Ben Horowitz & Marc Andreessen: Why Silicon Valley Turned Against Defense (And How We're Fixing It)

The capitalist approach is messy but you have you have dynamism on your side.

Just come back to the big picture thing.

Is America in aggregate a force for good in the world? Is it important for the world that America succeed?

Is it important that American values, Western values are preeminent of the world?

Is it important that the world not devolve into a complete Soviet communism everywhere?

The other direction is literally fighting everything about our culture, everything about our history, everything about our system.

And the fact that it has appeal is like a weird psychological defect some people have.

They just always want central control.

They always think it's better.

>> And by the way, it routinely doesn't work.

Like it like routinely fails because the world is too dynamic and that's not nearly a fast enough iteration cycle.

>> The thing that people want is exactly what we named the category. How do we build American dynamism? How do we build Silicon Valley in our own country?

>> Geopolitically, we entered a new era.

We're in this exciting moment in time where both the need and the demand for new technologies is greater than it's ever been.

>> The creator of the concept of the five-year plan was of course Joseph Stalin.

Like it it was literally it was literally the Soviet Union run as 5-year plans.

I'll bend a little bit.

He comes from the People's Republic of Berkeley.

Um the old model of World War II era, mass machinery and mass men to win wars.

Like those days are long over.

This should play greatly to America's benefit if we unleash our strength with flexibility innovation creativity dynamism, uh, and apply that into the battlefield of the future. Like, we we really ought to win if we're really able to do that.

I thought we'd start with a bit of a opener.

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.

Ben, do you want to take the first step?

>> Yeah. Well, I would say that, you know, Mark and I kind of always were of the view in an abstract sense that um we had to integrate the, you know, American business and uh American defense back together because we were falling behind.

we we kind of knew the companies that we were investing in and we knew the companies that uh we were buying um you know missiles and aircraft carriers from and like they weren't of the same caliber in terms of the where they were on the technology curve and so we knew it was a kind of a a national security problem for the country. Um, but we didn't, you know, we didn't have a a plan.

And then, as I recall, David, um, said, you know, there's this woman, Katherine Bole, who I want to recruit, and she has this very, very good idea.

Can you guys talk to her about it?

And that's when she uh said, "Look, we should call it American Dynamism and we should build this thing.

" And it was a very easy sale for us, I would just say.

Yeah. And maybe I could just take take a step back.

Um, so um, uh, some of you on this call are too young to remember this, but um, you know, there was an earlier era in Silicon Valley.

Um, uh, and it actually wasn't that long ago.

Um, and Ben and I were both, you know, lucky enough and maybe of the right generation to be part of it, which was, uh, you know, Silicon Valley and the United States, let's say, the the mission of the United States as a country.

Um, and then, you know, sort of the submissions of of, uh, you know, not just economic and technological success, but also, you know, military success.

uh and intelligence success um and you know our ability to you know propagate our our you know our our way of life you know not just in in the country but but around the world um you know there had actually been like a fairly tight degree of of of integration of cooperation and if you actually trace the history of Silicon Valley back before even before World War II there was there was a lot of the original uh defense uh technology work that happened in in Northern California where we sit today um and then you know for sure through you know from the ' 50s through to the I would say to the '90s um you know it's just it was just taken as given that this, you know, this was, you know, this was sort of inherently an alliance. Um, you know, with a with a shared with a shared American mission.

Um, and so, you know, many many great American tech companies, you know, including all all the big names, um, from the ' 50s through the '90s all had, you know, very big government businesses, defense businesses, you know, were very important to the to the to the national mission.

And then, you know, Ben and I in the ' 90s, you know, we when we built our company, Netscape, like that that was always front and center for us.

>> Uh, my my first uh uh sales call to the Pentagon was in 1994. Um when I I don't think I actually owned a suit yet.

Um and uh and uh you know so 31 years ago um and um you know our our company Netcape ended up being a major supplier uh of technology to the to >> Yeah.

Actually both Mark and I had for years top secret clearance um because of those those deals.

>> Yeah. So we you know we've been working in you know we we we were working in Pentagon and and and in you know related agencies for you know for a very on the civilian side also for for a very long time.

and we just sort of you know considered it kind of natural um and um and you know I'm really proud of the work that we did there and it turned out to be a very big part of our business also um and then extended over time to also governments outside the US that were American allies um and so for us this was always very natural and I think this was even everything I'm saying is almost like non-controversial up until probably the 2000s um uh and then um you know then basically for you know for the last 15 or 20 years you know by the way for a variety of reasons including you know reasons that people feel very strongly about we could talk about for a long time but you just a much greater degree of contention and you know escalating in some cases to just outright hostility you know kind of developed you know and I would say in most directions from from from Silicon Valley let's say large components of Silicon Valley not not all but you know significant you know companies for sure you know hostility towards uh DC um and hostility towards you know any sense of national mission national purpose um and then um you know and you know quite frankly that feeling was quickly reciprocated by Washington uh you know back back to uh back to Silicon Valley and there's plenty of people from Washington in the last 20 years who've made a point uh of how much they you know they they hate us. And so it just it felt like we kind of to me it felt like we entered this kind of you know deevolutionary spiral uh over the course of the last 15 or 20 years.

It probably been I think you you might maybe you'd agree at sort of the the peak hostility disconnection was maybe in the late 2010s early 2020s.

>> Yeah. I think the Google Maven project was kind of a watershed moment where, you know, people had to take sides um just kind of intellectually.

>> Uh you know, when Google pulled uh they won a government contract um for kind of I think it was AI to be used in kind of drone technology or something like that.

And then uh they basically pulled out of the contract um due to a protest from uh you know a bunch of their employees.

>> Yeah. And not just and I think you confirm like not not just like a mild protest but like visceral emotional >> Oh like yeah it was like a a revolt from I remember Sundar described it to me a revolt from the international AI community.

Um and so it it was pretty wild uh and and certainly unprecedented.

>> Yeah. And so so you know I think there sort of things sort of bottomed out there and then you know I think you know some of us and obviously you know there are new companies that have played a big role here but you know some of us like Ben and I who were involved in this in the old days you know it was kind of a chance for us to kind of take stock of you know where things were how things had gotten that bad what went wrong and then you know start to you know at least try to figure out kind of how to fix it.

Um, and so anyway, so that's why like I was so enthusiastic when David and then Katherine, you know, devel developed these ideas uh and and you know, developed this new mission for the firm.

Um, like I I you know, I I I thought it was just like an absolutely fantastic idea at the start and and and still do.

And but but I just wanted to go through that which is it's it's like a there's a back to the future component of it, right?

Which is like it is like what we're doing and what others are doing in this space.

It is new and bold and exciting and different and very different than the the norm 5 years ago.

Um and and that's all real uh and but at the same time there is a historical resonance which which is it's also a return to the original values uh of Silicon Valley which is something I I find to be you know just incredibly positive uh and important to be a part of.

>> Yeah. And two two footnotes to that that that I think are important. One is um it actually started uh with uh the universities.

So, professor uh Frank Turman and and William Shockley who were developing these technologies and um to support the war effort you know basically encouraged their students to not pursue PhDs and spin out and build companies to support the uh the country.

So, which is an ironic turn because those same uh those same universities kind of spawn the ideas uh I would say that led to their revolt at Google.

Um and then the other footnote is Google has definitely since Google/Alphabet has reversed their position and now do work uh with the US government and the defense department.

So um we're in a happy place there.

And just to tie the threads together, can we spend just a couple minutes explaining the uh why things went wrong?

what are some of the headline reasons um that the hostility developed um so that we can then get back to the present and uh and describe what changed. I want to hear from Katherine I think in particular on this because she she was both an observer and a participant in it you know for the last for the last like decade plus.

Um like I don't know like I start by saying like look there are like I would say serious and legitimate differences um in uh in philosophy and worldview.

Um I just I happen to watch I'm watching a lot of movies with my my 10-year-old and we've watched the movie Real Genius last night. It's a movie in 1985 actually made by our good friend Brian Graaser.

