Hey everyone, it's Tony Robbins with the Holy Grail of Investing podcast.
AI is going to change the world. Dario who runs Anthropic, he's really very worried and a lot of people think you've created the god, but I think the right way to look at it, this is a very important industrial revolution.
Please welcome to the stage co-founder, volunteer Joe.
Today, my partner and co-host Christopher Zuk's going to sit down with one of the greatest entrepreneurs of this generation. That says a lot, I know, but he's someone who doesn't just talk about the future, he's actually building it. We were pretty horrified that our country was under attack and the FBI spent tens of billions of dollars on stuff that was 20, 30 years behind Silicon Valley. Before I left the company, we hunted down 9,000 terrorists.
Wow. Let that sink in for just a second. How do AI, defense, space, energy fit together in a strategic landscape?
There's six levels, zero through five. These levels are all interesting to invest in. I happen to think level five is the best risk-reward. It's tough to invest in defense because you don't know that the revenue is going to be there. We shot down military drones nine and a half times farther away. The generals were applauding and it was a big deal. And then the next year we basically got almost no revenue and I found out.
Give us what you're most optimistic about in the next decade.
Every one of our challenges that we face, there's really good answers that come and what we cannot afford to get wrong.
One big part of that is we can't afford not to fix.
Our guest is none other than Joe Lonsdale, the co-founder of Palantir, one of the most influential companies in the modern world. Joe's also co-founded and backed category-defining businesses like OpenGov, Saronic, and Anduril. Companies that are reshaping finance, government, defense, and technology itself. But I think what makes Joe different isn't just what he's built. It's really how he thinks. He thinks long term. He uses first principles, and he's relentlessly focused on real world impact. If you want insight in how the most powerful platforms of the next decade are being created today, this episode will expand how you see the opportunities ahead. Let's meet Joe Lonsdale.
It's a bigger crowd than I realized.
It is a big crowd. We're very proud of that and we're glad that you're here. Thank you for making the time. I'm going to put up on the screen just so that everybody has a little bit of history. I'm not going to read you all of this.
Okay. No, that's to you should be very proud of it. But it would take way too long to introduce him. But as a co-founder of Palantir, obviously a lot of you know that company as being involved in some of the most innovative companies that exist on the planet, we wanted to put them up here as well as some other things we'll talk about, including the University of Austin, which he is a co-founder. University of Austin. I said it again, didn't I?
University of Austin. I actually started all these except for Addepar. Palmer started Addepar, but I'm back at him.
Got it. You're with him. They did a big thing where they put my face next to his unless you probably saw that I did it. I mean, it's not mine.
That is okay. So, Joe has got an obviously incredibly varied background. So, I could take this conversation like a thousand different directions, but I'm not going to do that. We're going to try to stay really refined on a couple of things. The first of which is AI. You have a very unique perspective, which we're going to talk about in just a second.
But what I'd love for you to do is let's talk about what the myths are in AI. Let's talk about, you know, kind of what's real and what's not. Go with that one.
What's real and what's not. I was on, you know, I suggest I was on the Zoom with Dario who runs Anthropic today. If you guys haven't read his latest piece, I think it's actually a very good piece. He and I differ politically, but he's a really obviously smart guy. It's one of the top three labs. You know, he's raising at $350 billion and he's really very worried and I agree with him about some of the things he's worried about. I think what's not real, at least to me in my view of the world, is I don't think this is like existential thing that changes our entire civilization where we've created and a lot of people think you've created the god basically we will create a god in the next several years and to me that's very unlikely. I think it does change a lot. I think it's very very important how it changes the whole world. But I think a lot of people especially in Silicon Valley they don't really have the same maybe religious tradition that we have here more often in Texas. And so a lot of them this has become their religion where they think this is like a whole new change in the entire world and everything's going to be different. You've created a god who's going to run things and I think that's not the right way to look at it. I think the right way to look at it as investors and as citizens is this is a very important industrial revolution. So I think productivity is definitely going to go up a lot. Right? The last time productivity grew this fast was probably the second industrial revolution which is 1870 to 1900. If you take a typical person in America, the median wealth, median income, it more than doubled in that less than one generation basically. So you basically have people I think almost two and a half times as wealthy. It was very very good for America. It was really awesome. It was a lot of change, right? A lot of jobs that existed in the 1860s and 70s did not exist by 1900. You don't have Coopers anymore. We have our last names as Coopers or Smiths or Boers or whatever, but you don't have the jobs and you got a ton of these jobs go away. And that's going to be similar now is there's about $5 trillion today in wages in the services industries and already $2 trillion worth of wages. So already 40% of our entire service industry we've seen examples of being able to double the productivity.
