From PayPal Intern to Starting 4x Billion-Dollar Companies - Joe Lonsdale Interview
26 Apr 2024 (8 months ago)
The One Reason strategy (0s)
- The most successful companies usually have one dominant reason for their success.
- Having multiple reasons for doing something often means that there is no strong reason at all.
- It's better to focus on one strong reason and push on that rather than trying to do multiple things at once.
- Making decisions based on blended reasons or having a blended strategy is a seductive trick that can lead to mediocre decisions.
- It's better to have one key reason for doing something rather than a long list of pros and cons.
- If there is no one reason that alone is worth doing something, then it's best to say no.
Learning Global Macro Finance from Peter Thiel (3m18s)
- Joe Lonsdale reached out to successful people in college to learn from them.
- He met Peter Thiel, one of the smartest people he had ever encountered, and was drawn to his intellect and shared interests.
- Thiel's hedge fund, Clarium, focused on global macro finance, analyzing the big picture of financial markets from a top-down perspective.
- Lonsdale found global macro finance fascinating, particularly interested in long-dated oil prices and the impact of Fannie Mae and Freddie Mac on the global fixed income market.
- Joe Lonsdale interned at Clarium Capital, Peter Thiel's hedge fund, during his junior year of college.
- He was exposed to complex financial concepts and strategies, such as regression trading systems and hedging portfolios.
- Lonsdale gained valuable insights into the world of finance and developed a strong foundation for his future career.
- After graduating from college, Joe Lonsdale co-founded Palantir Technologies with Peter Thiel and other PayPal colleagues.
- Palantir is a software company that specializes in big data analytics and is used by governments and businesses for various purposes, including counterterrorism and fraud detection.
- The company has grown significantly and is now valued at over $20 billion.
- Joe Lonsdale went on to found Addepar, a wealth management platform that helps clients manage their investments and track their financial performance.
- Addepar uses technology to simplify complex financial data and provide users with a comprehensive view of their assets.
- The company has over $1 trillion in assets under management and is used by financial advisors, family offices, and institutions.
- Joe Lonsdale co-founded 8VC, a venture capital firm that invests in early-stage technology companies.
- 8VC focuses on companies that are using technology to solve real-world problems and have the potential to make a significant impact.
- The firm has invested in over 200 companies, including Instacart, Cruise, and Flexport.
Taking multi-million dollar bets at 4:30am (5m35s)
- Joe Lonsdale worked at a hedge fund in San Francisco.
- The market opened at 6:30 am, but on the first Friday of every month, traders had to come in at 5:30 am due to the release of non-farm payroll numbers.
- Kevin Harrington, the head of research, discovered an error in the seasonal adjustment of the numbers, allowing them to predict whether the number would hit or miss.
- This information was valuable as it could move bond markets significantly.
- Lonsdale and his colleagues took advantage of this opportunity by making large bets on the market's reaction to the numbers.
- It was a high-stakes game with potential rewards and losses in the millions of dollars.
- Lonsdale remembers the excitement and camaraderie of those times, celebrating successes and supporting each other during setbacks.
- Lonsdale's background in computer science and finance, along with his interest in those fields, contributed to his success in the hedge fund.
- He emphasizes the importance of being in the thick of things to truly learn and gain experience.
- Lonsdale acknowledges that the hedge fund took a chance on him despite his lack of extensive experience in the field.
Hire for raw IQ over expertise (8m43s)
- Prefers hiring for talent, ambition, and hard work rather than expertise.
- Expertise is important for operating existing systems, but raw IQ and adaptability are crucial for building new systems or working in complex fields like high finance.
- Uses challenging math problems as an interview tool to assess problem-solving abilities.
- Relies on recommendations from within a network of top talent to identify exceptional candidates.
Nurturing employees into unicorn founders (10m33s)
- Joe Lonsdale has mentored over 20 former employees who have gone on to start their own unicorn companies.
- Lonsdale believes in providing employees with useful frameworks and guidance, but also acknowledges that many of these individuals were already talented and driven.
- Some of these former employees have even gone on to create successful companies without Lonsdale's direct investment or involvement.
- Lonsdale worked at PayPal in the early days of the company.
- He learned valuable lessons and gained advantages from his time at PayPal that he was able to apply to his own entrepreneurial ventures.
- Despite some mistakes, Lonsdale and his team were able to build a successful company.
- One of Lonsdale's former employees from PayPal went on to start a company that was valued at $3 billion within four years.
Solving hard problems with Addepar (12m24s)
- Addepar is a leading wealth management technology company in the US.
- It helps registered investment advisors manage their clients' wealth.
- It took three to four years to build Addepar and make it useful.
- Joe Lonsdale did not give up because he saw the potential and the challenge.
Always “Being on” (13m53s)
- Joe Lonsdale is always "on" and engaged in his work.
- He loves what he does and finds it enjoyable and challenging.
