Scott Kupor — Why He Left a16z for the Most Overlooked Job in Government | Nathan Lands #1

Thanks, Nathan. Good to be here.

Absolutely. Since the beginning.

Well, it's funny. Are we allowed to curse on this show or not?

Okay, good.

Well, I'll tell you exactly what my wife said, which is she's like, "Why are you [ __ ] up our life basically?" That's what she said.

Yeah. No, in all seriousness, you know, the story is a little bit... I'd gotten involved a little bit on the policy side, as you know, at A16Z, we've been doing, you know, we started doing crypto way back when. And so, before we actually had a real team, which we have today, today we have like a fully-fledged government affairs team, there was nobody else willing to go to DC. And so I kind of raised my hand back in like 2015, 2016 and said, hey, I'll start having some conversations. At the time it was like just about the beginning of Trump 1 and we were trying to kind of, you know, talk to the SEC and others about, you know, could we get some broader regulatory frameworks. Anyways, that's how I kind of got the itch, I guess, for DC. As I said, eventually way smarter people replaced me on the government affairs side of things. But then what happened was, you know, as a firm, as you probably know, we got more and more involved over time. So, you know, this is all public information, but, you know, the firm was very involved in like, you know, the Fair Shake PAC, for example, in supporting a bunch of, you know, crypto-related congressional seats. And then finally, we had not been involved at the presidential level, but Mark and Ben made a decision in, you know, 2024 to ultimately, you know, donate some money and get involved more in the administration. And so, I dropped Mark a note back in like, you know, May of '24 or something. And I was like, "Hey, if this thing turns out, you know, to work in Trump's favor and they're looking for people, like, let's you and I have a conversation at some point in time about it." And, the honest answer is, I kind of forgot about that note that I had sent him. You know, he reached back out in like September, end of September. He's like, "Hey, remember, you know, you told me you were interested." And I was like, "Oh, yeah." He said, "Well, we're kicking you out or what?" Or how...

I said, "I didn't realize you were so eager to get rid of me." Right. Exactly. But he's like, "You know, you got to go meet this guy, Howard Lutnick." Howard at the time, obviously, who's now the Commerce Secretary, he was running the pre-election transition effort for the Trump campaign basically, and so we led on to... and that's, you know, so that's how I got here. So it was definitely, you know, I raised my hand and, you know, kind of Mark saw my hand raised and he's like, okay, if you're serious, like, now is the time to put up or shut up basically. And I was like, look, this is exciting to me. It's, you know, the stuff that, you know, I get the opportunity to work on, which we can talk more about, is actually really fun. And stuff that I'm, you know, I'm passionate about. So anyway, that's how it came to be. But, you know, my wife still probably has that, you know, nagging feeling of, you know, me having [ __ ] up our life basically. So...

We were, yeah, we've been in the Bay Area for almost like 35 years. Our kids grew up there. Yeah.

We did one stint in Raleigh actually when I worked for Mark and Ben at our last company, which was a company called LoudCloud and became Opsware. We bought a business in Raleigh and Ben's like, hey, like, you know, can you go out and run this business? So we did a little hiatus, but other than that we've been in the Bay Area. So yeah, so right now kind of, you know, living in new areas and is definitely part of the exciting challenges of being in government.

Exactly. So yeah, the company was originally called LoudCloud and there were four founders. It was Mark and Ben, Andreessen, yeah, who you mentioned, and then...

Oh, you're kidding. Yeah.

Oh, you're kidding. That's awesome. Yeah. So they were all, as you know, they were all Netscape. They were all at Netscape together. And then, you know, post kind of AOL acquisition and then they spun out to go to LoudCloud back in September of '99. So yeah, long, long time ago.

I think that's right. Yeah, I would say there's a couple things. Like one is there's just a lot more of, I don't mean coordination, I guess is maybe not the right word, but there's a lot clearer sense of like, what as an administration are we trying to do, right? So look, you know, the president's been very clear, you know, about, you know, I'll just take the stuff, you know, that I'm involved in, which is, okay, look, how do we kind of, you know, revitalize the kind of talent pool in the workforce? How do we make sure we have, you know, a workforce that's really working efficiently on behalf of the American people? And so in summary, it's actually very good, which is he's been very clear about what he wants. And I wasn't here, as you mentioned, Trump 1, but my sense is there was a little bit less of, okay, like the White House having a singular message and then the agencies executing on that, a little bit more of the agencies kind of, you know, doing a little bit of their own things. And look, there's good give and take on that here in this administration, but I'd say the president, in my perspective, you know, and everybody from Susie Wiles and everyone down has been very clear on like, look, these are the priorities of the administration, now you all go figure out obviously the best way to execute those. But I'd say there's a very clear sense of kind of direction. And then you're absolutely right, look, in terms of tech, I mean, look, it's very, very different, right? As you well know, certainly kind of, you know, in 2016 and then in the first Trump administration, there was not a lot of kind of concerted effort on behalf of tech to quite frankly have, you know, much of a presence at all. And I think, you know, to the credit of, in my mind at least, the credit of the tech industry and certainly for A16Z where I was, I think we all recognize that that was a mistake, quite frankly, and that, you know, look, the reality is we can all bemoan it whether you like it or not, but, you know, if you don't have some presence in DC and you don't kind of tell the story about why you think tech is important and, you know, kind of how it can be valuable to the broader country, the reality is there are plenty of other groups who've been here way longer than tech companies have who will tell that story for you, and it may not be the story that, you know, you feel best represents the industry. So...

