Joe is a co-founder of Palantir, a multi-billion dollar global software company best known for its work in defense and finance. Most recently, he was a founding partner at Formation 8, one of the top-performing private funds and the precursor to 8VC.
Dakin Sloss is an entrepreneur, investor, and philanthropist. He is the Founder and General Partner of Prime Movers Lab, the world’s leading partner of breakthrough scientific startups. He has led investments in and is a Board Member at Momentus, Heliogen, Covaxx, Tarana, and Carbon Capture. Prime Movers Lab I is on track to be one of the top-performing funds of 2018. Prior to founding Prime Movers Lab, Dakin served as founding CEO of Tachyus and OpenGov.
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SPEAKERS
Joe Lonsdale
General Partner
8VC
Dakin Sloss
Founder & General Partner
Prime Movers Lab
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello everyone, and welcome back to SALT Talks. My name is John Darsie, I'm the managing director of SALT, which is a global thought leadership platform and networking platform, at the intersection of finances, technology, and public policy. SALT Talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these SALT Talks is replicate the experience that we provide at our global conferences, the SALT Conference, which is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future.
John Darsie: (00:41)
And we're very excited today to welcome two fantastic technology investors to SALT Talks, in Joe Lonsdale and Dakin Sloss. Joe Lonsdale is a general partner at 8VC. He was an early institutional investor in notable companies, including Wish, Oculus, Oscar, Illumio, Blend, Orca Bio, Relate IQ, Joby Aviation, Synthego, Guardant Health, as well as many others. And 2016 and 2017, he was the youngest member of the Forbes 100 Midas List. Joe is a co-founder of Palantir, a multi billion dollar global software company, best known for its work in defense and finance. Most recently, he was a founding partner at Formation 8, one of the top performing private funds, and the precursor to 8VC. Together, these funds manage a total committed capital base of about three and a half billion.
John Darsie: (01:33)
Before that, he found Addepar, which has over two trillion managed on its wealth management technology platform, and OpenGov, which modernizes various processes for over 2000 municipalities and state agencies. He's also a found of Affinity, Anduin, and Esper. Previously, Joe was an early executive at Clarium Capital, which he helped grow into a large, global macro hedge fund. And sorry for the banging above me, there seems to be some construction going on in the building. But that's just part of what we get here in the quarantine era.
Joe Lonsdale: (02:04)
They're getting tired of the bio, it's too long John. They're saying move on, we don't want to hear about Joe anymore.
John Darsie: (02:07)
Exactly. He also worked at PayPal while he was at Stanford, and that's the condensed bio for Joe, if we're being honest. He could have gone on for at least five more minutes with all the things that he's done. But we appreciate him packing about, I don't know, 50 trillion dollars worth of value that he's created into that short bio. So thank you, Joe, for that.
John Darsie: (02:25)
Dakin Sloss is the founder and general partner of Prime Movers Lab. Over the course of the last decade, he's created billions of dollars of enterprise value, including founding two breakthrough startups, OpenGov and Tachyus, investing in extraordinary early stage companies, like Boom Supersonic, and coaching dozens of prime movers, founders who invent breakthrough scientific inventions to transform billions of lives. And prior to Prime Movers Lab, he served as the founding CEO of Tachyus, where he built the leading prescriptive analytics company in the oil and gas industry. And before Tachyus, Dakin co-founded OpenGov where he was the CEO and recruited the core team, secured millions in angel funding and venture capital, and arranged the initial pilot partnerships, and launched the world's most advanced smart government platform. Before OpenGov, Dakin built California Common Sense, the premier California open data and government watchdog nonprofit, and California could certainly use some common sense. So thank you for doing that, Dakin.
John Darsie: (03:26)
Hosting today's talk and making his SALt Talks debut, we're very excited to have AJ Scaramucci, who as you might have guessed is a son of our typical host, Anthony Scaramucci. But AJ is an absolute beast in his own right. He started his career working at Google, then served as an entrepreneur in residence with Peter Diamandis, graduated from Stanford Business School, and has now launched the SALT fund, which is an incubator focused on life sciences companies, so we're excited to welcome AJ here to his debut on SALT Talks, and hopefully he comes back for many more episodes. Although he's busy building about seven different companies, so we try to squeeze him in in his spare time. So with that, AJ, I'll let you take it away for the interview.
AJ Scaramucci: (04:07)
Thanks John. Yeah. So I think what's unique about today's interview is we actually have two friends on the line, people that really know each other very intimately, have a long standing history with one another. I'd like to start there, actually. I'd like to start with how you guys met, as well as how you guys came up with the idea for OpenGov and created that together. I mean, Joe or Dakin, feel free to jump in there.
Joe Lonsdale: (04:31)
Yeah, well I remember Dakin was one of the brighter, more ambitious people at Stanford. You're not that much younger than me, but it felt like you were at the time. I feel like it was much-
Dakin Sloss: (04:39)
But I want to pretend I'm a lot younger than you, because the bios really make it seem-
Joe Lonsdale: (04:43)
I think you may be a decade younger than me, that's fair. But Dakin, we spent a lot of time meeting the top talent at Stanford, the different various groups, and entrepreneur groups, and policy groups there. And Dakin and I got along right away. He had a lot of strong opinions, and he wanted to do big things, and we became partners very quickly in a lot of different schemes.
Dakin Sloss: (05:04)
Yeah, I was just really lucky to have Joe as a mentor who's a bit further down the path and building amazing things that really help people transform their lives. And I certainly couldn't have created the things that I've gotten the privilege of working on over the last 10 years without learning and absorbing lots of lessons from Joe's successes and failures before me.