- He believes in using one's mind to its highest capacity and finds complexity stimulating.
- To recharge and gain clarity, he takes cold plunges and schedules open time for creativity.
- His daily routine involves focusing on his fund, venture capital, building new companies, and strategy sessions.
How to spot opportunities for new businesses (15m32s)
- Conceptual gaps in the world present opportunities for new businesses, and finding the path to bridge the gap between the current state and the desired state is crucial.
- AI can be used to improve the efficiency of loading yards in logistics by optimizing processes and creating accountability incentives.
- Building relationships and having strategic sessions with industry leaders, as well as involving entrepreneurs and residents in the brainstorming process, helps identify problems and opportunities.
- Joe Lonsdale emphasizes the importance of constantly looking for new ideas and opportunities, collaborating with talented individuals, and leveraging their expertise.
- Lonsdale suggests partnering with someone who already has an unfair advantage to increase the chances of success and stresses the significance of persistence and hard work in entrepreneurship.
- He encourages young people with entrepreneurial aspirations to seek out partnerships and support from experienced individuals.
How Epirus landed a military defense contract (21m10s)
- Joe Lonsdale, a successful entrepreneur, shares his experience of starting multiple billion-dollar companies, including PayPal.
- Lonsdale observed the decline of the defense industry in the US and became concerned about China's growing technological advancements.
- He and his former Palantir colleagues identified electromagnetic pulse (EMP) technology as a promising area and discovered that the government had not fully utilized modern chip technology in this field.
- Lonsdale highlights the potential of directed EMP technology, which involves using microwave energy to disable electronics, particularly in defense against drones.
- He emphasizes the importance of competition in government contracts and pushing for laws that allow outsiders to compete on merit rather than longevity of relationships.
- Lonsdale's company, Epirus, developed a non-lethal technology that can disable threats like missiles and trucks without causing harm.
- Despite concerns about potential misuse, Lonsdale believes the technology has proven effective in eliminating terrorists, making it a necessary creation.
Getting hits in hard domains (27m9s)
- Joe Lonsdale's successful ventures span diverse and challenging domains, such as logistics yards and EMP pulse technology.
- Unlike many entrepreneurs who focus on familiar problems, Lonsdale intentionally seeks out these hard areas where there's less competition.
- Lonsdale's experience at PayPal exposed him to numerous payment apps, making him realize the potential of applying technology to underexposed sectors of the economy.
Business Idea: AI-powered Estate Planning (28m24s)
- Lonsdale suggests an idea for an AI-powered estate planning platform that automates the process of starting a trust and related legal work.
- He believes such a platform could revolutionize the wealth management industry by saving time and improving efficiency.
- Lonsdale acknowledges that the business might not reach a billion-dollar valuation but still considers it worthwhile due to its potential impact.
Business Idea: Business Process Outsourcing for local government (29m19s)
- Trillions of dollars are spent by local governments, but many struggle to find the right staff for certain processes.
- A business process outsourcing company for local governments, augmented by AI, could be a huge business opportunity.
- The first 6-12 months of such a company would involve finding early partners willing to trust the company and work with it on outsourcing some of their processes.
- The company would need to figure out which processes cities are willing to let it handle.
- There is a secular trend towards local governments not having enough money, so if the company can find ways to save them money and provide higher quality service, there could be a significant opportunity.
Big swings vs. base hits (30m58s)
- The speaker agrees with the philosophy of getting a solid base before embarking on a huge, risky quest.
- It is not advisable to be poor for 12 years while pursuing a noble mission if it can be avoided.
Idea vs. execution (31m49s)
- The speaker believes that ideas matter and that project selection and picking the right market are crucial.
- Execution is the harder part, but amazing execution with a stupid idea will not yield results.
- Both ideas and execution are necessary for success, but ideas by themselves are not that valuable.
Focus vs. diversity of thought/attention (32m38s)
- Focus is a superpower.
- The most successful people in the world have focused and compounded over a long time.
- It's okay to do different things when having an impact on the world in different ways.
- As an entrepreneur, it's important to focus and get a giant win before diversifying.
Insights from Elon’s inner circle (33m33s)
- Elon Musk is very bold and direct.
- He is good at saying no to things that are not tied to his passions and focus.
- He is able to clear nonsense and mess out of the way to focus on what matters.
- Elon Musk was insanely focused for a long time on scaling his companies.
- He is now at a level of success where he can expand his focus to include things that really matter for society.
Joe Lonsdale’s unfair advantages (35m36s)
- Has a huge talent apparatus with people at dozens of universities and a scouting department to find and recruit talented individuals.
- Has a network of people who run big industries and can provide advice and feedback on ideas.
- Believes in sharing ideas and iterating quickly, rather than keeping them secret.
- Prefers to be a minority owner of his companies and is generous with founders, employees, advisors, and partners.
- Wants to create companies where everyone feels like a co-founder and is proud of their work.