It's just like an one of my favorite movies.

incredible movie, but it it was sort of an art it's sort of an artifact in the postvietnam era um in which, you know, spoiler alert, the kids in the movie are going to basically a thinly disguised version of MIT and they're working on lasers and they they discovered to their enormous horror that they're working on a weapon. Um and the and the sort of assumption in the movie is if you're working on a weapon, you're evil.

Um and they don't even like pause for a moment to like ask the question of like, well actually could this actually be like super helpful or like you know is this how does this fit into strategy or whatever.

they just immediately like we got to like and so and so it was like there was like it was like of a moment you know sort of very much like of a moment post post Vietnam if the military was evil you know in general um and so you know there's been some of that in the ecosystem you know for for a long time by the way you know Ben mentioned Stanford the pioneering role of Stanford in all of this Stanford was actually forced in the 1970s to devest all of their military R&D and any R&D that touched the military into something called the Stanford Research Institute so so you know there there was this you know many top American universities you know forever for for basically since Vietnam have not allowed like ROC or like you know intelligence agency recruiting happening on campus and so there's there's like a 60s kind of dimension of this post post Vietnam thing and then in the last you know 15 years I think it just all got kind of wrapped up in the broader kind of national political drama you know of our of our time and you know basically people feeling like they have to take sides in all kinds of political issues um 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 and so I I And you know, and by the way, there's also like a post Iraq, you know, component to it, which is, you know, can we really trust the system that took us into Iraq, you know, which obviously had, you know, big impact on our on our on our national politics.

And so that that stuff just kind of snowballed in the valley uh leading into the, you know, what Ben described um in the in in the late 2010s.

Um you know, and I think there's a variety of different responses you could have to that. One is, you know, you could say like, you know, you believe that the postvietnam generation or the post Iraq mentality is the correct mentality.

And there's lots of points of view views that you could have on that.

Um I I just think like in the fullness like in the heat of the moment I think it's very easy to get wrapped up in like the specific let's say you know politics and morality of a specific situation.

I would just come back to the kind of the big picture thing right which is like is America in aggregate a force for good in the world like is it important for the world that America succeed?

Um is it important that um you know that that that that you know broadly speaking American values western values you know are kind of preeminent in the world. Is it important um you know that the world not you know devolve into a you know totalitar you know it was important during the in the 20th century cold war that the world not devolve into a complete Soviet communism everywhere 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 um and so I I think you can just kind of have these kind of big big big picture views um of the importance of the of the overall thing.

I think you can also just say you can have a lot of respect for the men and women in uniform, you know, who put their lives on the line every day protecting and defending us.

And, you know, it's I think it's a pretty reasonable stance to say that they deserve to be supported um you know, by by their by their, you know, fellow countrymen like us. Um yeah, and and then you you could just also have the view of like, yeah, I mean, look, we as the cliche goes, we live in a society, right?

and and and part of the society is is is that uh you know the government is is going to be uh have certain capabilities and it's going to be you know better if they're better and worse worse worse if they're worse 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 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 you know as maybe some of the superheated you know kind of emotions of the last you know eight years maybe are fading a little right now. Um, and you know, some people are are kind of saying, well, actually, we, you know, need to think about what the next 30 years looks like, and we want it to work in a different way.

>> I I'll add two points to that because I think Mark's point on culture um plays a huge role in this. Uh, but there's there's two things I I've noticed um since moving to the valley. I moved to the valley in 2014, but I moved from Washington DC.

And one of the things that I noticed when I moved is that in if you are in Washington DC, you ride the metro.

Metro stops at the Pentagon.

every time you ride the metro, you see men and women in uniform going to work.

So, it is a daily part of life that national security issues like when when people talk about technology in Washington, they're talking about aerospace, they're talking about defense.

I mean, they're talking about the companies that they see every day, the billboards for, which are very different than the billboards you see on on, you know, in in Silicon Valley.

So I think that's that's a huge part of it is just culturally people are very accustomed to national security missions and needs and people in uniform in Washington DC and there's none of that in Silicon Valley. Um like you you could go a decade in Silicon Valley without seeing a person in uniform. And so I think that's that's a part of it.

But to Mark's point on on culture, I I've always said that I think the social network had probably the greatest influence of the 2010s in terms of being a defining movie of what technology means.

And when you look at sort of the the kind of Bob Noise generation of working with your hands, building the physical world, where those engineers came from versus the story of a Harvard dorm room that inspired generations of college students who were studying computer science in their dorm um to come to Silicon Valley, those are two very different populations and they symbolize two very different things.

And so what what I think is is is interesting is probably like the 2010s were really solidified by this sort of Harvardesque social network culture that is totally different than the culture of people who are building you know satellites or building any anything in the physical world and and we really didn't start talking about how those people are necessary for Silicon Valley technology until Mark's essay it's time to build until 2010 until we didn't have enough PPE for co and so I I think it was really just sort of the kind of almost the logical 180 to what have we done here?

Like we're we're not all Harvard grads uh building in the application layer when we should be thinking about the things that we actually need in the physical world.

>> Yeah. If I could just Katherine, I think it's a good point. I just I'll add one kind of personal component to that which is Bob of course grew up in rural Iowa um and was sort of that world, you know, kind of World War II contemporaneous generation.

Um you know, he undoubtedly knew many uh servicemen and women.

you know, he he undoubtedly knew many, you know, he and his family undoubtedly knew many soldiers who went to war and didn't come back um and others who came back wounded.

Um and um and you know, I grew up in rural Wisconsin. I actually grew up in rural Wisconsin kind of post Vietnam.

And you know, kind of very similar thing like if you look at where the sort of war fighters in the American military come from, it's it's you know, it's sort of the center of the country in a lot of cases. And so if you grew up in one of those environments, it's just it's like it's yeah, it's just like an integrated you just realize that this is an integrated part of your society.

Um yeah, and then uh yeah, maybe maybe I I come from a little bit more of that background and then I'll I'll I'll tease I'll tease Ben a little bit.

He comes from of course the polar opposite uh the People's Republic of Berkeley.

Um in which I'm guessing probably the uniforms you saw people walking around in your youth were not camouflaged.

They were somewhat something else.

Um that that is definitely true.

Although although you know I ended up um I ended up knowing a few people who did go to the so you know probably because I played on the football team I ended up knowing a few people who did go to the service and I mean I think that's one of the things that always um struck me as incorrect.

I I I'll just say about the kind of anti you know we're not going to sell stuff to the US military and so forth.

That'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 uh equipment and technology available, like, and that's your moral position.

Like, that always struck me as very weird, but you know.

>> Yeah. Um I remember a few months ago Paul Graham was trying to critique Palunteer I think for sort of involvement in some sort of military activ.

>> Yeah. Yeah. um is just indicative of kind of uh you know web 2010's insults that that don't work anymore because the culture has changed so much such that you know within just a few years Palmer could be uh you know you know uh negatively impacted or you know let go from from meta for sort of uh political contributions to the to the wrong side um or presumably the wrong side and now is is a hero for for his work in saving American defense.

It's just indicative of how much the culture has changed the last few years. Yeah, it it turned out I'll I'll just bash the counter arguments for a moment. Um uh having been trying to be fair earlier, I I'll be totally unfair. Like a a lot of the arguments against like they're very thinly substantive.

They're they're emotional in nature and very thinly substantive.

And so my favorite story, Eric, of your your example was there was there was a big pro there was a big protest against tech companies working um uh with ICE um in in the in the early in the first Trump term in uh 2016 2017 and there's sort of this revolt where a a bunch of tech CEOs kind of did this kind of berry posturing thing where they said of course we're never going to work with those horrible people you know who are you know trying to deal with like all you know everything on the border.

Um uh and and I remember actually a friend of mine was running one of this kind of you know at the time one of the most like culturally advanced technologically advanced coolest tech companies in San Francisco and uh you know they they had a they had a contract you know they had their their services used by ICE along with you know thousands of other organizations um and and you know his employees did the big you know kind of outrage how can we possibly do this um and so he actually went out this is I think 2017 he went out like during the heat when it was maximum level heat intensity of that of that time um and he went out and actually got a former director actually he got a guy who had actually been in the Obama administration is basically the head of head of border the head of the border security and the Obama administration to basically come in and give an hourlong seminar at the company and just explain like here's what's actually involved at the border here are all the things that make it complicated here's all the stuff involving you know not just you know not not not just people coming across but also children and and and you know sex trafficking and like you know drugs and like all all the other aspects of it and he and he was he came in to do an hourong talk and you know and the entire company was invited and you know three people showed up right and so like I think that, you know, that that level of emotionality like it had its moment. And I and I think it's just it's just over now.