AJ Scaramucci: (05:26)
Absolutely. And so you guys both have... dabbled is not even the right word, you very much so have been intimately involved in building companies in the gov-tech space, whether it be OpenGov or Palantir. This seems to be a generally under invested in area in venture capital.
Joe Lonsdale: (05:50)
It's a very tough area. It's a very tough area to build companies in. I'd probably be in some ways wealthier even today if I had not spent time in gov-tech. That we're not going to make money in gov-tech, it just is very hard to do. I think Dakin and I are both very mission driven people, we both see problems in the world, and we say we're going to go and we're going to fix those problems. And obviously, the way our firm looks at it is just conceptual gaps in the world. There's how things should be working, and there's how things are working right now. And government has some of the very biggest conceptual gaps, so it's a really compelling area to work, and we do a lot of other things in healthcare, where there was lots of big gaps. We do a lot of things in logistics, in the deep tech. But government has so many big gaps, that yeah, it's something that really appeals to me to fix.
Dakin Sloss: (06:31)
And I think it's really important to note also that in today's day and age, government is, for better or worse, involved in almost every industry in the world deeply, and so whether it's a direct gov-tech company or not, if you're working in energy, transportation, infrastructure, defense, manufacturing, life sciences, all of these things involve huge aspects of interfacing both with domestic and international governments, and all the challenges and opportunities that come with that.
Joe Lonsdale: (06:57)
That's true, Dakin and I are doing some fun things in defense, that's true. We've co-invested on some things there lately, there are a lot of good opportunities there especially.
AJ Scaramucci: (07:05)
So yeah, I mean I think that's a natural segue, so both of you guys are at the helms of your own funds, you said you're very intrinsically motivated, which is very obvious given both of your track records and pedigrees. Can you articulate to us in a cohesive way what the investment thesis is for both Prime Movers as well as 8VC, and paint us a picture of this year, and out of this fund, what you are investing in today and why.
Joe Lonsdale: (07:33)
Dakin, why don't you take that first?
Dakin Sloss: (07:35)
Sure, yeah. So as John said, our mission is to invest in breakthrough scientific inventions that have the ability to transform billions of lives. We're basically investing in six areas, energy, transportation, infrastructure, manufacturing, human augmentation, and agriculture. And basically, the unifying theme across all our investments is that there's some sort of fundamentally very valuable intellectual property. Some sort of scientific breakthrough that's been invented, that opens up a big new market opportunity. And I think when I talk about Prime Movers Lab, it really boils down to two things that we're doing that I think are quite unique in the context of venture. It's this exclusive focus on scientific startups, and then it's really a service mindset.
Dakin Sloss: (08:16)
We treat our founders like customers and we have a whole set of portfolio support resources, executive coaches, talent partners, folks helping with PR, government relations, marketing, to make sure that the least useful thing we're providing to our companies is capital. And I will give a shout out to 8VC. I think there's been a lot of inspiration, because they're one of the few other firms that does think, I think, in a way that really supports founders so that they're not just building great companies, but they're learning and personally growing themselves, and enjoying the process in building companies as well.
AJ Scaramucci: (08:50)
Definitely. Definitely. Yeah, Joe feel free to...
Joe Lonsdale: (08:53)
Yeah, sure. So 8VC, we do a lot of different things. I think the number one role of a top venture capital firm is to focus on knowing where the very top technology talent is going, and what they're doing, and being a place where they're going to come knock on your door, and they know you are. And so Dakin's getting to this place with his firm too with a lot of success. We've been lucky to have a lot of things work, so in the last seven months we've had eight companies go public. When you have these things you backed early that are now going public, there's lots of people there doing new things. And so I think number one is we're managing talent, I'd say, if I'm honest about my job. I think it's more fun to talk about the macro stuff than the tech stuff. But managing talent, and having talent want to work with us, that's one.
Joe Lonsdale: (09:34)
I think number two, the question we always try to ask is what's possible now that was not possible five years ago? If you look at the role of venture capital in the global economy, and why are we investing venture capital, it's because it's helping the economy evolve. It's exploring new ideas. You couldn't have Uber, or Lyft, or Didi, or ride sharing work before the mobile phone existed. Once it existed, those were great investments. Now that they've existed for 14 years, you're not going to make 100X on those investments anymore. A venture capitalist should not probably be looking at that area. And so the big question always for us is what's possible now that wasn't possible before.
Joe Lonsdale: (10:07)
And there's a lot of good answers. Probably the most compelling answer might be the renaissance in biology, but there's still a lot of things with big data and cloud and AI, applied to big industry's processes. There's a lot of things with how healthcare works, and how risk works, and how you can use incentives, and accountability, and markets in different parts of healthcare to deliver healthcare better, with preventative medicine more affordably to everyone. Obviously a big issue for our country. So wherever you see gaps in the world where something new is possible or a better way of doing things are possible, that's venture capital's job. And if you find those areas, you own networks, you own platforms, and you're betting on the top people to go after them, you're going to make a lot of money.
AJ Scaramucci: (10:45)
Definitely. Yeah, both of us you seem to have a real keen interest in life sciences and biotech, and this is something has its origins perhaps in Boston, but is very much so now permeated Silicon Valley. Software is infecting wetware for the first time meaningfully-
Joe Lonsdale: (11:04)
That's right, a lot of biology is becoming information science in a lot of areas.
