The a16z Show
00:16:02 · Connor Love, Erin Price-Wright
[00:16:02] S2: in And this why that's important is when you look back at how we've articulated AD 50 this year, it's kind of three categories. And a lot of times what we focus on, at least, you know, I have and and many people in the in in the sector are focused on, is just the systems companies. And look, there's a lot of really interesting systems companies. I mean, Anduril, Serrano, Castelion, mean, you know, the list goes on and on of who's building really good end systems, But the problem is, is if you can't iterate on the design and iterate on that prototype, you don't not only not get to an end system that is different, better, but you also just move at a slower pace. So then what happens is by the time you finally fix a production level, missile or plane or whatever, then all of a sudden, then you gotta go back and rejigger and build up all these subsystems in order to meet the scale. But if you have a more transferable line, a more adjustable line, number one, you can also build a prototype faster, but then two, you can then, you know, set up each one of these different components in a way where it actually can get to rate production quicker. [00:17:05] S1: Yeah. You're you're you're designing for you're designing for manufacture from the outset.
00:17:05 · Erin Price-Wright, Connor Love, Elena Burger
[00:17:05] S1: Yeah. You're you're you're designing for you're designing for manufacture from the outset. [00:17:09] S2: Exactly. And and that that is... Again, I I keep going back to warnings from, you know, Tesla and SpaceX. In a lot of ways, they they had to make those choice because they didn't have any other opportunity. But in the end, it's actually just that mantra of design for manufacturing that now exists within all these systems companies. And to some extent, like, we are now in the age of now seeing them produce. I mean, again, like, go look at what Anduril's built in, you know, in in Ohio and now on the East Coast in in in Baltimore. You know, go look at what, you know, Ceramic has built with the shipper. I mean, these are massive. Yeah. Huge facilities that are, at some point, you know, in a very soon soon timeline, gonna be producing thousands, tens of thousands, hopefully hundreds of thousands of systems. We haven't done that in America in a long time. [00:17:52] S1: Yeah. This is no longer an on paper theoretical exercise. This is happening in in in the real world, and and real stuff is coming off the lines. [00:18:01] S3: Something that I think is, like, special about AD Founders is they make any problem an Elon sized problem. And and I'd love to I'd love to hear sort of that applied to the different industries that we're talking about here.
00:18:18 · Connor Love
[00:18:18] S2: Yeah. I mean, I think when you look at defense specifically, this has actually been one of the most historically hard, you know, sectors to just build the thing that you think the government needs, because unfortunately, and again, I experienced this in my past when I served in the army, buyer is not the user and the appropriator of the dollars for the buyer is completely removed. You have all these disjointed decision makers or groups that matter. And so what happens is, companies, back then we didn't really have neo primes or AD companies to serve, but what you had is you had primes would just sit there and listen, tell me what you want, I'll develop the thing after you give me the money. And the age old problem is you get a system that's actually not technology forward, you get a system that was evolved for ten years ago, and then the end soldier gets something that actually is not super valuable to them. What's different now, back to the like, you can think through an Elon problem now is, you can say, okay, what does the military actually need? And the beautiful thing is, venture capital and what we do at American Dynamism, but also the rest of the capital markets is saying, we will actually fund that in advance, and you can build in advance of the government saying, here's the thing for you to build, and the outcome of that is the soldier gets a better product, gets something that actually fundamentally changes the battlefield and helps with deterrence or security or safety, and then more importantly, you get a timeframe of type of system that is actually built, aligned with the requirement of the market and what technology can do today. So it's a fundamentally different way of like instead of sitting and waiting for the government to tell you what they want, the government signals and you see it, and you build in advance by using private capital, and that just has not happened in the history of defense. So you can build, like Castelion, building a hypersonic missile that does a, not a super exquisite thing, but it's really hard to build a missile that goes that fast and is reliable. And the government now has given them contracts, and kind of showed up and bought missiles, but if you go look at the last three years of that business, I mean, was private venture capital.
00:20:22 · Connor Love
It was entrepreneurs taking the risk, and building the thing in advance. I think if you see that again and again in defense, you're just gonna get better products, and fundamentally you'll have the neo primes and the new companies start to take a lot of that market share. But it's not just the defense thing, Erin sees it on energy as well, we're re writing our entire energy grid right now. And we're... Again, like, Erin would know better than I would, but, like, we are in... On the one yard line. We we are just starting We're just getting started. That process.
00:20:52 · Erin Price-Wright
[00:20:52] S1: I I think, you know, another part of it is is a little a little more intangible, but, like, these are really hard companies to build. These are really, really hard problems to solve. You know, when I talk to Turner, who's the CEO of Mariana Minerals and, you know, he's flying all... He's flying to the middle of nowhere places all over the world to build his company. He's, like, out where there's no cell phone signal, where there's no electricity Yeah. You know, touching dirt, you know, spending, like, weeks and months away from his family. Like, it has to be worth it. You're building a physical thing. You're not sitting at a desk on your computer. You're out in the world. It sounds kinda sexy and romantic, but when you're actually doing it, like, it's rough. The travel is really hard. This people you're engaging with, you know, you're not talking to... You're calling up your suppliers. These are not like other startups who operate in the same kind of time scale and culture as you. These are like really tough people to negotiate with and work with who, you know, have a very different culture. And if you're gonna be putting yourself through that, like, it better be damn worth it. And so I think people people really gravitate towards these problems that feel huge and enormous because they're... You know, these are real missionary founders that we see building in this space. Even as even as it's kinda heated up and there's more capital and it's gotten cool,
00:22:20 · Connor Love
[00:22:20] S2: it's still brutal. I I think the biggest thing that has changed in American dynamism land in the last few years is we always knew that the companies being built in this category were really important to the fabric of America. I mean, again, like when we talk about defense systems, when we talk about energy, I mean, when we talk about building manufacturing widgets that go into everything, like that stuff's really important. Like it affects our safety, it affects how we live our life, but the biggest change is those companies weren't just the most important thing to us, now they can be the most valuable companies. And that's like a big distinction that has happened, is, it's not just solving a problem for safety or security, It's solving a problem for safety and security. And oh, by the way, those can be some of the largest companies that exist in the world. That's what technology has changed in these industries. I mean, mining has always been a big, big industry. Defense has always been energy.