And I think we we we and, you know, hopefully, you know, hopefully we and hopefully a lot of others are are just kind of, you know, back back to back, you know, in a lot of ways back to basics, back to fundamentals.

These missions actually really do, you know, independent of the political mood of the moment.

These issues these these these issues matter.

These people matter.

These organizations matter and they deserve to be supported.

>> Okay, cool. We've we've heard Ben Mark's perspective on the on the origin of American dynamism.

uh do you and Katherine let's uh let's hear it from from your p perspective >> when I joined the firm in 2018 uh you know you have to remember what time that was what era was in Silicon Valley I think Silicon Valley lost its way as we've discussed in terms of focusing on defense um focusing on really hard problems you know hardware was not in vogue um the intersection of software and advanced advanced hardware was not was not popular um and about a year after I joined Mark asked me if I wanted to meet Palmer Lucky who is the founder of Anderoll. I think Mark was skeptical that our firm would be interested in a deal like that for a variety of reasons. Um, but I went down to uh Costa Mesa to their office.

They had just unveiled their their new office, which is no longer their new office.

It's now their old office.

Um, and when I was there, you know, like we we had fallen in love with the company.

We thought it was amazing what they were doing.

When I was there, actually, I met Katherine.

Um, she wanted to lead the series B when she was at General Catalyst.

I wanted to lead the series B.

We ended up splitting it. Um, so we >> wasn't the best first meeting.

I'll put it that way.

>> That That's true. That's true.

Um, I'll let you decide how much of that you want to share.

But we basically started out, I think, with uh, not knowing each other at all, competing to win a deal, having to split it. I think one of the worst things I did was that I actually had not, she had done so much work for the series B.

She had done all the diligence work.

She had done notes.

She actually helped the company prepare for the series B.

I had not done that work.

And I think to add insult to injury of having to split the deal, I then asked her for her notes. Um, so I could write write our memo, which is really probably uh, one of the more embarrassing.

>> I sent them because because I because I'm a good soldier.

>> You are you are good. Yeah. Yeah.

It was it was a brutal way I think to meet.

But I respected Katherine.

That's the important part. The important part is I respected Katherine.

Um, and we both uh thought Andrew was a great company.

U a couple years later uh, and I I then continued to follow all of Katherine's writings.

she was really she used different terminology at the time but eventually she came up with the terminology of American dynamism.

Um I thought that was a perfect uh phrase.

Um I then in in 2021 I think uh invested in flock safety.

Um that was at a time where Black Lives Matters was a big movement.

Um people thought the idea of funding public safety and supporting the police was not so cool in Silicon Valley.

But we knew that when we talked to people um who actually were customers of Flock Safety and people in the communities, they loved it. And I just thought this was the highest and best use of my time. It's the time I wanted to spend.

Um at that point, Katherine Katherine uh she was really writing more and more about this idea um and the importance in investing these areas critical to the national interest.

Um and I reached out to her with with Mark and Ben's support and said, "Hey, um I think you we should join forces.

We should make this uh a full-fledged effort.

we will make this a long-term commitment.

We'll raise money.

We'll raise a fund. The firm is totally behind it.

Um I think she didn't believe me at first.

She can she can give her version of it, but then she came around to it.

Uh and at the end of 2021, she joined the firm and uh we launched the American Dynamis practice and it's been uh as they say up and to the right ever since.

>> Can I give another part that we've never told to you that is actually >> it's really for you to tell.

>> You you could tell me. We'll we'll we'll cut it if it's if it's uh inappropriate.

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 because until a single moment we had always been competing and you know I I I had sort of secretly been like I wish I wish you would just stop looking at these companies.

It actually is flock safety.

Garrett Langley called me um very late like 11:30 at night um right before his process was about to kick off and he said I have terrible terrible news.

Great news for me but terrible news for you. Uh David flew out and wouldn't let me leave the restaurant and made me sign a term sheet and I'm not going to be running a process anymore.

And I said Garrett, how could you do this?

I've been you know like not I wasn't like how could you do I was like happy for you but I'm like Garrett you know I wanted to be part of your process and he said well I think the right solution and I told David this is that you guys should just join forces and you should join and then I kid you not two minutes later David calls me um and says hey like we haven't we haven't had a meal we should we should grab a meal um and so I sort of knew what was what was cooking but I am forever grateful I think for Garrett Langley um kind of trying to to smooth things over and kind of thread the needle very gracefully for himself.

Um, saying, "Well, why don't you just join Andrea and Norwoods and that way we can all work together.

" He >> he's an amazing CEO. There's one other funny part about that fundraising round, which has never happened to me in any other, this is just sort of a nonsequittor, but another investor who was really excited about that round and not excited about that phone call wrote me this crazy email. I won't say who it was.

Um, but one of his reasons about why he should then get into the round um was that he had already printed out the term sheet.

And I was like, well, I also own a printer. Like I don't like what is what does printing out the term sheet have to do with anything?

>> Or had some some very upset people who were hanging around the hoop um who didn't fly out to Atlanta um the the day before he started u which is a very strong um reminder to all of us.

Get on the plane and fly out before the process starts.

to totally >> and don't let them leave until the term she designed.

I like that pro pro move to you.

The um so let's segue into you started American Dynamism and I'm curious cuz people had this perception that you know hardware is very hard it's very capital intensive margins are worse.

It it takes a long time to to get returns if they ever do.

How should people think about this category from an investment perspective given some of the preconceived notions that people people had about the category? There's a bunch of different ways to build a hardware company.

Um I think if you look at a lot of the American Dynamism companies, at least the early um sort of innings of of where they started, a lot of them were using off-the-shelf commodity hardware with really advanced software.

Um so Flock Safety was basically a camera um a cell phone camera in a box um with with power to it um and an LTE connection.

If you look at some of the early Androll work, it was largely commodity optics, commodity hardware, commodity, you know, um, parts that they were able to turn into things like the Sentry tower.

Um, and then over time, those things have gotten more sophisticated. But a lot of the companies we invest in, their early versions, um, are really more commodity hardware they're able to put together.

And then I think the unique thing and the the the key thing is that we're at this moment where you can then pair that with advanced software that drives things like computer vision, autonomy, um, etc. And I think that that that is why this is the moment in time where hardware makes a lot more sense.

The other thing is that the customers that they're serving, it's not like you have to build your hardware for the Christmas um gifting season where you only have one shot to make 80% of your sales.

Um when you do government uh hardware or hardware for uh for the Pentagon um or across enterprises, it's a much different um sales cycle and process.

you can better manage your inventory and your pacing and your hardware spend.

Um, and there's also just a lot more, I would say, equipment financing available for the very large scale hardware projects.

Um, and so it really is just a different dynamic.

And I think if you understand that and you spend time in these categories, you recognize that this is not the same thing as making like a consumer electronics toy, which is a really almost like a hits business or, you know, if you have one major issue and recall, it destroys the company.

It's not it's not quite like that.

Do you let's go deeper on on energy.

Where are you most excited or where are we thinking about it from a from investment perspective?

>> Yeah, look, I I've said this many times.

We we as a general society, as an economy, have an insatiable thirst for for energy and for power. Um, and those are not exactly the same the same thing.

Um, but we need power in order to run our AI compute loads. um we need base load power which means always on power um to run our electrical our aging electrical grid that means we need generation we need transmission and we need storage um and so again whether it's electric vehicles whether it's AI compute it does it doesn't really matter what what the reason is we know that there's just absolute demand from the consumer side to have more and more electricity in the system and more and more power generation um and so I think what we look for is where are there just massive ways to create um and generate energy that is uh transposable, that is transmittable, that can be modular, that can be mobile. Um and so we've made two investments in the energy space.

Um exowatt is one, radiant nuclear is the other.

Um we know that those are two um power power generation systems. One uses the sun, one uses nuclear uh energy um to create reliable um power systems. And so we're very excited about it.