AJ Scaramucci: (11:08)
Absolutely. So I'd love to lean into this topic a little bit more. I know Dakin, you've been investing pretty aggressively here, both in response to COVID-19 with companies like COVAX, as an example, which I obviously know super well, given Mr. Diamandis. But I'd love to hear from you where in that landscape you're seeing opportunities in the near-term, long-term, whether it be synthetic biology, mRNA, or something else.
Dakin Sloss: (11:38)
Well yeah, as you said COVAX is one of our portfolio companies, they have near three billion dollars in vaccine sales this year, and hopefully can play a big role in ending the global pandemic. Not just here in the US, but with a vaccine that can actually be distributed safely, effectively, cost efficiently, to under developed parts of the world, where a lot of their business is. Beyond vaccine development, we're really looking at three areas in life sciences, neuroscience, longevity, and agriculture. And those are all obviously very broad areas, but we have companies like Elevion, that have identified the underlying growth factor that's responsible for parabiosis, where basically young blood can have rejuvenative effects for older organisms or people. And they're commercializing that first for targeting stroke recovery, but also for other indications as well.
Dakin Sloss: (12:33)
We've got companies in the neuroscience area, things across brain-computer interfaces, one of the areas I'm most excited about now actually is the application of psychedelics for the major mental health problems that we face as a civilization. I think there's 300 million people around the planet that have some sort of mental health challenge, and we've got compounds that have thousands of years of historical data. Not necessarily scientific data, but anecdotal data, that indicate they could provide some value there. And then in the world of agriculture, we have a major portfolio company, Upward Farms, which is using aquaponics rather than hydroponics to produce leafy green vegetables in urban areas at higher yields than anybody else in the market can. So that they can actually be economically scalable.
Dakin Sloss: (13:18)
And when you look across each of these areas, they fit the criteria that Joe was talking about of major things have changed, particularly in the application of computation to these areas. But in other discoveries and breakthroughs that have happened within these fields, that mean they're on the cusp of major commercialization revolution, not just scientific revolution.
AJ Scaramucci: (13:38)
Definitely. Definitely. And on this topic of in the subset or matrix in there, we find longevity, which is an interesting subarea. This is an area that circles around the nine hallmarks of aging, or in fact that aging is the fundamental indication that it is a disease in and of itself. This is something that is becoming perhaps more popular, with nodes like Peter Diamandis, or Dr. David Sinclair, or whoever. Is this an area, Joe, that you also are seeing an uptick in momentum? Actually longevity, preventative medicine, et cetera, as opposed to some of this indication driven traditional biotech?
Joe Lonsdale: (14:25)
Yeah, no it's definitely becoming a hotter area. Our fund is focused on things that maybe sometimes we don't take as much technology risk in very new technology, but I think there's a lot of things that are going to work there, and they're going to be really valuable. So we're probably not working on my end on nuclear fusion or on things that will prevent death, or et cetera, in a quiet stream way, but there's lots of things we're working on.
Joe Lonsdale: (14:55)
For example, in going after cancer, and going after Alzheimer's and cell therapy, that are all part of this longevity wave. And as we understand these things better... For example, I'm really fascinated right now with the whole idea of applying Yamanaka factors, which are these factors you trigger in a cell, that will put it back to being basically age zero. And one of our more advanced companies that's raised billions of dollars now is applying, one of the things it does is it applies these to white blood cells and it turns a white blood cell back into a pluripotent stem cell, turns it back into a young white blood cell. Suddenly it can fight cancer better.
Joe Lonsdale: (15:28)
So if you're able to fight cancer better, and it's working, you're using a mechanism that's changing something back to age zero, why not in theory couldn't you change other parts of the body back to age zero? So it's actually a really fascinating age where we're just right in the middle of, we call it a renaissance. Because every month or two, we're using these new tools with gene editing, and with cell therapy, and with synthetic biology, to discover how life works at a fundamental level, and to try things and to learn from it. And so yeah, I'm very, very bullish on the progress that's going to be made. I tend to take, and I know Dakin's done a great job at this too, take things that are possible to do now, as opposed to things that are really high in the sky that might happen in 10 or 15 years. But even those things that are possible in that area now are advancing the area, which will lead to these great results, hopefully.
AJ Scaramucci: (16:09)
Definitely. And what would you say, which area in this life science theme is not being invested in the way it should be? Which area is actually in fact under valued, or where is-
Joe Lonsdale: (16:23)
I think there's too much AI for drug discovery, as a default thing where they're just exploring. There's just a lot of like, "We're going to use AI to discover drugs." And I actually think AI is more useful in these much more narrow applications of helping. So I think AI, like to tweak how antibodies work, and we already have something working, and we're making it work better. Or AI to tweak how certain things are understood with the tools. There's applications of AI that require you to have the best scientists, and be working hand in hand with those scientists very closely, as opposed to these pure tech companies started by a lot of my friends, who may be the best in the world in computer science, but don't necessarily have a PhD in biology.
Joe Lonsdale: (17:06)
So I think having to go to the forefront, and spend the two or three or four years it takes for a smart person to really get to the forefront of some of these areas of science, at least to understand what's going on, and then help them by applying AI? That's not helping nearly enough. That's not happening nearly enough. People are working too independently from scientists.
AJ Scaramucci: (17:22)
Sure.
