast the ground moved beneath Silicon Valley’s feet. For decades, tech and defense were allies, then came 15 years of hostility so visceral that Google employees revolted over a Pentagon AI contract, and when leadership caved, only three people showed up to hear what border security actually involves. But something broke: COVID exposed our inability to make things, Ukraine revealed wars now iterate in days not decades, and suddenly the Harvard dorm room generation realized the people building satellites and drones weren’t just necessary—they were the future, while legacy defense contractors still operate on Soviet-style five-year plans that guarantee cost overruns and obsolescence. Now the question isn’t whether Silicon Valley returns to its Cold War roots, but whether America wins by becoming more like China’s centralized system or doubles down on the chaotic creativity that built nine of the world’s ten most valuable companies in 25 years—and the founders flooding into defense, energy, mining, and manufacturing suggest the second American century is just getting started.
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