Um, and we we certainly I think would make more investments.

But we the last the last thing I would say is that there's been multiple studies that we we've seen shared around over the years that when you pour more and more energy into an economy, you get economic growth.

And that's been true um in all of modern history.

Uh, and I think that's going to be true today as well.

>> Yeah. Gen, I I want to segue to aerospace.

There's there's a lot going on in in terms, you know, space manufacturing uh hypersonics responsive launch.

Where are we making making bets where are we most excited to to make more?

>> Yeah. So, I think the thing that's really changed about aerospace that I think we're we're incredibly excited about is it used to be that everyone had to vertically integrate. Um, and sort of space 1.0 was was very much categorized with companies taking the SpaceX model.

You will build everything yourself.

Um, it might take 10 years to get to space and that's okay. uh that is not the case anymore.

Uh we you know we we were one of the earliest investors in a company called Apex Space. I believe they are the fastest company to get from clean sheet design to orbit in 13 months >> um in in history. Um which is which is pretty incredible.

Um but they had a different view which is that we only want to make the satellite bus.

Um, and if we can figure out ways to make the satellite bus cheaper, more efficiently, and and work with all of the the legacy primes and the new primes, um, to put their payloads into space, um, that will be far more efficient for these companies that are building, um, different types of of payloads.

And I think that thesis has been has been largely correct.

Um, they've been able to work with um, you know, some of the the most kind of legendary, I would say, um, you know, legacy companies, um, but also the the emerging ones.

they, you know, they they um Andrew flew on their first flight.

Um so I think there there's there's something to be said about sort of deconstructing the vertical integration process in space.

That's been very um novel in space 2.0.

We're also investors in Northwood space.

Um it's building ground stations.

Um you know, that's a that's a problem that hasn't been tackled in a in a in a very long time.

We do not have enough ground stations to get data back to Earth as quickly as we need to. And given that low Earth orbit has just been, I would say, you know, saturated um by by payloads in the last several years, particularly because the cost of launch has come down and because SpaceX has put 85% of all mass into orbit, um we we do need more comms. We do need um an ability to be able to to have communication and downlink to from lower Earth orbit in particular to to ground stations.

So these companies, I think, are attacking very important parts of the problem, but they're also kind of deconstructing the problem of space, which used to be build it all yourself, build it in house. Um, which was, of course, the reason why SpaceX has been so successful.

But we're sort of seeing this unbundling um with the the emerging companies that are doing parts of the stack that that maybe SpaceX and some of the legacy players um haven't innovated in or don't see as the priority.

>> That's a that's a good overview.

I I want to segue to defense which is bas you you both know know about um maybe Katherine we we'll start with you similarly where are we excited where have we made bets where are we looking to to make more or what have we seen change >> I mean the the thing that's really exciting about defense is for the first time you have sort of this I would say almost a golden triangle of the customer is desperate and moving very fast and and the customer isn't just the Pentagon it's also Congress uh do you and I and and Mark, we're were just in Washington um talking to to senators and and members of members of the House who were very engaged on this year's NDAA.

Um how do we fix some of the core problems with procurement?

And I think that it it you know, I've never been so hopeful um about these minor changes in procurement reform having a dramatic impact on all of the defense ecosystem. So not just, you know, not just our companies, not just even little tech, but I think it will have a dramatic impact on improving research and development even in the primes.

So, so there's there's something to be said of, you know, the last 10 years we've been saying the same thing over and over and over again, which is we need more competition. We need, you know, modern software and Silicon Valley engineering to be brought into the Pentagon.

And now you're actually seeing it and you're seeing everyone say the same thing.

But the other things that I think have really changed in the last 10 years and particularly since we started uh the AD fund is one, the the downstream capital requirement that used to be sort of the thing that made investors very nervous. It's there.

downstream capital has never been more excited to invest in these these hard tech companies, American Dynamism companies.

And so the sort of messy middle that used to exist where companies had to sort of float through or hope that they would get contracts.

Now there's capital to subsidize which is I think is really important.

And that's led to so many different founders leaving the Andurals and the SpaceX's and the extraord you know they they've sort of graduated with the blessing of of of their of their teams and they're building things that are that are novel in the physical world. taking the the methodology of how they learned manufacturing from SpaceX or taking the manufacturing methodologies they learned um or pioneered at Anderol and and and you know and and doing them in in different ways doing them for different things sometimes not even in defense.

I mean I love pointing out um another energy company that we invested in base power u you know the the the founder CTO of of that company led at manufacturing at at Andreal for years and so it's they they learn they learn the process or build the process in house in in one area in one sector and then they move to something that's that's that's adjacent but not necessarily the same and so I think defense is really benefiting from just years of people learning from the school of Elon Musk and then building these new companies for very kind of I would say specific use cases.

Um and they're finally sort of awake and saying hey we will we will write you a contract.

So I think it's only going to get better.

I keep saying I mean yes we're early stage but um and and very optimistic.

I think there's never been a better time to start a defense company.

I just think I think that the the floodgates are opening and we're going to just see just incredible pace of innovation um with startups that are starting today.

>> It's um yeah it's amazing the the the founders that have emerged from from those two companies as you mentioned.

You know, we did this episode a few weeks ago about uh how Apple built China and how the expertise that uh that people who went to work on Apple go, you know, um translated into other industries and maybe there'll be something someday around like how Ander SpaceX rebuilt America to some degree in terms of all the expertise that was developed there and how they went on to go and build uh you know, other tremendous companies.

Yeah, I mean I do think that the legacy of SpaceX, yes, everything they've built and done is important, but the the manufacturing processes that people have learned at SpaceX is going to be carrying America forward for generations. Uh when you think how tens of thousands of people of engineers have left SpaceX and gone on to other companies and pioneered new ways of building and the manufacturing process in particular is is what was novel and different. The factory is the product of how how Elon built across Tesla and SpaceX. So I think the the in some ways it can't be overstated just how important um that company is for for a number of different domains.

>> Yeah. And and a lot of people thought that the the legacy incumbents sort of their lobbying arms were just so powerful that it' be just very difficult for um you know for startups to break in against the against their the primes.

What um what changed? Obviously you know the sort of the need has been there for a while.

Did it just come to a breaking point at some point or or what really sort of, you know, created this opportunity?

>> Well, we always say SpaceX and Palanteer walked so that everyone else could run.

And I would, it's maybe unfair to say that they walked, but both of them had to sue the government. Um um so so you know, those are those are two early companies, extremely early, right?

These are the companies that wereed in 2002 2003.

Um so I think in some ways they had to do the very very difficult work of educating the government, educating themselves, right?

Explaining why it is so important.

Um but I think you know that now 20 years on from from those companies founding we just see an extraordinary amount of I I think alignment um that we've never seen before.

One because the the kind of you know stakes have changed in 2002 no one was worried about China. In 2012 no one was worried about China, right?

So there there's something that I think has changed in terms of nearpeer adversaries as well that people are now waking up and saying okay like we we we you know we can't let our own procurement process be the thing that stops us from actually fielding these technologies and producing them in mass.

>> I think that's right. I think on the adversary basis we now have a much healthier respect for China as an adversary particularly on their production capability but I think the product has also changed. I think the war in Ukraine really um put a very very bright light on how our exquisite large platforms are not uh going to be the platforms for the fight of the future.

And we needed new we needed new products.

You know, when when Andreal talks about rebuilding the arsenal of democracy, they're talking about not doing it with new aircraft carriers.

are talking about with the tradable systems um with you know swarms of drones uh with with new kinds of autonomous uh submersibles and other vehicles and so it really is a different product and I think the government has woken up in in many ways to that need and they are now working through the procurement reforms a lot of a lot of the the work that Katherine and I and Mark and and and Ben and others do inside the firm in Washington is to really drive some of these reforms which will benefit um ultimately will benefit America but will benefit at all companies but you know in addition to the companies we work with um but the product has changed and I think the customer recognizes they need a different product which is going to come from from a different place.

>> Is there anything more we want to say on on Ukraine and h how that sort of changed the investment landscape or did you sort of say the main thing you wanted to say? You know, one one other thing I would add is that um and and you've seen this actually, you know, when JD Vance went and gave a speech in Europe, I think at the Munich Security Conference, he really said like it's time for Europe to step up and start spending money on defense again.

