Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Scott Nolan
[00:00:00] S0: How do you reason through the, what seem to me like illogical, data-free fears that people have about nuclear in general? You started to address them earlier around just the amount of waste is actually quite small. I think it fits in this room or something, something crazy. The bad events that we can call to mind, Chernobyl and Three Mile Island, were bad, but if you dig into the data, it seems like nuclear is very safe. But these fears really do seem to be the reason why we don't have a lot more of it. What matters is reality, not the data. How would you pitch people on not being worried about these things so we can get over this problem? [00:00:00] S1: You're pointing out the difference between acute and chronic events. And I think acute events, they are very attention-worthy, people remember those. And the things that are just low-level in the background, people don't think about. [00:00:00] S0: Car crashes every day.
· Scott Nolan
[00:00:00] S1: Car crashes, all these things. You can think of it in terms of catastrophic events like that. You can think of it in terms of your health, and what are we chronically doing that's unhealthy that's taking its toll versus acute things that take their toll. I think people have a strong bias towards that, but often the right thing is to look at the data. I don't think most people find that compelling. I think the more compelling thing in nuclear for me is – think of a world in which we are not constrained by energy and we won't be constrained because we can all agree that it's good, because it's baseload. It's very affordable. It's going to bring down your rates. It's safe and it's clean. And we can debate those and we can look at the data, but let's imagine that future world in which we have all those things. I think the way to make nuclear really compelling to people is actually to check the final box, which is cost. Again, going back to why have we not had more nuclear? The schedule to bring it online for the large gigawatt-scale projects has been uncertain. The costs are often above what's projected. And when you look at the total package, it's not cheaper than coal. It's not cheaper than natural gas. It's not cheaper than hydro. So why do we want this? And I think if you told someone, okay, nuclear is safe. We can dig into that. Understood you're not interested if it's more expensive. Why would you be? But what if it's cheaper? What if your utility bill got cut in half? I think people would suddenly find that extremely compelling for something that could be tens of miles away from their house and still powering the grid.
· Patrick O'Shaughnessy
[00:00:00] S0: To bring it back to where we began the conversation. Why do you think there are not more Founders Funds, and more founders pursuing some radically different, very unique vision for the future? It doesn't seem like there's many of these people. More investors have taken on this mantle of big contrarian, unique projects, I suppose. But why are there not more of each? It seems so strange.
· Scott Nolan
[00:00:00] S1: It's all case by case, even for Founders Fund. It's not a programmatic thing that Founders Fund has tried to do. It's almost the opposite. Founders Fund recruits for people that want to be investors that don't want to be entrepreneurs. If they want to be entrepreneurs, they should go be entrepreneurs. And the two roles are extremely different. People that have done both realize how different operating is than investing. And so Founders Fund explicitly selects for people that want to be investors. And yet once in a while, a company will start just because it almost feels like a disservice to not go start it. So in this case, decade plus of investing, met all of the reactor companies. They all see the same problem. No one's doing it. And then you look at the final thing of like, okay, important problem, no one's doing it – maybe I can do it. And you look at what it takes to actually go do that. And you realize, wait, my background is really aligned with that. If I don't do this –if the goal is to have an impact on the world, and we can have positive impact through investing, but a much greater impact through starting this specific company – then it's actually wrong to not go do that. And so it's almost like there's a desire to not start companies full stop. And then only with extreme exceptions will we start them. I think if it's an extreme exception, it makes sense that it doesn't happen that often. Now, why don't most people do that? I think the investing life is probably far better than the operator life.
· Patrick O'Shaughnessy
[00:00:00] S0: Have you experienced it that way so far?
· Scott Nolan
[00:00:00] S1: I like what we're doing a lot, but in terms of quality of life, it's not as good. I think any entrepreneur would tell you that the quality of life is not as good. Once you start a company, you're taking the harness and you're latching on. Whatever it is you have to go do. It's not optional. If you're an investor and a deal comes across your plate, but I'm a little bit too busy, I've got enough over here I gotta work on – it is easy to let that one go and not have to do that work. I think when you're running a company, there's stuff that comes up that you just have to deal with and you have to take care of it, or it's going to be a problem. Now that's also a function of the time horizons of each job. So I think when you're operating, you can see the feedback cycle very quickly. As an investor, that company that you might've just chosen to not meet with to preserve quality of life, that could be the next great company. You might not realize that you're not doing well until five years from now, when you don't have that return from that company. Some people are just wired a certain way, like even in the investing role, I would take 10 meetings a day, to the point of definitely diminishing returns, but I want to work hard and make sure you see everything. The other thing about investing when properly understood is that you actually don't need to invest in that many companies. And while you can brute force it and boil the ocean and try and meet everyone and try and be extremely helpful to everybody, all that ultimately matters is a few companies per vintage. And you just have to be into those. Certainly as a VC, much more than even private equity or hedge funds – as a VC, you don't actually have to work that hard meeting everybody. You can dive in as much as you want into specific companies and value-add and help them and be their preferred investor. But it is not a job of labor. It is really a job of ideas and thinking. The quality of life of being surrounded by smart people, talking through ideas and thinking, I think can be a lot more comfortable than rolling up the sleeves and diving in.