Dakin Sloss: (17:22)
Yeah, I think often at the beginning of these revolutions or renaissances, it can feel like, from a public perspective, that it's over hyped. And that already, too much money is going into bio. I think it's almost always, though, the exact opposite, which is it's extremely under hyped. So if we look forward 15 or 30 years, I think people are going to think it's a joke, the things that people were dying of, the things that people were sick from, the things that people were struggling with. And our current understanding of the human body, of physiology, and of how to prevent disease, rather than respond to issues that pop up, is so unsophisticated relative to what's actually possible now, based on the latest things that are happening labs.
Dakin Sloss: (18:05)
So I would say almost universally, all of these things are being under invested in. Specifically, I would say neuroscience in particular. I think neuroscience is a relatively novel and new field, and we're still very limited in our understanding of the brain. And if you project forward 20, 30 years, what is going to have made a massive difference in how human beings are functioning on this planet, and how we're expanding as a civilization and species, neuroscience is clearly going to play a crucial role there. And we're just at the very beginning of that wave of bio funding flooding into neuroscience.
AJ Scaramucci: (18:39)
Yeah, I see that. That resonates with me as well. It may be switching topics a bit here. In a world where capital is unbelievably abundant, where sovereign wealth funds, pensions are coming down and doing direct investments, where there's truly hundreds of billions of dollars now per year being injected into venture capital at every stage, how do each of you differentiate yourselves in the eyes of the entrepreneur? Why do they take your capital, which they do, very often, as opposed to another firm. I'd love to unpack that. I mean, Joe, if you want to start, go for it.
Joe Lonsdale: (19:19)
Yeah, sure. Well I mean, in a lot of cases, they or their close friends have worked with us over the last couple of decades, and they knew who we are, they know what we can do. You've got to find ways of creating unfair advantages for your entrepreneurs. Building a company is just fundamentally a very, very hard thing to do, and the world's usually against these new things, and usually crushes them. And it takes amazing perseverance, and so any advantages you can get are really key. And so the question is, what are types of advantages that you can create?
Joe Lonsdale: (19:45)
And obviously, if you have a brand and you have great people around you, that's one advantage. A lot of firms, we spend a lot of time figuring out how to build new advantages, so for example, we do a lot in logistics, that's another area we're very bullish on, how it's changing in the next 10 years. So five years ago we got to know the guys around logistics for four or five of the biggest companies over the last couple decades, like the guys who used to run it for Walmart, or guys who used to run UPS, or guys who used to run it for Coke.
Joe Lonsdale: (20:09)
And we got to know these guys, we made them our senior advisors, we got them involved in the firm, and then we got to know a bunch of their friends with conferences we host. So we got to know 30 or 40 of the CEOs, CCOs, of these places. We hired a couple of them as senior execs and residents, and some they were part of a network, with these leaders. And so now we introduce all of our companies to that space to them, they help give them feedback, give them deals. Now we're looking to build something new in the space, we're looking to partner with it, people know that we're the guys who know everyone there.
Joe Lonsdale: (20:37)
And so you do this in a handful of industries, and you start to get some pretty big advantages. And the more wins you have, the more the industry trusts you, the more the industry is going to look at, and going to help, and going to do deals with your new things. And of course, you spread the upside around, you have these companies make people advisors. So I think a big part is just the autocorrelation of venture capital is this very cool thing, because as you have more money, as you get more people on your side, and you have that. So I think that's a big part of it. But just in general, you have to have people who are running the firm who are admired and who are liked, and who are, ideally, in the same spectrum of the people building the company.
Joe Lonsdale: (21:12)
So our firm, even though we have 40 people, most of them are actually young entrepreneurs, mostly habit entrepreneurs were our partners, and for us that works really well. There's different ways of doing it, but you have to create some way in which these people relate to you and in which they see they're getting advantages from working with you and are excited to do it.
AJ Scaramucci: (21:30)
Yeah.
Dakin Sloss: (21:31)
Yeah, I agree with everything Joe said. I'll highlight just one of the things that we focus on. So one of our partners is Tony Robins, who's one of the world's leading business strategists and executive coaches, and basically in business, 80% of success is psychology, 20% is mechanics. And so when you talk to early stage VCs, I think everyone recognizes the biggest risk any company faces is the founder's psychology, the founder's development, the founder's leadership, and the dynamics across that leadership team.
Dakin Sloss: (21:58)
That being said, I think it's really under focused on how do you actually mitigate that risk? And so we have full time executive coaches, we have leadership training programs, we have a whole suite of things that we're doing, and when we originally started the firm, I figured that would attract less experienced founders, more than it would attract the more experienced founders. But I think the more experienced founders recognize how unique that is actually, and serial entrepreneurs recognize that if they can get a 1% improvement in how they're functioning, that can translate to a 10% or 100% improvement in how the business is functioning.
Dakin Sloss: (22:29)
And so we've really had a lot of serial entrepreneurs love that focus on their personal development and their expansion as a means to serving the company, and I think that's attracted a lot of founders to us. Because we're genuinely, I think this is something Joe and I, and 8VC and Prime Movers Lab have in common, we're entrepreneurs who happen to be running venture capital firms, and we're not just investing in cutting edge tech, we're rolling up our sleeves and helping to build a business. We're not taking control, or being a pain in the butt to deal with, but we're doing whatever it takes to help make sure that the company succeeds, and that's one example of the kinds of services that we offer. And we've built the firm like a startup, where it's like the founders are our customers, what are they most wanting? And then we figure out how to deliver that to them, and build our team to deliver that.