Um and you know, while the reaction in in the press was like negative, how could he do this?

How could you do this to our friend and our allies and and like whatever, the reality was like a lot of a lot of the uh politicians in Europe said, "Okay, wait, wait a minute.

This is actually probably true." And uh almost every major country in Europe has made a commitment to double or more their spending their GDP level of spend on on defense. And that spend is ultimately going to go there.

There aren't enough incumbents in Europe to have to have all that money go to companies in Europe. So it's a huge opportunity for um their strongest ally, which is the United States, for the companies here to actually go and increase their business uh overseas.

And so I think there's just broadly a ton of opportunity.

Um, and you're going to see that and I think look, the fight in the Ukraine obviously has has caused the uh the all the countries in NATO and you know all of Western Europe to wake up and recognize that they have to change their posture when it comes to defense.

The we've been talking about energy, we've been talking about aerospace, we've been talking about defense.

What what's next in terms of where are we excited to invest or where are the opportunities?

Do you >> Yeah.

Well, I think a couple things I would say.

One is that sometimes people think the categories that we invest in are just totally desperate and and it's like oh we like we like them and so they think like okay yeah it's space it's defense it's energy but actually um these categories are often much more interrelated than people people realize.

You cannot have strong national security without a reliable uh energy grid and electrical grid.

Um you cannot have obviously strong national security without strong defense. You can't have that without strong communications which requires space uh satellites and satellite communications and space domain awareness.

Um and so these things are much more interrelated than people realize.

Um we obviously have other investments in areas that we say as Katherine often puts it serve the national interest.

So we have investments in education. We have a massive portfolio in public safety.

Um that you know every definition of the American dream that somebody would come up with would include the idea of living in a safe community. So, we have a massive um I think we're probably the largest public safety venture investors uh in the country um if not if not the world.

Um and I think as you look to the future, I mean, everyone has their own view of what the the future will will look like for American dynamism, but I think we you'll see us increasingly shift left.

That's why we look at minerals and uh we look at critical critical minerals and and mining.

um we look at manufacturing and the supply chain and the criticality of the supply chain and the ability to get the important uh precursor ingredients we need for manufacturing um in the event of a conflict. Uh and so I think I think those are some areas that I'm excited about.

>> Yeah, I'll echo that you know I I joke that I just love production companies um and that it you know you're now actually seeing large companies say we're moving back our manufacturing back to the USA.

Um, I just think there's never been a better time to to really focus on components, um, and to focus on sort of like the the like almost like the dumb parts, um, the dumb hardware that's needed for a war of mass. And so, I think we're we're taking serious looks at a lot of companies that have interesting thesis on how you do that in bulk.

Obviously, Hadrien was an early company um you know that that really focused on how do you build a factory of the future but I think a lot of learnings over the last several years of how you how you really automate factories to build for um you know whether whether it's exquisite systems or sort of dumb parts all will be necessary in a war of mass and so I think we're we're taking all of that very seriously.

You mentioned al also education which isn't always a category that people uh you know uh sort of tie to American dynamism. Katherine I know we've done Odyssey. What has been a sort of our our thesis in terms of where we're excited there?

>> Well, what's what's exciting about Odyssey?

I'll give a an overview there.

That was an early education company that saw the sea change happening at the state level um around education saving accounts.

Um so in the same way that you have a health savings account through your employer that you can then put forward towards health care of any kind.

Um this was a view um by a lot of states that that people should be able to opt out of the public school system, particularly parents that want to homeschool or that want to have sort of a hybrid uh method of learning for their children.

Um and this became very popular during co um because it was sort of there weren't enough schools, there weren't enough, you know, a lot of people had moved around the country and and and homeschooling and sort of alternative learning became very popular.

But now you're seeing, you know, uh, states like Texas pass a universal ESA where any parent can opt their their child out of out of the the public school system and receive cash from the state. And that cash has to be transferred and regulated somehow and ensured that that's actually being spent on education.

And so Odyssey is building the the financial rails to do that tracking to make sure that parents get the the cash that they deserve from these state programs um and can put forward to to any program that is, you know, approved by by the state um based on their bylaws. And I think you're just seeing more and more experimentation with with K- through2 education.

One, because it's necessary, right?

There's there's more and more, I would say, special needs kids or kids that have different um learning capacities, and people are realizing that one-on-one tutoring can support that. Um, and so I think you're you're seeing, you know, a variety of different um, methods of of learning and they have to be, you know, supported by different types of technology.

Um, we're also obviously looking at how AI and and one-on-one tutoring can can support these initiatives.

I think we're just going to see so many changes to K through2 education um over the next decade um enabled by not only technology but also just this kind of I would say this this sea change that happened because of co um which is realizing that that parents are sometimes best equipped to make the decisions about how their how their children are going to learn.

>> We've talked about the categories we're excited about investing in. Is there any for AD entrepreneurs listening to this?

Are there any requests for startups that you particularly want to see that people yet haven't yet done um as much or as well as they should have across any of these categories?

>> I have one I feel like I'm a broken record um with my request which is offensive space.

Uh I think everyone looks to the past conflict and says oh well we look at what happened in Ukraine and that's what we should build.

I actually think there's very few um lessons from Ukraine that are going to be relevant in the future war.

Candidly, I think that the future war, the infrastructure that we already have in low low Earth orbit will be exceptionally important.

Um, and we have to figure out ways to protect what we're building in low Earth orbit in particular.

And so I think anything to do with offenses of space um both on the software side and the hardware side, we're we're very excited about.

>> Yeah. You've mentioned that the how do you phrase it? It's the war is not going to be about space. It's going to be in space or something.

>> Yes. Yeah. No, I I very much believe that and it's because we already have so much important infrastructure.

Like what when when we visited I was fortunate enough to go to the the border of Ukraine with some um US officials and and and operators on the ground and every time I talked to to people on the ground and asked them what's the most important piece of technology that you use, they all said Starlink. Um and of course Starlink is in low Earth orbit.

It's not um something that necessarily you would you would need to to target low Earth orbit and able to take out that infrastructure.

And so, you know, obviously SpaceX is a very um sophisticated company.

Um but but I think anything to do with offensive space capabilities that can shore up what the US government needs given given where the next conflict will be uh I think is extremely important. I want to zoom out and also talk about how we think about American dynamism in the context of our international efforts because you mentioned you know and for different uh different spaces but also countries are trying to build their own version of it and of course Andrew's also you know working internationally as well but um maybe Katherine we'll start with you how do you sort of think about uh American dynamism but also and I'll pass it to Ben as we're building our international efforts uh our American allies.

Well, I I think you know Ben Ben has always said every time and I I I won't put words in your mouth, Ben, but every time that he travels, I mean, the the thing that people want is exactly what we named the category, which is how do we build American dynamism? How do we build Silicon Valley in our own country, right?

Like how do how do we build national resilience?

How do how do we think about, you know, future of manufacturing?

What are the things that are going to supercharge our own um economy?

And I think the the thing that that by calling it American dynamism and by talking about how important it is to be building in the physical world, I I think we kind of captured a few things that are really important to to every nation state.

One is, you know, we always point to the fact that 25 years ago, if you looked at the market cap um of the largest 10 companies in the world, 25 years ago, uh three of the top 10 were American tech companies.

Now that is nine of the top 10 25 years later.

So Silicon Valley has truly I think transformed with software um you know the the the size and scale of how large you can build these companies.

Many of the companies that are now in the top 10 in terms of of market cap didn't even exist in 2000. Um, so I think that's something where other nations look at what Silicon Valley can build, whether it's hardware, software, whether it's, you know, companies that are building in the physical world and say we want to bring this to our own country.

How do we do that?

And the spirit of American dynamism is recognizing that it's not just uh, you know, an economic zone in a silo.

It's not just um pure software.

Like the companies that are that are really having the impact of that scale are building the physical world and they're interfacing with governments not only in the US, but they're interfacing with governments around the world.

And in order to build, you know, many many more of those companies, um, we we have to have sort of a game plan of of how you interface with with regulators, with governments, um, and with the international community.

