00:45:52 · John Collison, Scott Nolan
[00:45:52] S1: Okay. I wanna try something on. It feels like sometimes you have a trend that sweeps an industry that takes place at many companies at once. And so in The US, in the seventies and eighties, this happened with lean manufacturing, where a lot of the success of private equity firms at that time or, you know, early Danaher were there were all these US firms that had not embraced lean manufacturing. And so you can buy a manufacturing firm, just adopt the lean stuff about better inventory management and everything like And, yeah, you can make the business much better because it turns out these are like... This is a a technology, managerial technology that had not been adopted by a whole bunch of firms. [00:46:31] S0: Right. And maybe there's people doing this today with AI, applying it to services industries. [00:46:35] S1: Exactly. That would be another example. It feels like there's maybe another trend that you're a part of in hardware, which is there is this stasis in companies where there was stasis in launch until SpaceX came along and targeted much lower cost launch. There was stasis amongst the primes, and then Anduril and now kind of a whole bunch of other neo primes are coming along. And, similarly, you're identifying stasis in the existing companies that enrich uranium that you can very... Do... Does that does that resonate with you as a trend where, you know, there's something that has not been adopted amongst a whole set of companies and entrepreneurs are coming along and finding those weak spots and building better competitors?
00:46:35 · John Collison, Scott Nolan
[00:46:35] S1: Exactly. That would be another example. It feels like there's maybe another trend that you're a part of in hardware, which is there is this stasis in companies where there was stasis in launch until SpaceX came along and targeted much lower cost launch. There was stasis amongst the primes, and then Anduril and now kind of a whole bunch of other neo primes are coming along. And, similarly, you're identifying stasis in the existing companies that enrich uranium that you can very... Do... Does that does that resonate with you as a trend where, you know, there's something that has not been adopted amongst a whole set of companies and entrepreneurs are coming along and finding those weak spots and building better competitors? [00:47:18] S0: Yeah, it seems like it. It seems like it. Although these are like... Each of those three examples is like at least a decade apart, I'd say, on average. Yes SpaceX, Anduril, Us would be on average a decade in between. The only way that those opportunities were found were by people trying to actually go deep into space. And so nobody really thought that like space launch was a thing until Elon tried to launch something realized it was the cost of the launch. You know Trae at Founders Fund was looking for a defense company, couldn't find someone that was taking this holistic approach. Then we only discovered this because you know I knew many or virtually all of the advanced reactor producers, and they had the same issue.
00:47:18 · Scott Nolan, John Collison
[00:47:18] S0: Yeah, it seems like it. It seems like it. Although these are like... Each of those three examples is like at least a decade apart, I'd say, on average. Yes SpaceX, Anduril, Us would be on average a decade in between. The only way that those opportunities were found were by people trying to actually go deep into space. And so nobody really thought that like space launch was a thing until Elon tried to launch something realized it was the cost of the launch. You know Trae at Founders Fund was looking for a defense company, couldn't find someone that was taking this holistic approach. Then we only discovered this because you know I knew many or virtually all of the advanced reactor producers, and they had the same issue. [00:47:58] S1: Is the thing that all of the incumbents miss? Like, why do they become slow and stodgy? Presumably, like, it's not a problem for you yet, but it will be a problem when you're successful that you'll also need to avoid becoming slow and stodgy. [00:48:11] S0: Yeah. Yeah. You definitely want to avoid that. How do [00:48:14] S1: you avoid becoming ULA or Lockheed Martin or... [00:48:16] S0: You know, I think all those industries, not to, you know, not to single them out, but they were all cost plus industries. That was my experience. So you know before SpaceX I did work at one of the aerospace incumbents as did? An [00:48:31] S1: Which one? Boeing. Okay.
00:48:31 · John Collison, Scott Nolan
[00:48:31] S1: Which one? Boeing. Okay. [00:48:34] S0: And I worked on a military program it was cost plus. You know there was a big project. There was a goal of getting online and so you know at some point while I was there it felt like more and more people were working on the project and it just didn't feel like we were going faster and you realize like that is one tool. Put more people on the project and if there's not strong downward pressure on cost your incentives are just not aligned with like moving fast and doing it in a lean way. And so I think these industries that end up getting stagnant often have that same characteristic. Now people assume once a company gets to a certain size that it becomes that way. I think it doesn't have to at all. I think the best companies that get large even like tens of thousands of people always have that new project, that new thing that's like borderline existential where if they mess it up they're gonna be in a much worse place than if they never tried it. And it almost risks the business and I think that's almost the thing to stay to like stay young as a company you just have to keep doing that next project and not just say, well I have this nice business, I'm just going to earn my economic rents and do nothing else ever again. You have to actually have a vision for the future of what you want this industry to be. [00:49:45] S1: What were your other takeaways from Boeing?
00:49:45 · John Collison, Scott Nolan
[00:49:45] S1: What were your other takeaways from Boeing? [00:49:47] S0: Really, the main takeaway, I think, that I walked away with was that the cost cost plus structure was not the right structure to motivate moving fast. That was just empirically evident by working at both. [00:49:58] S1: I mean, sounds like you more broadly think it's a completely broken incentive system. [00:50:01] S0: I think the whole point of cost plus is to make sure people can work on projects whose costs are very uncertain. Mhmm. And, okay, we have a very urgent project, the government needs you to do x y z, we need some of the suppliers to come forward and actually say that they'll try and do this, and it's for everyone's good. [00:50:21] S1: It's a wartime and not a peace time incentive system.
00:50:21 · John Collison, Scott Nolan
[00:50:21] S1: It's a wartime and not a peace time incentive system. [00:50:23] S0: I think so, or it's something where it's very urgent, never been done before, and it's very uncertain what the cost will be. Yeah. Once you get to equilibrium I don't think that structure makes sense at least not to motivate the right behaviors. But I think the bigger thing I walked away with after Boeing even in just being an intern at SpaceX when it was sub 50 people was at the end of the first week or month I felt pretty high certainty that SpaceX would eventually win even though it was at most at oneone thousandth the size. And it was just because of the speed of execution. And so the thing I walked away with that I actually, especially in the early years with that as a more recent memory while I was at Founders Fund, was these small teams, even though they seemed completely outmatched, by moving quickly with a good group of people you can still beat incumbents. [00:51:15] S1: So it gave you this ability to be optimistic about the odds of a five person startup. [00:51:22] S0: Bet on the small guy. Yeah. Yeah. If they have a vision, if they have some insights about how they wanna do it differently, especially if they're motivated by something more than just Yes. Let's stand up a a small business here. Now let's actually change things long term.