AJ Scaramucci: (23:16)
Absolutely. Yeah, I think both you guys have done, clearly, an extraordinary job. And Joe, I've seen first hand, perhaps Dakin is a great example, right? There was a real relationship there, there was a company built together, and all these years later, you're on this SALT Talk, you're interacting with each other, I'm sure you-
Joe Lonsdale: (23:36)
You've got to invest in the people you work with, you've got to keep learning from each other, and you've got to find things to do together. And we both... Dakin's done a lot of great things with people that have really benefited our firm, and we've tried to bring him into some things as well. And that's how this world works, it's very positive sum world in venture capital, if you have a big network doing this, that's just to your advantage.
AJ Scaramucci: (23:54)
Definitely. So I was catching up with Zach Rifkin a month ago or so, and I've seen some action on the interwebs related to this city, apparently, that is being built near Austin. Uh oh! So I'd love to get into that, Joe, what is going on with that, please?
Joe Lonsdale: (24:17)
Oh, we're still exploring ideas. We're still exploring ideas. But a lot of us, I wrote this obnoxious article in the Wall Street Journal op-ed that a lot of you may have read, about leaving California even though we love it, because there's just so many things that are broken, and so many things that are hard about doing business and hiring people there. And there's just lots of levels of problems that are hard to fix. And so a lot of my friends have moved to Texas, we have obviously, publicly Elon Musk is here and nearby, who we do a lot with, and there's like... I don't even know, I shouldn't mention all the names, because I don't know who's in public and who's not in public. But a lot of prominent entrepreneurs have moved here. It's usually either Texas, or Jackson Hole, where Dakin is, or Miami pretty much. Maybe a couple of other places and a lot of these entrepreneurs have moved to.
Joe Lonsdale: (25:01)
And a lot of people are realizing they can work from anywhere, but they still want to be around these clusters of other entrepreneurs around town, they still want to spend time with them. I was in Jackson Hole with Dakin and a bunch of friends even just a week around, and teaching my three year old how to ski, but also there for business purposes as well. And so there's just all these people on the move, there's all these people looking for better places to live and build and work, and a big gap in the world, we think, is how cities work. So we talk about our job is to identify gaps, obviously government could be better. It's not just the government itself, it's actually the way the city's designed, the way a city works. I don't believe in this whole status thing, where you can just design a city top down exactly, it just doesn't make sense to me. I'm very much about free society and organic, and evolution.
Joe Lonsdale: (25:42)
But I think you can give a skeletal structure and order in ways the city works, that make it work a lot better. So I have quite a few friends who are names you would know, that we've been chatting for a while about this. And we may buy a bunch of land somewhere and decide to build one. And the boring company to me makes it even more exciting, because we can dig... It sounds crazy, but we have. We've proven it now, we're digging this very, very cheap tunnels, and if you could do really inexpensive tunneling, that could really change how a city works, and how access to a city works. Economically, even, as it gets more expensive for everyone. So we would love to make a world-defining city, to teach the 21st century how these things should work, and do that with friends.
AJ Scaramucci: (26:16)
Our you keen on selling some [inaudible 00:26:19] to back-
Joe Lonsdale: (26:19)
You know, I think Elon's extremely clever about how to fund these things, and so it's one of these things where I think we may, especially if we have the right people like him involved, and we get a city going that's designed properly, and we make it lower cost of living, we make it easier to access, we make it cool in lots of different ways. I mean you could think about underground speakeasies with a boring company, right? Who knows. There's all sorts of fun stuff we could do with this stuff. I'm not sure we're going to have to worry too much about funding it, I think people are going to want to come right away. So it's a matter of finding the right place, and right leadership, and the right time, because all of us are so busy building what we're building. But I think it'd be really fun to work on something like that.
AJ Scaramucci: (26:52)
Definitely. Yeah, so I mean both of you guys, as well as myself, have origins in Silicon Valley, right, I mean you guys all went to Stanford here, we started our careers there, and so on and so forth. But now we're dispersed. I mean, I'm spending most of my time in Miami, and-
Joe Lonsdale: (27:12)
But we have these networks, and we know each other because we're from the same networks and we're excited to work together. Obviously I'd love to do more with you, AJ. And so I think it's an advantage, because we do have these networks we've built. That's why we can be dispersed.
AJ Scaramucci: (27:23)
Definitely. But is it, I mean the fact that you're in Austin, and you're in Wyoming, have we gotten past a sort of event horizon in the Bay Area such that it is a point of no return? Our people are truly leaving, I mean you can see in the news, we've got 70, 75,000 people leaving the state of California in fiscal year 2020. That seems to be a trend that has, if anything, accelerated into 2021. Is this here to stay? Is California on the decline? I'd love, Dakin, if you want to jump in and answer that.
Dakin Sloss: (28:04)
I mean, to put it bluntly, California has been mismanaged for decades. In any business, if you spend dramatically more, and commit to dramatically more obligations in the future, then what you're receiving in revenue, you go bankrupt. And we are running a grand experiment at a societal level about... not just at the state level, but at the federal level... how much can we outspend our means, and how long can we survive doing that? And California is the leader, unfortunately, in that, and I don't think it ends well.
Dakin Sloss: (28:35)
Now, none of us can predict when or exactly how, but I think the much more interesting and exciting story than California's decline is the rise of so many other places. And I think what the... I moved here three years ago, a little before it was trendy to leave the Bay Area, and already at that point you were seeing this wave of entrepreneurship happening around the country in teams that were being built that were remote teams from day one. Where there might be a particular location that's attractive for manufacturing, like Florida. There might be a particular location that's attractive for customer support, like Salt Lake City. And you have these tremendous benefits that have happened for the bay area, and for a relatively small group of people from the tech world over the last 20 years.