And >> Ben, what would you add to that?

>> Yeah, I think that um, you know, geopolitically we we've kind of entered a new era. Uh and so if you kind of go back, you know, post World War II, we had kind of um bombed our big manufacturing competitors, you know, Japan and and Germany uh kind of out of existence or out of the game for a while and America became the the just the dominant economic power uh in the world for for decades. And as a result, we could be um team America world police uh and just kind of, you know, provide defense to everybody. And our our strategy was kind of like it's actually not only do we not, you know, we don't need other countries to defend themselves.

If they were to do so, it might be dangerous. And so we kind of uh station our troops all over the world.

And we built this massive military.

Um fast forward to 2025, we're $ 38 trillion in debt. Um and you know there's a very uh competitive superpower um economically in China uh who has a I I I would just say a very different idea about the way the world should work and the way their society should work than than we do. And so now we're in a position where allies matter a lot.

Um, and not only do allies matter, but we need them to uh to be able to defend themselves and to work with us to kind of defend our values, our kind of way of life, our view of freedom. Um, and you know, what it means to kind of be a citizen.

And you know as a result of that uh you know American dynamism does need to kind of extend out beyond America to our allies because you know if they are providing their own defense um and they are allied with us then they need these same kinds of uh technologies and uh and products and so you know it's just part of the overall mission that I think we have to pursue. It also makes the economics for these companies work better if there are kind of a larger market for them. going to deeper on on China, it seems like a lot of the cultural embracing of American dynamism stems from some of the realities that Katherine mentioned like like Ukraine, like COVID and and of course sort of this great power conflict with with with China and people realizing the the urgency of of uh and need to to prepare for it and it seems to inspire a lot uh you know some of the American dynamism um f focus and and and where we invest.

So maybe let's just briefly take stock on what are the areas in which uh they're ahead, what what are our unique advantages and how does that inform uh sort of where we're thinking for for American dynamism.

Katherine, do you want to take initial step?

>> Sure.

>> Yeah. I mean, I thought the the conversation that that you all had in the last episode with with Brian and Chris about what does it mean to to participate in wars of mass is one that Silicon Valley really hadn't thought about uh until very recently.

Um, you know, I if if you go to Washington, there's all this talk now about what is what is known as a treatable systems, which are systems where, you know, you're not spending millions and millions of dollars building out exquisite systems that that only are are usable once.

You're you're building out, you know, very cheap drones, very cheap hardware where if you lose them, that's okay.

And because the and the reason why that is so important um is because I think a lot of the the learnings of Ukraine um if you have an exquisite system that was hundreds of millions of dollars and it can be taken out with a thousand dollar drone uh that changes the economics of war and it particularly changes the the economics of a war of mass.

Um so I'd encourage people to to kind of understand um the sort of complexities of of why you know why it matters so much that we've exported our manufacturing that we can't uh manufacture these attitudable systems as cheaply and as quickly and in terms of as as as many um as say as say China could.

But I say there's there's two also there's two really important things to take from the war in Ukraine which is that China has been supplying both sides of that war. Um, when you look at sort of the drone warfare that is that has come out of the trenches for the last 3 years, you know, China is a is a supplier in the same way that Russia is a supplier to to its own side.

But that means that their their industrial bases have been built up in a way that the US industrial base hasn't built up um in the past 3 years. And that's something that I think a lot of our American dynamism companies are very cognizant of.

um that we're we're at a disadvantage because we haven't been supplying just in time manufacturing to to the Ukrainians in the way that say um you know Chinese parts um have been.

And so that that's something we we very much have to think about when we think about wars of mass is how quickly can we can we start investing in our manufacturing base so that we can have this just in time manufacturing and these attritable systems um to compete against a country that that has been building for the last 20 years.

Mark, I'd like to hear your your thoughts on on on manufacturing.

We were talking offline a bit ago and about how, you know, people hope for the old manufacturing jobs back and and how it's uh harder to to bring those back, but there's an opportunity for for more advanced manufacturing.

Why don't you describe the opportunity you see it?

>> Yeah, so I g I grew up in sort of described as light manufacturing country um in Wisconsin. So we were adjacent to Detroit um and we sort of viscerally experienced you know the decline and fall of Detroit um you know but we were we were right in the middle of it but we were kind of around the edges um and so you know been thinking about this you know for for for a long time.

Um, look, I think the the the sort of the sort of great offshoring of manufacturing that happened over the last 40 years, you know, happened as a result of of a set of policy issues, uh, a set of policy decisions, like a set of explicit decisions that were made, and we could we could we could spend a long time talking about, you know, those decisions, but that, you know, it was it was it was a real set of decisions.

Um, there are a set of policy decisions that have to be made and and and are currently, you know, some of them are in the works now. Um, you know, to kind of uh to kind of reverse that.

But, you know, kind of to your point, actually, I'll I'll quote Heracitus. uh a man cannot uh step into the same river twice uh because it is not the same river and he is not the same man. Um right so what's not like even if you completely cleaned up all the regulatory stuff and legal stuff which I think we should um and you you you sort of corrected the incentives that drove everything out I think what you're just not going to get practically is you're just you're not going to get the old factories back and you're not getting the old jobs back in the in the way that they were 40 years ago when they were lost. Um and the reason you're not going to get that is it's actually several reasons.

one is that the nature of the products themselves have changed and I'll talk about that a little bit. Um uh and by the way to the good that you know the the things that are getting manufactured in the in in in the in the future decades are much more complex and sophisticated and technologically you know kind of infused and powered than than the things that that used to get manufactured.

So the products themselves have changed.

Um the the methods of manufacturing have changed.

So there's you know a lot more a lot more robotics and automation now than there was 30 or 40 years ago. And then the jobs themselves have changed. Um, and you know, look, if you go into like a manufacturing plant in China and they're, you know, assembling phones or whatever, like you're building bicycles, like you are going to see a lot of people, you know, standing at an assembly line doing the same thing over and over again for 10 hours.

Um, and there was a component of that to the, you know, manufacturing jobs that were lost, you know, 40 years ago in the US.

But like, you're probably not going to get the bicycle manufacturing plant back that's going to build bicycles the way they existed 40 years ago, where the plant's going to work the same way it were 40 years ago, and where the jobs are going to be the same as they were 40 years ago.

And it's just like it's just like the the the level, you know, it's one is it just is cheaper to do that overseas and then like that that's just that that that's the backward-look view like that that's just that's not necessarily the thing you want you want to get.

What you would like in contrast, right, would be something much better.

And the better thing, let's just take bicycles as an example.

What you actually want is you you want to be making electric bikes. You you want to be making ebikes, right, which are much more sophisticated, right?

physical artifacts that involve, you know, batteries and computers and chips and, you know, you might want to have all kinds of, you know, advanced capabilities in the bike just like people have now in cars and motorcycles.

Um, and and then um, you know, maybe, by the way, maybe a bike that balances itself, right?

Like, you know, things like that, right? Um, so like a new kind of product that's much like more sophisticated um, built in a manufacturing plant that is more sophisticated, right?

and has a much you know greater degree of automation where you don't have human beings standing in line you know turning a you know turning the same sphere every time for 10 hours but where what you have is a large number of jobs that are kind of call them blue collar plus jobs and then and then also you know white collar jobs and all the associated service jobs around those um that are that are building and maintaining that new kind of plant to build that new kind of thing um and and I think those job and by the way you can see this if you visit a Tesla fac you know you go visit a Tesla factory today you know you see this in action like you know this is how the world's leading manufacturers actually actually do this like this is actually happening and so I think what you can do is you can leap forward on the nature of the product you're building you can leap forward on the nature of the plant that you're building and you can you can leap forward and actually create much better jobs right higher paying jobs higher skilled jobs that are frankly a lot more pleasant that are a lot more interesting and so I I think you want to have like the futuristic outlook on this and and then if you pair that with the regulatory reforms and you know you you solve all the issues around energy prices and natural resources and everything else that need to solved.

Like I think that's the formula.

Um and by the way, if we don't do that, all of those things are going to get made in China, which does mean over time, not just phones being made in China and not just drones being made in China, but also cars.

Um and also, um uh uh and also robots.