I think a lot of people, and again, I know for us at A16Z certainly, this was an evolution of learning for us of the criticality of, you know, as tech kind of grew up, you know, Mark always liked to say, or I don't know if it's Mark or Ben, I always forget, but, you know, it's one thing like when you're kind of like the pirates and then, you know, now you've evolved and you're the Navy. Now it's like, okay, you can't act like pirates anymore. You actually have to have a seat at the table. You have to be responsible. And for a lot of us, I think that's a big difference. You know, now it kind of started, you know, obviously during the Biden administration where I think many people felt like there was, you know, not even an opportunity to discuss, but in some cases, you know, a level of hostility toward some of the tech-related issues that were happening. You know, the whole, you know, AI executive order that happened, certainly that caught a lot of people by surprise. And so I think we've all kind of learned that, look, you know, it's a big industry now. We got to kind of, you know, represent ourselves or nobody else will. Look, some people don't like that, which is understandable, but I just think that's the reality of the world, right?

Yeah, I think that's right. Look, I think what's evolved over time is a couple things. One is just, look, you know, by any measure, whether you look at like venture capital dollars invested or market cap of companies, look, there's no question that tech and its presence in the economy today obviously is just dramatically larger and more critical than it was, you know, even 10 years ago, quite frankly, almost by any measure. And then you're right, you kind of compound that with this kind of, you know, what I believe is a fairly existential race between us and China to, you know, control the, you know, intelligence, control the kind of development of what, you know, we all believe will be an incredibly important technology over the next 10, 20, 30, 40 years. And so, you know, I think for the first time, people are realizing not only does tech have a bigger influence overall in everybody's day-to-day lives, but it kind of incorporates, you know, national security. Now, how do we think about kind of job growth? How do we think about economic, you know, sovereignty? All these other things that were kind of maybe cute little things that nobody really cared about at one point in time when they were kind of neatly contained to, you know, what was happening any given day on Sand Hill Road, basically, but now that they actually cross, you know, kind of geographic barriers and deal with critical national security issues, I think it's a very, very different story.

Yeah, look, so OPM stands for Office of Personnel Management. The simple way I like to think about it is kind of we are the talent organization for the federal government. And I would kind of divide that into two areas. One is kind of policy as it relates to talent. So one of the things that we're working on, we can talk a bunch about this, is how do we do a better job of hiring people? For example, how do we make sure we have policies that go across government that kind of make hiring more efficient, that make sure we're getting access to the right talent pools? You know, how do we do performance management? How do we do promotions? How do we do evaluations of people, right? All the day-to-day stuff that you would do. So that's kind of the policy side of things. And then the other side is kind of, you know, we're not directly responsible for hiring all two million people in government, but like I think there's a vital role for us to play in telling the story about what's attractive about government. Making sure we're going to places, quite frankly, that we have not done a great job of going to, you know, in my mind, kind of early career college campus is a big, big miss that the government's had, and we can, you know, again spend more time on that one. So those are kind of the big things, but I say, look, my goals are very simple, which is like I just want the government to be a place where every smart person, period, in the US thinks about it as a place to spend a couple years, a career doesn't really matter in my mind. And I think we've had this kind of weird dichotomy, which is like you either come to government and you stay here for 40 years or you go to private sector. My personal view is like both places would be better if we had a lot more kind of, you know, folks kind of doing both. And then I also think we should do a better job of tapping out into the broader talent community. So again, I think we just marketing-wise and presence-wise, you know, we don't do a great job ever of telling the story and recruiting and being proactive. We're kind of, you know, we put a job announcement out and a bunch of people apply and that's great, but like there's probably, you know, whatever 10x the number of people who have no idea the government is even hiring for this stuff. So some of it is, you know, if you don't... one of the guys I worked for at Opsware ran sales, a guy named Mark Cranny who also joined us at A16Z, and it was one of the lessons I learned from him in sales is he always had this quote, which is, I don't know if it's his or not, but it was basically, hide it, keep it, show it, sell it, basically. And it's like, okay, like we do a lot of hiding it and keeping it in government, which is we just don't tell people about who we are and what we do and how cool it is. And I just think like that's just a huge miss on my part that I think we can do a much better job on.