- Believes that the best way to develop an idea is to share it with others and get feedback.
- Has a network of people who respect him and are willing to help him iterate on his ideas.
- Can get to the right answer much more quickly because he knows everyone running everything.
How to invest your time to make your first $1M (38m48s)
- Making a million dollars is not about investing money, but rather investing time.
- Disciplined investment of time is key.
- Saving money and being thrifty can work over a very long time horizon, but it's not the most efficient way to make money these days.
- Focus on learning how to build, create, and be useful to others.
- Find what you're passionate about and what you're good at.
- Spend time with people who are good at what you want to do and learn from them.
- Be part of a business and help it grow to see how everything works.
- If you're talented, the people you succeed with can help you do something new later.
Working on an A+ problem as an intern at PayPal (40m40s)
- Joe Lonsdale tried to intern at PayPal twice, and was rejected the first time.
- He eventually got an internship and was tasked with setting up the PeopleSoft instance.
- He learned about finance and treasury by sitting next to someone who managed money on Bloomberg.
- PayPal was facing a challenge as the Chinese and Russian mafia were stealing money by writing down credit card numbers from customers at stores.
- This was costing PayPal millions of dollars per month and many competitors went bankrupt.
- Joe Lonsdale got involved in working on the solution to stop the fraud.
- Joe Lonsdale advises working on the A+ problem at any company, regardless of your role.
- The A+ problem is the real problem that the company is facing and needs to solve.
- Working on the A+ problem will give you the most learning, action, and impact.
- Joe Lonsdale almost quit his internship at PayPal because the work was not glamorous, but his dad convinced him to stay and be helpful.
- Joe Lonsdale also almost quit college because he felt mediocre compared to his peers, but his dad encouraged him to stay and challenge himself.
Be within 2 standard deviations of top talent (43m15s)
- Being within two standard deviations of top talent allows you to appreciate and harness their abilities.
- Even if you're not the best, being very good at something enables you to recognize exceptional talent.
- This recognition allows you to hire and collaborate with highly skilled individuals.
- Joe Lonsdale, a successful entrepreneur, shares his insights and experiences on building billion-dollar companies.
Early days at Palantir (44m14s)
- Joe Lonsdale worked for Peter Thiel's family office, which was the first investor in Facebook.
- He started hiring people and helping Thiel run things, despite resistance from some older employees.
- Lonsdale and his roommate Stephan sketched out cool products and built prototypes, which became the genesis of Palantir.
- They realized that the government was spending billions of dollars on outdated solutions to catching criminals and decided to create a better solution.
- Lonsdale and his team at PayPal were approached by Secret Service and FBI agents for advice on fraud.
- After 9/11, the government started spending heavily on supposed solutions to catching criminals.
- Lonsdale and his team saw that the government was wasting money on outdated technology and decided to create a better solution.
- They started Palantir to provide the government with more advanced technology for catching criminals.
Building a top engineering culture (46m56s)
- Prioritize building a top engineering culture.
- Engineers should be respected and partially in charge of the company.
- Attract top engineers by offering challenging problems, opportunities to work with cutting-edge technology, and the potential to save lives and protect liberties.
- The government is spending billions of dollars in the field, but they are behind Silicon Valley.
- There's an opportunity to create a multi-billion dollar company by solving a complex technical problem.
- Engineers will get to work closely with National Intelligence and defense agencies.
- The mission is to save thousands of lives and protect liberties.
Borrowing trust as 21-year old defense contractor (48m31s)
- Alex Karp, a philosopher and advisor, assisted the young founders in navigating institutional interactions and securing funding. His high-status connections and understanding of institutional dynamics were crucial in gaining credibility with government agencies and potential investors.
- Peter Thiel, a financial supporter and strategic advisor, prevented the company from entering into potentially detrimental early partnerships. His financial backing and strategic guidance were essential for the company's early success.
- When starting a business, it's important to focus on partnerships that align with the company's long-term goals and scalability. Avoid partnerships that may distract the company from its core mission or create unnecessary complexities.
Peter Thiel’s biggest contrarian bet (52m22s)
- Peter Thiel becomes more expansive after his initial success.
- Thiel forgets the amount of effort and resources that went into his first success.
- Thiel's expansive approach leads to some questionable decisions, but his intelligence allows for some successful ventures.
- Thiel's investment in Facebook was one of many at the time and its potential wasn't fully recognized.
- Thiel's friend, portrayed as an African-American in the movie, helped him with the Facebook investment.
- Joe Lonsdale, a former PayPal intern, has founded four companies valued at over a billion dollars.
- Lonsdale's success can be attributed to his ability to identify and capitalize on market opportunities.
- Lonsdale is known for his contrarian investment style, which involves investing in companies that others overlook.
- Lonsdale's advice to entrepreneurs is to focus on solving real problems and to not be afraid to take risks.