Um you know, you know, the great industry of the future that we could spend a long time talking about is going to be is going to be robots, right?

AI and mechanical form u which is going to be, you know, I think the biggest industry that's ever been built.

And you know, right now, by default, China's set up to do that.

You know, like what an amazing story it would be for America in the 21st century, which is we re-industrialize not to build the products of the past, but to build the products of the future. And I and I think that's the opportunity.

>> Let's go deeper there. Uh I want to ask you the same question I asked Katherine about our unique strengths relative to to their unique strengths because I I heard you say this framing in another conversation which I really liked, which is, you know, are we going to win by being more like us or or more like them?

So why don't you uh flush that out a little bit, Mark?

>> Yeah. So we actually had this fight, this fight actually happened during the during the first cold war with the Soviet Union.

Um, and there was just this raging debate that started in the, you know, 1920s, but like was fully raging in the ' 50s, '60s, '7s, including when I was growing up, which is, you know, basically, you know, democracy or dictatorship. Um, and then, uh, uh, free markets or, uh, you know, state directed capitalism. Um, you know, or sort of state directed production.

Um and and you know this was a very real debate and and one of the sort of little fun facts of how kind of screwy everything got in the 20th century was America common American undergraduate textbooks economics textbooks in the 1980s would stated as fact that communism was a superior economic system to capitalism and they they would have these charts of projected growth rates and they would show that it's purely inevitable uh that communism was going to outperform capitalism because it was a better organized system right it had it had top- down controls it didn't have all this messy inefficiency of of of free market capitalism um and So you know they you a lot of sort of economic experts in the US including ones with like big newspaper columns and like big media footprints you know were basically selling the siren song of of of communism all all the way through the late 80 all through the late ' 80s and and and the reason I say that is like that that that debate was actually happening all through that period which is right are are you better off having a Soviet style system where the state directs production and if the state decides that you need to build tanks or planes or cars or anything else like they're going to directly that's going to happen it's going to happen with maximum sort of centralized efficiency.

it's going to happen with like the entirety of natur you know the natural resources lined up against it like everything orchestrated you know in the right way to be able to maximize production um or are you going to have the American system which you know has aspects of you know communism here and there u you know but it's much more you know the pro argument much more dynamic much more flexible um so are you going to have in the American system are you going to have a higher degree of sort of independent action on the part of individual capitalists indep you know independent companies independent technologists are you going to be inventing a much broader range of new technologies.

Are you going to be deploying those technologies in much more creative ways? Um or you know, are you going to be just like much much faster on the innovation curve because you've unleashed the the sort of inherent creativity of all your people rather than just like ordering them to all stand in the line together.

Um and then you know the capitalist approach is messy, right?

And you know it has boom bus cycles and it you know it has companies go out of business and there's like you know sometimes there's too much competition and you know profits go to zero and like you know you get into all these kind of crazy crazy things but you have you have dynamism on your side, right?

you you you've got you got you got you got freedom, exploration, creativity, innovation, uh uh free market competition um and and dynamism on your side. Um I think that question was asked and answered in the 20th century quite definitively. um you know it is back today. um you know the new you know the upcoming new mayor of you know of uh New York City uh you know is proposing government run grocery stores right because there you know like it's the exact same argument is back and and there are you know people in you know you know people in positions of great power uh you know who still want to have this argument u I think it's long settled it does seem to be back um it is coming back and I think it's fundamentally the same thing and by the way like it's not that the centralized approach doesn't have certain advantages like if you want to pump out you know 20 million tanks or something or if you want to pump out you know a billion phones There is something to a top down centralized approach, right? I mean, you know, every company within itself is it is it, you know, is a form of a dictatorship that does that.

And so, like, you know, there is some advantage, you know, to China at being able to kind of direct all the national resources.

And and there is something frustrating being on the American side where like in theory, you all share the same mission, but in practice, you're too busy beating each other's brains out, you know, to, you know, to to ever get to the get to the um, you know, in competition, ever get to the shared purpose.

Having said that, like I I think we won Cold War I by doing it our way. I think we win cold war by doing it our way. Um, every time somebody stands up and says we need to get to be more like China, I always ask the counter question, you know, where we need like more state control, you know, more top down, more direction, uh, more planning and all these things, you know, I always just ask the opposite question, which is, well, no, actually, like what if we take the opposite approach?

What if we become more like us, right?

And and and what if what if we lean even harder into innovation and even harder into creativity and even harder into entrepreneurship?

And isn't there so much more that we could do if we if we if we got to be more like us?

And obviously I think that's what we should be doing.

It is interesting that that that debate is back though.

>> Mark sort of defined the the Chinese system, but he also sort of defined one of the major problems with procurement which is that the the Department of War makes its decisions about what weapons it's going to buy on fiveyear cycles, 10-year production cycles, right?

And it's very difficult to to correct the ship because of the way that we've structured our procurement process going back to going back to the 60s and the 70s.

So I think there is something about the you know if you look at the last 25 years the second American century has been a story of American dynamism innovation creativity and how on a global stage that has actually led us from three companies in the top 10 to nine companies in the top 10 that are tech companies but the department of defense really hasn't benefited from that.

It's the exact same companies that were that were founded in some founded in world just after World War I solidified their dominance in World War II and then you know mergers in the 1990s post the Cold War with this view that we're post war we don't actually have to worry about things anymore.

So there really is sort of I think a Soviet style uh procurement system that's still at work inside of the Department of War and there's many good people in Washington trying to change that to allow for this American dynamism to actually flow into the places that it needs to exist. So it's actually just a historical tweak which is if you I don't know about DoD but if you work with big companies a lot you know one of the things you see is they have they they often have fiveyear plans they have five year planning cycles fiveyear strategies and actually you know the creator of the concept of the five-year plan was of course Joseph Stalin like it it was literally it was literally the Soviet Union run as five-year plans and actually in in the between the 20 1920s 1950s that idea actually mainstreamed itself into Western society and into Western business and has stuck there ever since.

Um, and and by the way, it routinely doesn't work.

Like it like routinely fails because the world is too dynamic.

And, you know, that's that's not nearly a fast enough, you know, iteration cycle.

Um, and yet people still stick to the five-year plan thing. And it's just it's like this it's like the, you know, it's like Soviet communism out, you know, the hand coming out of the grave, you know, kind of still strangling our ability to actually, you know, advance and be able to, you know, get get our jobs done.

Um, yeah. And and look, like just to double underline what Katherine said, right, the battlefield itself is changing, right?

Um and so one of the things that you see for example in the in the Russia Ukraine conflict is an incredibly high rate of iteration the battlefield techniques and use of technology on the battlefield you know I mean I don't know whe they have Katherine a 5day plan or something you know in the Ukrainian military in terms of how fast they adopt new technology and adapt what they have um and and that's what they need to be able to fight and if they didn't have that approach you know they would have lost a long time ago um and and and by the way the Russians are you know are trying to match them on that um and so you know the the the old model of World War II era you know just simply mass um you know mass machinery and mass men to win wars like those days are long over.

Um you know even even when you have like this very kind of contentious you know even the modern version of trench warfare still you still have this very rapid iterative cycle time um and and if and again this should play greatly to America's benefit if we unleash our strength which is if we take our strength of flexibility innovation creativity dynamism uh and apply that into the battlefield of the future like we we really ought to win if we're really able to do that. Yeah, I I I would just add to Mark's thinking um that going the other direction for the US is literally fighting our everything about our culture, everything about our history, everything about our system.

And the fact that it has appeal is like I think like a weird psychological defect that some people have where they're just they just always want central control.

Um and they always think it's better. And this is, you know, the a great investing strategy is to if you see a company with a five-year plan, short it. Um, and it works every time.

And yet they still do it. And I it just comes it really has no basis in anything.

We saw this actually weirdly in networking.

You know, Mark and David and I all come from the networking field and when uh decentralized networks and packet switching came, you know, people fought it to the death. uh even after Len Kleinrock like mathematically proved it worked like people would still say it would never work uh because you couldn't control it and this and that and the third and you know of course history has has proven them all wrong but you know it's not logical it is just like some kind of brain defect that they have in their psychology where they can't even you know visualize the fact that a system could work well that's decentralized.