No, but that's not common in San Francisco.

No, I think you're right. And look, I think you're exactly right, like on the specific issue of like, you know, military and defense spending and all that stuff. You're absolutely right. And you know this history probably since you were out there, like for a very long time really until very recently, until you had like Palantir and Anduril and folks like that. The honest answer was I wouldn't say it was verboten to, you know, kind of invest and start defense technology companies, but it was pretty much like just not done basically, right? I mean the closest thing might have literally been, you know, SpaceX obviously predated all these companies, but the idea of, you know, recreating the whole Northrop Grumman industry or stuff like that was just like completely out of it. And I think you're right. I think some of it may have been just we all had these views that like none of us grew up in military communities or military families, and for whatever reason we had these social values that we thought it was like okay to do consumer internet but not okay to do like, you know, defensive technology. But I think your point is a really good one, which is a broader one, which is, and this is why again I feel like telling the story is so important, is so much of, you know, look, we all know this, but so much of what people do in life is a function of what zip code they grew up in, right? And whether it's fair or not fair, right? You know, if you happen to grow up in a zip code where you have people who were in Silicon Valley or people who went to great universities, like your whole zeitgeist of what you know and the networks you build and the people that you come across, those things inform the experiences and the biases that take into a lot of stuff. And again, I think like, you know, I can tell you for sure that, you know, there's a whole cross-section of people in this country who never would think about working for the government or don't understand, you know, how cool the different opportunities might be in different places, just because, look, the reality is like it's just not part of their vocabulary. And so that's part of what I just think we got to do a better job on is, you know, look, everybody will decide what is right for them, but we ought to at least give people the information they need and like expose them to the networks and the people and the relationships that allow them to make an informed decision as to like where they want to spend their working hours.

Yeah. No, I think you're right. And look, I agree with you. Look, obviously, look, we're not perfect. There's no question about that. But look, I don't think perfect exists anywhere. The question to me is like, okay, like, you know, how strong are the strengths? You know, one of the things that we talk about a lot at A16Z is we talk about investing in strength, not lack of weakness. When we think about entrepreneurs, and I think it's actually a good way to think about the world more generally, which is there's a ton of weaknesses in everything. Everybody's got problems and like there's a million reasons why you can kind of say no or why you can be negative on things. The real question though is like what's the magnitude of the strength? What's the magnitude of the upside potential that these things have? And obviously, look, I'm biased. I voted with my feet. But look, I think the upside opportunity and the magnitude of like what the US is and what the US can be in a world particularly where we lead in AI and technology and hopefully in education and all these other things. Like, you know, I'm enormously bullish on what that opportunity looks like. And yes, like we have problems. That doesn't mean we don't have problems, but like we got to at least frame the conversation a little bit more around not we won't, you know, we can't eliminate every single problem. We have to deal with them. But like we also got to think about upside opportunity as we think about kind of where the potential is and where we want to spend our money and invest in.

Cool.

Yeah.

Yeah. So yeah, the short answer as you said is look, it's still very active and there is a department right called, you know, the US Digital Service, which is DOGE basically, that still exists. And then there are people who are now kind of in various agencies and departments who might have come into government, you know, initially as part of kind of the DOGE group, but now, you know, literally they are in, you know, the technology department in, you know, Treasury or IRS or a place like that. So all that stuff is very much alive and well. You're exactly right, which is that look, we kind of have to do two things, and I've been using the word kind of reshaping, you know, the kind of workforce, as I don't know if that's a good way to describe it, but that's how I think about it, which is yes, like we need to do two things. One is like we need to be more efficient in my mind, but there's no question, and look, no matter how much people want to debate this, I think nine out of, I'm willing to bet like nine out of 10 people would say any organization, obviously the government is no different, any organization can always like be more efficient, right? So like we can absolutely be more efficient. And also, and sometimes unfortunately being more efficient means that, you know, either job categories or technology potentially, you know, can do things that are more efficient than what, you know, an employee can do. And, you know, that's no fun, but unfortunately that's part of the reality I think of the world we live in. But at the same time, you're exactly right, which is we also have to make sure we have the right talent in the right jobs to do the right things on behalf of the American people. So, you know, part of like what we're doing, for example, at OPM is in addition to working with all the agencies and helping them figure out, okay, like what efficiencies can you bring to bear, you know, there's other stuff we're looking at. So like I'll just give you two examples. One is, you know, there's an enormous amount of contract work that goes on in government, right? So if you look at just rough numbers, the US spends about, we spend about 250 to 300 billion on actual full-time employees in the government and we spend probably close to 750 billion on contract resources basically. So almost by a factor of three to one is our spending on contractors. Now, look, contractors are super valuable in some places. Like if you've got a temporary job assignment or you have a skill set that you can't get, clearly you should go do that and you should pay for that convenience of being able to kind of plus up and plus down. One of the challenges though, if you look across government, is we've kind of taken contractors and basically created a shadow FTE workforce out of contractors. So, you know, we have contractors who've been here for three, five, ten, fifteen, twenty years basically, which, you know, in my mind, like that's an FTE at that point in time.

