Invest Like the Best with Patrick O'Shaughnessy
· Shyam Sankar
[00:00:00] S1: Let me start with an analogy. How did Bruce Banner become the Incredible Hulk? It wasn't progressive overload. It's not like he lifted a little bit more weight every week. It was a near fatal dose of gamma rays. 50% chance he died, 50% chance he turns into the big green monster. And there's absolutely an element where we're taking people and just irradiating them. Prospectively, you're not sure if they're going to come out the other end, but you have some belief that they have the raw talent and potential. And then you want to create an environment that has enough transparency and flow of information and exhaust, that if you see that this thing is really going off the rails, without them having to seek you out, you're able to push in and help them. A lot of environments don't have that by default actually. You would have to like manage them. You have them do reports or check-ins or whatever. You gotta create an environment where it's okay to ask for help. The reason this model is really valuable is that I think the alternative model – you have to judge it by the counterfactual – the alternative model doesn't actually work. So this structured career ladder with progressions, it's perfectly designed to make you feel comfortable that you are growing. It gives you some belief that there's a linear path to follow and you'll learn these things, but actually it's all fake. On the other hand, if you're willing to just suspend disbelief, throw yourself off the deep end, the maximal rate of learning will be coincident with your maximum ability to tolerate pain. So now you're in over your head, you're working on a problem you don't even know. This is the environment that you're gonna learn at the fastest possible rate. You're only limited by your motivation and ability to endure through the discomfort of getting there. Then you will find that if you look back retrospectively, you're like, "Holy shit, I grew in all these ways, I learned all these things." None of which you could have predicted specifically ex-ante. And then if you just are willing to do that serially, just keep jumping off the deep end, go after problems you're frankly not qualified to go after, but there is some belief you have the raw potential to do, you turn into a superhero. I think that's actually why Palantir is a founder factory.
· Patrick O'Shaughnessy, Shyam Sankar
[00:00:00] S0: Did you have your own gamma ray moment? Was there an original moment like that for you where you discovered your own potential? [00:00:00] S1: The article talks about the deployment at the COIC. I think that was a seminal one where I was leading the deployment, it was all on me. And it was never obvious until basically the last second whether it was going to work or not. And it allowed me to learn a lot of lessons along the way, which is really where I internalized, "Oh, success looks like a lot of pain." That instinct to figure out how to reduce the pain, like how do I do this the next time with less pain, is exactly the wrong instinct. [00:00:00] S0: If you were giving a commencement speech to a group of people that heard this conversation, how would you urge people to seek that out? Like if someone is pre-gamma exposure and they're interested in that test for themselves, how can people expose themselves to that test?
· Patrick O'Shaughnessy, Shyam Sankar
[00:00:00] S0: If you were giving a commencement speech to a group of people that heard this conversation, how would you urge people to seek that out? Like if someone is pre-gamma exposure and they're interested in that test for themselves, how can people expose themselves to that test? [00:00:00] S1: I think this is the conspiracy of the people around you who give you that chance. I don't know why Kevin Hartz hired me as some Stanford grad student coming to talk to him, but the fact that he took the bet and just threw me out there, that was the first time I got to jump off the deep end in many ways. So I really think, how can you find it? You're assessing the people who are hiring you as much as they're assessing you. Is this an environment that I think is going to bet on me or is this an environment that wants me to be a veal cow? Are they going to be able to tolerate my eccentricities or are they going to try to squash that? [00:00:00] S0: How do you know someone's worth betting on? The other side of that equation. New unproven talent, how do you know? [00:00:00] S1: At some point, it becomes lizard brain. You get enough reps in doing it, but early on, I think the early indicators would be first derivative, proof of some sort of sui generis. Did they create anything from zero to one? And then expression of agency and initiative. Here's the simplest way I'd say it. If I give this person an inch, can they turn it into a mile? And the worst sort of bet to make is I gave this person a mile and somehow they turned it into an inch.
· Shyam Sankar, Patrick O'Shaughnessy
[00:00:00] S1: At some point, it becomes lizard brain. You get enough reps in doing it, but early on, I think the early indicators would be first derivative, proof of some sort of sui generis. Did they create anything from zero to one? And then expression of agency and initiative. Here's the simplest way I'd say it. If I give this person an inch, can they turn it into a mile? And the worst sort of bet to make is I gave this person a mile and somehow they turned it into an inch. [00:00:00] S0: Yeah, it's an incredibly powerful idea and it seems like the culture of Palantir – I mean, obviously there's tons of founders that have come out of this that have mega agency or something like this. If you think about Palantir's future for the next 10 years, now 19 years in, what do you hope changes most in the next 10? Obviously, it's now a huge company, it's one of the bigger companies by market cap in the country and in the world, doing lots of really interesting work with lots of interesting customers. But generally speaking, what are your hopes for it over the next five to 10 years?
· Shyam Sankar, Patrick O'Shaughnessy
[00:00:00] S1: All value creation is downstream of the culture. Continuing to be an environment where a new person can come in and just have huge responsibility, be in charge of people who've been here 10 years or not. It's like that org structure, I call it a quantum org structure. I don't think a flat org structure is optimal. That doesn't actually work. I think what you want is an org structure that can crystallize, is the right structure to solve the problem as it exists today and is able to reform as the problem manipulates tomorrow. And you can see the pathology of big companies as they go through some sort of big reorg every five years, even if you just steel man it. Probably most of them are wrong, even at inception. But if you just steel man it and say, "Hey, they just reorged. This is the right org structure for this company today." Every day, the entropy is against them. And every day, it's slightly more wrong than it was before. If you're so ossified and committed to your structure that you have to wait until it's totally broken before you reorganize it again, that's a fundamental weakness. So that plasticity and how your commitment to working backwards from the problems, that is how we generate value. And that has to be consistent. And I think if we can protect that and promote that, promulgate that culture in the future generations, we're gonna keep winning. [00:00:00] S0: What critique of Palantir do you take the most seriously?
· Patrick O'Shaughnessy, Shyam Sankar
[00:00:00] S0: What critique of Palantir do you take the most seriously? [00:00:00] S1: When you have a structure like this, you don't get to spend nearly as much time with people as you'd want. The rate of irradiation is very heterogeneous. There's some sort of bimodal distribution for how long people stay at Palantir. The probability that you'll stay for a decade plus if you've stayed three years is incredibly high. But roughly around the three-year mark, everyone faces this crucible where they look around and they say, "This place is so fucked up and crazy." And they have to understand, oh, but that's the feature of it, and then they'll stay. [00:00:00] S0: Sign up for it or not, right. [00:00:00] S1: Or they'll say, this is the bug of it and I gotta get out of here and it's not gonna work. The critique I take most seriously, because I think with a little bit of help, a lot more people can make that hump. And that's the future of the business. It’s in those people. [00:00:00] S0: We have you to blame for how many freaking pitches we have to take that involve some forward deployed something or other in a company these days. You were the one that really pioneered the success of this model at Palantir. Everyone is saying it now, that every company has to have forward deployed engineers or forward deployed so-and-sos to be successful. Obviously, I think that's not true for every company. It's true in Palantir's case for sure. Can you tell us the story of what this term means, where it came from and why it's powerful?