The a16z Show
00:35:40 · Erin Price-Wright, Connor Love
[00:35:40] S1: A good example of this is kind of the... On the on the grid. And when you think about sort of like the electronic stack. And we're about to go through a a huge step change in how we manage and transfer power on the grid, moving from a system of sort of static and mechanical systems that were deployed in large scale across The US in, like, the seventies and eighties to now sort of modern power electronics, battery storage, architectures, which are much more software native and flexible. And, you know, that is is just... When when you have such a complete step change in technology where the technology that's replacing the previous thing is just completely different, you have this opportunity to rethink the entire supply chain behind that and the way all of that design and engineering work happens. [00:36:26] S2: And and in the energy world, it's the same thing that's happening in the defense or the Yeah. The commercial systems world, which is you have this massive amount of demand for, you know, data centers and, you know, new factories and new build. And when you get this top down level, you have the ability to innovate, like Erin's talking about, and rethink the entire architecture. And look like [00:36:42] S1: Because it's a completely new architecture. Exactly. So, you know, you can't rely on these components that worked in the previous world to just reconfigure. Like, you actually have the opportunity to rethink that from the ground up.
00:36:42 · Erin Price-Wright, Connor Love
[00:36:42] S1: Because it's a completely new architecture. Exactly. So, you know, you can't rely on these components that worked in the previous world to just reconfigure. Like, you actually have the opportunity to rethink that from the ground up. [00:36:54] S2: And another important point here is, you know, you can be pessimistic and you can say, okay, Connor, all these new military or end systems, like, not all of them are gonna be adopted. So, like, that that top down demand or or or or Erin, like, we're not actually gonna increase energy by four times, like there's not gonna be that much demand. I actually don't think it matters because I think once you start the snowball of the demand cycle moving in one way, even if you deliver half of that, you know, requirement [00:37:21] S1: You're not going back. [00:37:21] S2: You're not going back. And it doesn't make financial sense. It... And again, it's it's like when you rethink something first principles and you make the, like, new design, new engineering decision, and a lot of times that comes with better cost, better efficiency, You're just gonna buy that thing now [00:37:35] S1: going serviceability, easier to manufacture. Yeah. Yeah. You're never going back.
00:37:35 · Erin Price-Wright, Elena Burger
[00:37:35] S1: going serviceability, easier to manufacture. Yeah. Yeah. You're never going back. [00:37:41] S3: Yeah. I'm curious kind of what you're seeing in terms of founders being second generation Anduril or second generation Palantir or something like that. And maybe they they see some of these learnings and they see the opportunity to be the middle layer supplier in Yeah. Some... Something that has never been touched since, you know, decades ago. And and kind of like what what are you seeing in terms of, you know, those opportunities and those kinds of founders? Yeah. For sure.
00:38:11 · Erin Price-Wright
[00:38:11] S1: I mean, if you you get... A a great way to light a fire under an entrepreneur is for them to be banging their head against the wall on a sort of engineering or supply chain problem where they are, and then they're, you know, they're like, well, okay. I really care about this. This is a pain in my ass. I know bothering other people. I know it's problem a that I don't just have here at Anduril or SpaceX or Tesla is a problem more broadly. I'm gonna go solve that more generally. And the kind of lineage of founders that have sort of lived and breathed this on the manufacturing floor, and not just founders, but even engineering teams who are like, I saw this problem. I solved this, you know, within Anduril or Cyronic or whatever, and I'm gonna actually, like, go out and build this as a company. And then I'm gonna... You know, I know that everyone in the ecosystem, so I'm... I I have, you know, automatic access to a customer base that's captive. Yeah. You know, we certainly see that trend happening. And, you know, this is how ecosystems get built. Like, people make fun of YC for all YC companies kinda selling to each other. But, like, that's how it works because you have... You know, it's it's your friends. They're tolerant. They're understanding. They're willing to like work with you and help you and and, you know, put up with something breaking because they're working on their own really, really hard problem. And if, you know, the thing you're doing is not the most existential thing to them, they're, like, very willing to outsource it to you. That's beautiful. That's how Silicon Valley was built. And what's really... Like, what makes me really optimistic is the extent to which we're starting to see that in these kind of physical world ecosystems and supply chains. Yeah.
00:39:36 · Connor Love, Erin Price-Wright
[00:39:36] S2: I think that the few companies you mentioned, the SpaceXs, the Palantirs, they weren't overnight successes. Those companies took a long time to get to both the product scale and just the size and success of the company that they're at. [00:39:50] S1: Overnight successes that took twenty years. [00:39:52] S2: Exactly. And and I think the the learning point... You know, we invest in a lot of the entrepreneurs on this list, like, come come from those ecosystems, is you just learn this, like, focus to do the one thing as well as you can, down a path until you've succeeded. And I've seen this with the Castelion guys, for example. Focused for two and a half, three years on the first hypersonic missile that was really hard to build, And other people showed up, oh, be multi product, go build this small drone here. And they're like, no, we need to do this one thing really well. And I think that comes from the fabric of SpaceX. At SpaceX, the concept of being a responsible engineer, and if this thing doesn't work, it's my ass, I'm gonna make sure, I'm gonna obsess over this thing, and again and again. That's what it takes to build really hard things. And again, there will be different derivations of success. Not everyone will think just like the SpaceX mindset, but if you you look at a lot of these businesses like that, you know, in the physical world, you kinda need to do that to build something really hard.
00:40:50 · Erin Price-Wright, Elena Burger
[00:40:50] S1: And... But what what you do in doing that is you learn, you know, you learn that process knowledge. You learn how to do it. And so thing two, thing three, thing four are a lot easier. You've developed a supply chain. You have your relationships. You've developed manufacturing for... Or design for manufacture processes. You know, you've learned how to build a factory to a high quality, high spec. You've learned how to build that trust with customers. And so if you could do that one thing really well, that sets you up to do other things really well, but it doesn't work unless you deliver on that Yeah. On that one core thing. [00:41:21] S3: So we talk a lot about competition. China, what does The United States do uniquely when it comes to our capital markets that really enables these startups?