Dakin Sloss: (29:21)
And I think a lot of what's going to happen over the next 20 years is that benefit is going to be much more widespread across the country, and to many, many more people, because we are literally sitting at this point where almost every single area of our lives is being changed exponentially. And as a result of that, you end up shifting where the economy is. Most of the economy is not going to be sitting in the big companies that were the big companies 30 years ago, it's going to be sitting in startups and self-run businesses, and more distributed teams, which I think is exciting for just the average human being's lifestyle and quality of life.
AJ Scaramucci: (29:55)
Definitely, yeah. There seems, whether it's human capital dispersion, it's tax considerations, it's sunshine, there's many, many factors that are at play here, and have created a little bit of a shift away from California.
Dakin Sloss: (30:11)
I think on the tax piece, it's important to point out, because obviously no one likes taxes. The two inevitable things are taxes and death, nobody wants either of those. We're trying to fix death, but I don't think that... It's mis-covered, and often the first question I get is, "Oh, you left town because of taxes." No, I'm happy to pay taxes if I receive services in return. I'm not happy to pay taxes and then have my wife walking through the city and find heroin needles and nothing cleaned up. And so I think that the issues is much less about taxes, and much more about mismanagement of what services are being provided by governments.
AJ Scaramucci: (30:47)
Definitely. Definitely, yeah. I mean you've got over a million employees in the government, there's definitely, a lot of polarization, some mismanagement, lots of confusion, et cetera. I mean, are there some things just though that we can... Is there a way to inject some vigor back into the government? Is there a way to get real great human capital perhaps from Silicon Valley?
Joe Lonsdale: (31:15)
Yeah. Oh yeah, there's lots of ways. And so I have a policy group called the Cicero Institute, 14 full time people in there working specifically on issues like this, and it's purely how to help society, it's not cronyism, in fact we're trying to stop cronyism in all these areas. But what you basically need in government, is you need to make it look more like how a free society works. The way a free society works, is we try lots of stuff, and the ideas compete, and the good ideas win and the bad ideas lose. The problem with how government is set up right now is there's not a mechanism for a competition of ideas. So you'll have things happening in certain governments, like the way we run certain prisons is amazing. There's certain prisons with programs where there recidivism falls down below 10%, because they're doing some really clever, really inspiring work. And there are other ones, they're still using shock therapy and have over 90% recidivism. In fact, in New York State even they're doing that in one prison.
Joe Lonsdale: (32:03)
So you're like, wait a second, what's happening? And then you realize that the things the government touches, they don't have a mechanism for competition of ideas, then it's very, very hard to have this fresh thing going. Ti's like for example, the DMV in lots of states is a classic example. No one likes going to the DMV. For most places, it's horrible. Here's what you do, let's say you have 20 DMVs in an area. You should put one person in charge of 10, another person in charge of another 10. Just give them a little bit of a budget, ability to hire and fire their top five or six people, just they actually have the ability to change who's working for them and running it at the top. Ability to use the budget to try some innovative things, and then give them two years.
Joe Lonsdale: (32:38)
And for each one of them, we'll see how it works, and whoever wins gets a bonus, and whoever loses, they get pushed somewhere else, and someone else gets to try again. And just that competition... You know, just do it based on MPS scores from the consumers. So just a really basic set up of a competition of some control, some ability to innovate, wouldn't be that expensive. You could actually massively improve how DMV works. Same thing for every area of government, it's called accountability, and incentives. And without accountability and incentives, you should not expect government to work, it's just going to keep decaying, and keep getting worse. And so this is a very simple idea, but it's one of those things where just for whatever reason, people are really bad at this stuff.
AJ Scaramucci: (33:16)
Yeah, I mean this past year and even still now, the pandemic, COVID-19, has really pierced through and reared its head, and shown a lot of the huge issues we have in our healthcare system, in our ability to access supply chains, the FDA approval process. We've truncated some of that, a 10-12 year time horizon to bring a vaccine to market has been shrunk down to a little less than a year, which in and of itself is promising. But as you see the virus continued to tear open not just the United States, but the West, what can we learn from this? How do we adapt? What other countries and governmental bodies do you feel are doing a good job, and how can we come out of this as United States 2.0, instead of this perhaps continued decay? I mean, Dakin, if you have some thoughts there, jump in.
Dakin Sloss: (34:15)
Yeah, I mean I agree with what Joe was saying about looking at how do businesses work, and what are the lessons we can take from that. And it's not like every lesson in business is going to apply to government. I don't think that there's phenomenally inspirational examples of perfectly run governments in the world today. We live in general in a world today where the state is progressively playing a larger and large role in people's lives, rather than individuals in free society, and I think that there's these two opposing trends almost, right? One is the amazing technological progress that's happening, that has the potential, well used, to basically solve every major material problem that we face. And then there's these massive societal tensions that feel in general, and the way they're covered in the news, feel like we're moving backwards. And it feels like those two forces are against each other.
Dakin Sloss: (35:06)
I think ultimately, we need to come upon more flexible governance structures, that are designed for the world in which we live. And I think regardless of where one is on the political spectrum, you don't have to be critical of any particular political orientation to see that the way in which it made sense to set up a country 250 years ago or 100 years ago is super different in a completely globalized world, in a completely interdependent world, and I think there's a lot of work that needs to be done there. Joe, I think, is doing a great job exploring ideas in that landscape.