And but instead...

250 billion.

Yeah. Of course not million. Versus seven, a couple more zeros.

That's exactly right. Yeah. And to me, so that's again when I use the term reshaping, to me that's one area of reshaping, which is we ought to go through and say, okay, like where are we using contractors in the ways in which we should use them? And then where are the areas where quite frankly you'd be better off if you just hire an FTE? Quite frankly the per dollar cost would be less because obviously it's always more expensive to hire a contractor than an FTE, and you get the benefit of them being fully integrated in the team, you have the knowledge transfer, you have all the other stuff. So that's one of the things that we've been working with a lot of the agencies on as part of the reshaping is, you know, just be mindful about this stuff. Like your total headcount spend is FTEs plus contractors, and then let's manage those holistically, right? And then the other big example, you know, that we've been spending a lot of time in reshaping is, you know, what I've described as kind of getting the right people in the right jobs, which is, you know, we have a challenge of like modern software development, modern AI skills and stuff in government. And so one of the other areas that we're very focused on is how do we get that kind of talent into government? And it's not to say we don't have good technologists in government. We certainly do. But if you just think about like the pace of technological change, we need kind of people earlier in their career who are like very, very skilled and adept to these new technologies. And across government, if you look at early career, which is let's call it like people with like less than five or seven years of work experience, there's only 7% of government employees who fall into that category today. And if you look at that number across the entire workforce in the US, it's about 22, 23%. So like by a factor of three to one, the government is like way under-indexed on early career talent. And by the way, we're way over-indexed on, let's call it, mature career talent, which, you know, I fall into this bucket,

Yeah. And it's also, look, I mean, it's just like a pending retirement imbalance problem, right? Which is literally 44% of our workforce is over the age of 50. Okay. So if you just map that out over the next five or ten years, there's going to be an enormous amount of people retiring from government and we're not replenishing the pipeline of people. So you're right. You've got kind of a little bit of a modern skills technological challenge and you just quite frankly have a very simple demographic challenge, which is like if we don't do a better job of convincing early career people to come to government, you know, look, I'm all for efficiency, but like if literally nobody wants to come work for government, like that's a problem, right? Like we actually do, there are functions that we actually have to do, so we can't like have zero federal employees.

Yeah. So there's this weird dynamic that goes on in government, which is, and it's like a lot of things, which is something happened at one time in the past and we've never revisited like why that happened, and so all these behaviors just kind of stem from it. So the simple history of that question is the government used to have something called PACE, which was literally like a skills assessment test. It was kind of like, you know, a test of your, you know, American history knowledge, all kinds of other stuff. And, you know, we can debate whether it was perfect or not, but that was the primary mechanism by which like they used to screen applicants in the very, very early 80s, very end of the Carter administration, beginning of the first Reagan administration. That test was found to have what's called disparate impact, meaning that for minority applicants they did disproportionately worse on that test than did majority applicants. And so the government entered into a consent decree and basically kind of outlawed essentially the use of that. And so that was literally 1981 when they entered into that. And so from 1981 until literally about, you know, four months ago, no one ever went back and looked at that and said, okay, like should we revisit the use of kind of skills-based assessments, you know, and figure out can we do something that doesn't have disparate impact, but that also might make sure that we're hiring people truly based on the skills they have. So luckily, you know, OPM with the support of the Department of Justice, we did go back and we revisited that and we actually eliminated that. We got rid of that consent decree, which now makes it easier for us to introduce kind of skills-based testing. So if you now apply for a software developer job, instead of you just telling me like, you know, how to program in Python or you know how to do Perl scripts or whatever, like we actually can, you know, use a test and determine that. And, you know, people were trying to deal with that by having proxies for it and other stuff like that. But at the end of the day, there are certain jobs where there is some foundational technical skill sets you want. Right, if you're going to apply for an accounting job in the government, like, you know, it shouldn't be that hard for us to actually run a fairly basic accounting assessment to see like do you know what debits and credits are and you understand...