Invest Like the Best with Patrick O'Shaughnessy
· 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.
· Patrick O'Shaughnessy, Scott Nolan
[00:00:00] S0: Well, I for one am glad that you're not working on the problem that you're working on. It seems enormously high leverage. And I certainly hope that the future that you might enable is the one that we get to see. I think there's very little arguments against more cheaper, cleaner energy. So an incredible project. When I do these interviews, I ask everyone the same final question. What is the kindest thing that anyone's ever done for you? [00:00:00] S1: Maybe the recent example that's completely linked to this conversation is the transition from Founders Fund to General Matter. And you have to say okay, well, what was this thread that led me here? It goes all the way back to being recruited into Founders Fund by Peter and then support through a decade of investing. And then as I wanted to go shift focus to this, total support for doing that. Obviously, Peter tried to beat up the idea and make sure it's good. But being along for that journey and then ultimately joining our board – as one of very few boards that he's on. Really appreciate that. [00:00:00] S0: What was the hardest part about him beating up the idea? What was the hardest aspect to get through?
· Scott Nolan
[00:00:00] S1: All the abstract layers of meta-level questions, of just even going back to the fact of like, we haven't had any new nuclear in a long time. Why is that? Is nuclear just regulated to death? Is the regulation actually a thing that's meant to stop it – basically make it illegal. It's all these questions of like, why is it really the case that we're going to get more nuclear now? And I think it was that challenging of this that forced us to ask a lot of hard questions that we feel great about our answers to. Even the one you asked of, are you dependent on every SMR succeeding to make a real market? On the HALEU side? Yes, the HALEU production ultimately will be SMRs that create that demand. But to make HALEU, you have to make LEU. And LEU is what goes into the grid today. Our technology works on LEU also, and we'll be building LEU capacity. And so there's this $2 billion plus US market and a similar size market in our allied partners that we can sell into. And so there's this known good market. And so you work through questions like that, when being challenged on, what if nuclear doesn't grow? And it's like, well, worst case, there's an existing market. We can start a business there. And time is then on our side for when and if nuclear grows – which we think it will grow very rapidly. We're in a good position. And a lot of these conversations that I had with Peter were in 2023, before the AI data center boom. And so now it's extremely obvious why we need this.