Joe Lonsdale: (35:41)
I tend to have a lot of respect for the philosophy of 250 years ago, I think a lot of it was quite good. I think it was a high [crosstalk 00:35:48]-
Dakin Sloss: (35:48)
I agree with the philosophy, too. I think structurally, though, basic things. I think it's difficult to imagine, and Joe and I may actually disagree on this one, it's difficult to imagine a couple hundred years from now, that we're going to end up with these big mega countries like we currently have, where people identify as American, or Russian, or Chinese. That, in a very global world, that's going to change a lot. And I think the way travel has been shut down over this period of time has shown how crazy and silly that is. I think you're going to end up with communities, like the type of city that Joe's talking about building, that people organize around, and you're going to end up with simpler, more adaptable structures. Which I think is even the spirit of the founding of America, not necessarily in its current implementation.
AJ Scaramucci: (36:34)
Yeah, I mean one of the linchpin problems that has been percolating or bubbling for some time is wealth inequality. If you have assets in an environment where things are imploding, you invest those assets, you will in turn compound them, right? So that is very much so what has happened over the last 12 months, and seeing things bubble, whether it's in the cryptocurrency or blockchain ecosystem, or even something like this GameStop run up we've seen, is a way to stick it to the man, if you will, or create-
Joe Lonsdale: (37:11)
A lot of assets lost a lot of them in that run up.
AJ Scaramucci: (37:13)
That's true. That's very true. Yeah, I mean I'd love to hear your thoughts and perhaps opine on some solutions to this wealth inequality, and...
Joe Lonsdale: (37:23)
Yeah, so I think it's always there's something weird going on there, and it's worth bringing up. I tend to not like the framing wealth inequality so much as how do you create opportunity for the least well off, right? And I think there's a couple things there. First of all, we do have a very unfair system in the sense that the fed is printing a lot of money, and it's creating a lot of asset inflation. So our government policy is specifically giving lots of money to those who own assets and those who are very wealthy. I think that's probably the biggest source, if you're going to talk about the word inequality, is just we are making assets worth more than they should be thanks to what I think is a very naïve monetary policy that it's ironic that the Democrats are even more in favor of it than the Republicans. They're just going to print like mad, and so that is interesting, that does help the wealthy more.
Joe Lonsdale: (38:12)
But I think we have to step back and say, what we really care about is let's look at an index of opportunity and of wealth, and of prosperity, and of wellbeing, for the bottom 20% of our society, the bottom 50% of our society, and first of all, they're way better off than anywhere else in the world. So we're not doing that badly. Overall, we're doing quite well on most metrics there. And you'd much, much, much rather be a bottom 20% socioeconomic person in a country where there's rich people than in countries where they've banned billionaires. Because the countries where they've banned billionaires, that's where you get real poverty, and you get a real mess. Because there's no one growing and extending the top ideas.
Joe Lonsdale: (38:44)
So you don't want to be in a poor country where there's not billionaires. But then second, what do we do to help the bottom of society? And this is where my policy work comes in, the policy group comes in. There's lots of things we've done to accidentally make it tough to be poor in America. We've made cost of living way higher. We've made commutes way longer than they should be. We've stopped building in major cities. So it used to be, if you were poor you could go to a big city, you work your way up, you can't do that anymore. It's too expensive. So a lot of policy that Cicero Institute focuses on, that I focus on, is not about the gap about rich and poor, because it's not about bringing down. If I go start another company, like next year, I obviously, Palantir's worth 55 billion dollars. My fund's setting back three billion dollars this year. I can go sit on a fucking... pardon my language, I can go sit on a beach, but if I go start another company instead, I'm increasing wealth inequality.
Joe Lonsdale: (39:28)
So obviously wealth inequality is not the right thing to think about, because obviously I'm increasing it by choosing not to go to the beach. If you really wanted to lower wealth inequality, you can just force me to go to the beach. That's obviously not good for anyone, it's good for me to create more things. So the question is not how to bring down creators, the question is what do we do to help the least well off. And there's so many ways, education, healthcare, cost of living. There's so many policies we could fix there, so that's what I'm focused on is how do we help them.
Dakin Sloss: (39:51)
Yeah, I agree with Joe's framing on this. Another thing I would add is, I think one thing we don't spend enough time talking about in these polarized topics is we're all part of a shared human family. And if we think of everyone in the US, or everyone in the world as part of a human family, one question that's worth asking is, if these are all my brothers and sisters, when would I want them to be born in history? Would I want them to be born in feudal society 300 years ago, where the richest king in the world couldn't fly halfway across the world to go see a movie, much less look at an iPhone and all the incredible abundance that comes with that. Or I'd rather that king, 300 years ago, be born today, as one of the poorest Americans?
Dakin Sloss: (40:34)
I would rather he was born as one of the poorest in America, because the thing that the inequality framing misses is the average human being's quality of life today is higher than it has ever been at any point in human history. And I think that's extremely exciting, and we should feel really good about that. Would it be attractive for the average human being's quality of life to go up further? Absolutely, that's what we're all working on, and that's what we're all investing our time and energy in, rather than going and sitting on a beach. And I think that's important, and I think as you have... One of the places this has come about a lot from, frankly, is how the news works today. The news is designed to polarize and shock us, and grab our two million year old brain's attention through negativity, rather than covering, wow, isn't it amazing what the average human being's quality of life is?