Well, I think we we see this over and over again.

I mean, I I even think about, you know, there was like uh I'm curious what Mark thinks, but like when I think about Project Warp Speed, to me, that was like promoting capitalism at its best.

We said like, you know, any company that creates a vaccine like like we will distribute it, the government will distribute it. And then so it's not that there's no role for government, but they really step stepped aside and let the private companies come up with a vaccine, which happened much faster.

And we had, you know, depending on how you count, we had three working vaccines in a record-breaking time. I mean if you look at what China did they they did not have that and they were unsuccessful because they weren't able to lean on creativity and ingenuity. I think when we look at defense you know some of the defense reforms that we want to see happen are things that actually push more toward entrepreneurship not on past performance but like what can you do for me today?

What can you deliver today?

Can we can we put out the demand signals and then have you actually deliver it against against those? Not look at what you did 10 years ago, 20 years ago.

you know, the idea that there the government currently puts out RSPs that that have a criteria of what have you delivered in the past, no matter if it was over budget um or over time, but just what what have you done in the past doesn't uh doesn't lend toward leaning towards startups and uh so some of the changes we're pushing for I think will benefit all companies and certainly will benefit America and actually lean more toward that idea of entrepreneurship um and and to what we're best at.

>> Yeah. And an even uh kind of better or an equally good example of that is you know the whole chip industry in the US kind of came out of uh the uh the the the the race to get to the moon.

Um where the US government specified look if you build a a chip with these characteristics we'll buy it. Um and so the government is can set rules can create incentives can do a lot of good things.

Um but centrally controlling everything uh tends not to work so well at least for us.

>> So segueing more more concretely into some American dynamism investment thesis.

Um do you why don't you share a couple of the areas we're particularly excited about or opportunities we're looking at.

>> Yeah, I'll I'll start and then maybe Katherine can jump in. Um I think energy is a great one. We you know you can sort of zoom in at any level you want.

at a macro level uh you know we've just seen throughout history when you pour energy into a system you get just tremendous economic output economic growth um if you look at where where we are today not even looking forward we have this insatiable thirst for for energy um whether it's for AI compute or whether it's for people switching to electric vehicles um or even moving to systems that are just electrified I mean even the entire department of war has multiple initiatives about moving toward electrification um and so that This has this this huge uh consequence of creating opportunities for power generation, power transmission, power storage.

And the question is are there going to be opportunities that we think are venture scale there? We think there are.

We've invested in nuclear power companies, a company called Radiant Nuclear.

Um we've invested in uh Exolot.

Uh we've looked at lots of battery technology companies.

Um, and we might just think there's great opportunities here, but I mean, even just pragmatically, you know, we we have three companies now that are on China's unreliable entities list, which is an an amazingly named list, but they're they're forbidden now from buying batteries from China. So, it's like if you care about the defense industrial base, if you care about uh anything that requires a battery, even consumer electronics, like you need to have battery capability in the United States and or or amongst our allies, you need to have there's a whole bunch of things you need.

And uh so we just think there's exciting opportunities there on on the energy side um in the same vein if you start if you continue to shift left uh you look at critical minerals and whether it's magnets uh whether it's motors whether it's copper for manufacturing uh whether it's steel um there there's all the all these areas where you know software that are massive massive economic um spend centers I mean trillions of trillions of dollars is spent in mining in construction uh in manufacturing uh where software has really not uh looked into these areas like nobody's figured out can you really apply uh advanced algorithms to figure out how to do mining better.

Um and while that sounds like a quote that would be like you know memeable of like why that sounds so stupid it's actually not stupid.

There's pressure, there's temperature, there's a lot of work that goes into mining, not just in sight selection, but actually in the process.

And these are areas where I think we now see incredible talent shifting their their eyes toward these areas.

And, you know, we we just think it's a great opportunity and it will ultimately be good for America.

>> If we go back to sort of our early investments, you know, again, investments like Ander and Shield AI where we led the series A in 2016, we've been around this space for a very long time.

Um, but those early companies, they had no other choice but to be what's known as the prime. They had to compete against the legacy incumbents.

They had to try to get their own contracts in working with the Department of War.

And it was a uphill battle for them as they were the first.

But what we're seeing now from our our companies, which you know, I I always refer to them as sort of defense 2.0 or the ones that really started around 2021 2022.

These companies are happy to work with the existing legacy primes. I'd also say that a lot of the industrial base is is kind of waking up and recognizing that they need to bring software.

They need to bring uh the best and brightest engineers from Silicon Valley into what they're offering government and they're already on contracts. So, one of the things that we've seen at least in in in the kind of second cohort that's come through American Dynamism Fund 1 is that these companies can grow so much faster and they have a much richer customer set that they're supporting because of that.

Um, so I think that's something that's sometimes lost on people is just how how is it how is it possible that these companies can can really be working with the government this quickly.

One, it's because you have a a government now that understands why they need to bring these companies in from, you know, from from Silicon Valley or other places that really understand nextgen engineering.

But like the real reason is everyone's sort of woken up to to the opportunity.

Um, and there's a lot of partnerships that are happening among the legacy and the new new players. And and they're they're reaching, I would say, extraordinary heights much earlier in their trajectory than than the previous generation of of space and defense companies in 1.0.

>> I'd also say a lot of these founders are coming from some of these version 1.0 companies.

So, they've seen what success looks like in these areas at least at some level.

I mean, if you come out of SpaceX and you were there for, you know, six, seven, eight years and you saw how SpaceX got built, like you have a huge head start in starting the next American Dynamism company.

>> Yeah. To that you mentioned some winners in in the portfolio and and you know, others like Ceronics and Apex and Bass and Flock and and and and many others.

Um, as as they've emerged, what can we and maybe gearing towards closing here, what can you say about the founders and the the types of founders that are that are building these companies?

uh maybe what's interesting about sort of them culturally or or philosophically or or their backgrounds or or or what what they're understanding that may maybe others don't don't fully appreciate.

Katherine, what would you say?

>> Well, I'd say you know what what's what we've always pointed to is that these companies are built across America.

So Seronic is based in Austin, Flock is based in Atlanta. And if you look at the the founders, it it's not your typical again to go back to the the Bob noise uh Harvard dorm room comparison.

It's not your typical, you know, software engineer coming out of a college dorm.

Like these are people, you know, the case of of Dino at Seronic, you know, he served in the Navy Seals enlisted for 11 years before going back to to school and then and then founding companies and learning private equity, right?

So, it's there there's something about being um entrenched in what the customer needs that I think is very specific to American dynamism.

A lot of the best founders, you know, they've either sold to the government before they, you know, many of them have clearances before they even start their company.

They understand um how to how to how to really speak the language of the customer, which I think is is very important for this category.

It's something that we always, you know, really look for when we're investing in new companies is how deeply does this founder understand the customer.

And it's very hard to understand the customer if you've never served, if you've never worked inside of government.

And so I'd say that's actually something we very much test for across these categories is how deeply do you understand who you're selling to?

>> May maybe just gearing forward, um, you know, we've we've covered the the past and present of of American Dynamism.

What can you tell us about what what we're looking forward to?

Yeah, I mean I think that we're in this exciting moment in time where both the the need and the demand uh for new technologies whether it's in public safety or or uh in in the department of war uh or anywhere else in the government or just anywhere across the United States is greater than it's ever been.

We're also at this major transformation moment.

You know, Mark mentioned I think robotics is AI personified in physical form. Um I think it's going to be extremely exciting.

I think it's a lot closer than people think.

Um, you know, if you've been in San Francisco, got into a Whimo, you already know that, um, autonomy and self-driving cars is absolutely uh going to be like the way forward. Um, we we just see that there's we're just sort of, you know, entering this incredible moment in time where new technology is meeting these very very legacy uh and old uh uh categories and and I'm very excited about where it's going.

we see more and more founders entering the area uh across all these different domains.

Um and you know for us to me it's just like this this we're just in the early innings of America sort of on a major uh comeback when it comes to introducing new technology into these key areas.

I think it's pretty exciting.

>> That's uh sounds like a great place to wrap.

This is a great conversation on the history and philosophy and the past, present, future of American dynamism.