Dakin Sloss: (41:20)
And I'm not saying we should stop working on it, we should absolutely keep working on it, but I think we have to look at it, why did it change over the last 300 years? And a lot of why it changed over the last 300 years is good systems for innovation, and for encouraging people not to go sit on a beach, but to go pursue fantastic ideas and create novel products, and services, and tools that help the average human being's life quality go up. So I feel quite actually optimistic in this area. And philanthropically, the place we focus is feeding people abroad, in international countries. I think 10 years from now, you're not going to have people who don't have enough food. That's crazy that that's going on, and that is largely a structure due to poor governance in places, not to lack of resources. There's plenty of resources for everyone at this point, and it's a matter of execution, and a matter of governance to make sure that people benefit from the tremendous resources that they're already benefiting from at an even higher level.
AJ Scaramucci: (42:18)
Yeah, I mean one element to this opportunity gap, perhaps, is the idea market itself. So circa 1990s, early 2000s, companies would start and go public in a four to seven year time horizon. Today it's 10 to even 14 years.
Joe Lonsdale: (42:38)
Yeah, well it will be interesting to see if SPAXX change that, because Dakin and I are experiencing recently, some of our companies, three of our eight are SPAXX. I think Dakin's the king of SPAXX right now, they're all chasing him. So I agree, I think it could be faster, there could be rules to make it faster. At the same time, there's lots of other ways we could share benefits. Not everyone has to necessarily invest and be part of a tech company to hopefully benefit from it. Hopefully the things we work on and the policy we work on could lead to a better future for everyone regardless.
Dakin Sloss: (43:07)
And I do think that's a perfect example, right? So part of the reason that the IPO market and the time to go public changed so much was it became much more onerous to become a public company. And it's, you can see all the sides, right? People in government wanted to protect retail investors from bad actors in public companies, not disclosing things, not reporting things. Which, there's always going to be bad actors somewhere, but they're usually the minority in almost any system, not the majority. And the rules that were put in place made it much more attractive to stay private longer, and rather than actually protecting the average public market investor, a firefighter, or a teacher trying to grow their retirement account over time, the opposite happened, in that all the growth started happening in venture capital and growth equity, and stuff that the average investor couldn't access.
Dakin Sloss: (43:56)
And so I think it's exciting right now that through SPAXX, there's an opportunity for the average public market investor to get exposure to much earlier stage, higher risk tech companies than they would have gotten before, which is both going to produce some failures and produce some phenomenal returns. And help your average person grow their retirement and participate in the upside of all these things.
Joe Lonsdale: (44:20)
Yeah, I'd say that's a positive as well. We do need pensions to perform, otherwise we're in trouble. So there's a lot of good stuff we can do there.
AJ Scaramucci: (44:26)
So these SPAXX very much so seem here to stay. I mean, as you pointed out Joe, I mean Hims and Hers recently went public, I know Momentus is in the process of going public-
Joe Lonsdale: (44:40)
Joby just announced they're going, my flying car company, they're going to raise a billion it sounds like, in SPAXX.
AJ Scaramucci: (44:46)
Fascinating. So are you guys actually back putting together your own SPAXX at 8VC and Prime Movers-
Joe Lonsdale: (44:52)
I've been helping some friends, I've avoided it so far. There's argument that we should be. There's so many right now that I'm just a little bit cautious about it. I think it's a mechanism that's a great mechanism, and lots of my smart friends are doing them. They've done very well. My guess is the fees go down a little bit. I like making money in ways that are based in creating value over three or five years. Palantir is public now, it took us 17 years. That's a little long, may not want to wait that long for things I do, but I think making money over a longer period of time is a better framework for doing it. So I'm not really too focused on SPAXX. That said, if people are giving away money, probably should, nothing wrong with people doing it, you know?
AJ Scaramucci: (45:27)
Sure, sure, sure.
Dakin Sloss: (45:28)
Yeah, I mean we've got six different companies going public via this right now, and I think the thing that's really under reported on about this is the main innovation in SPAXX is the ability in the process of going and raising from a SPAC to do what you already do with venture capitalists, of showing forward looking financials. And those forward looking financials allow people to form a realistic perspective on the business, because none of the companies three or four years in look phenomenal from a rear looking financial perspective. They've been spending money and investing.
Joe Lonsdale: (45:56)
No, yeah, the fact that you did the forward looking is really good.
AJ Scaramucci: (45:58)
Dakin and Joe, thank you so much for joining us today on SALT Talks. I've found this conversation super dynamic, very interesting, we covered a lot of ground. John, feel free to jump in and wrap it up for us.
John Darsie: (46:10)
Yeah, thank you again Joe and Dakin, and thank you everybody who tuned in to today's SALT Talk. A lot of great information about building companies, trends that we're seeing, as well as how to fix public policy. We sort of covered the whole gamut here. So thank you guys, and thank you everybody who tuned in. Just a reminder, if you missed any of this talk, or any of our previous talks, or you want to sign up for future SALT Talks, you can go to salt.org\talks, we have our entire archive there, as well as fields where you can be altered to upcoming talks on subjects that interest you.
John Darsie: (46:42)
A reminder too, please spread the word. We love growing our community, which we've done a great job of during the pandemic, during the quarantine period. We're going to continue to do these SALT Talks even when we return to our in-person conference series. But please spread the word, and please follow us on social media, we're on Twitter, Facebook, Instagram, LinkedIn, our YouTube channel is SaltTube, so please follow us there, we have a fast growing subscriber base that gets alerted to all of our new content. So on behalf of the entire SALT team, this is John Darsie signing off. It was great to have you here for your debut on SALT Talks, AJ. We hope you'll come back and moderate one soon. But thank you everybody again for joining. We'll see you soon.