So in some cases triple or quadruple. In some cases we've already bought companies two years ago that we've already tripled their cash flow in certain areas. Right? So there's a lot of stuff already happening but productivity is 100% real. It's going to change a lot of things in a lot of positive ways hopefully. But I don't buy the whole existential thing.
Well, it's interesting because you know, by the way, you thought I talk fast.
He talks pretty fast, right? So, no, that's okay. You do you be you and they'll keep up. And you know, we're going to cover a lot of ground here. So what I will say is that the ability to think through what it is that truly is investable and what is not and what AI is going to be. I mean it's funny because Christopher and I were working on an agent that I've been working with ChatGPT on and I was being pretty firm with it because you're trying to train your agent, right?
So I was correcting it and Christopher thought maybe I was being a little bit harsh. She goes, 'They're going to kill you first.'
They come back and get you.
Maybe I might want that.
These things don't have very good memory yet. So, and I think they delete the logs. It's when we think about if I may on AI, I think for how to invest in it, we're computer scientists, so we start counting from zero. And so, I think there's zero through five. There's six levels. Level zero is energy, which is great for Texas, by the way. I think there's going to be a lot of energy that we need. Whenever you hang out with these guys who run these companies, they were admitting to me, they're not even telling how much they think they're going to need because they don't want to scare their investors. So, you're going to need a lot of energy, a lot. And then level one is the chips companies. Right now Nvidia dominates that with Intel and AMD. That's over 99%, but there's a lot of new chips companies, too. They're interesting. Level two is data centers. All of our friends have been investing in that. It's been a great alternative asset class for a very long time. It's very hard to measure how much you need, but that's obviously a big thing now. Level three is the model companies themselves. That's Anthropic, OpenAI, xAI, Gemini, Meta, the Chinese models. And those are obviously very interesting companies growing faster than anything we've seen before. A lot of people say what part's going to be commoditized, what part is going to not? That's a big question. Level four is the software infrastructure. These are the companies that help you deploy AI no matter who you are. So it's something like Databricks for organizing your database infrastructure. Something like Palantir of course which has been playing a key role there. It helps you deploy models. So lots of stuff there. Then finally level five the last level is the actual apps and services themselves. Is the companies actually creating value directly in the economy, actually enabling things to happen. And so all these levels are all interesting to invest in. I happen to think level five is the best risk-reward, but they're all pretty good right now.
Okay. So just because you went through them pretty quickly. Yeah. So five is basically the companies that are helping companies do better or even doing it themselves.
Or even doing it themselves. So this is a big difference in this wave. Historically, you would build a software company to help a services company deliver value. Most of the time now, we're just building a services company ourselves because there's a lot of really deep integration with the operations and the software for who does what. And over time, you just get better at it. It's much harder if you just give that to someone else. It's much easier to own it. So, for example, in logistics on the back end, when you send something, there's about $70 billion of revenue a year paid to companies that handle all of the kind of back-end payments and reconciliation, right? There's like 18 systems you got to plug it into. Everyone has to talk to each other. It's very manual. These companies tend to have 15 or 20% margin. You know, we have a company competing with them that has 60% margin now and that has actually bought and tripled the margin of things. Or I'll give you another one. Healthcare billing. There's $280 billion spent in the economy each year. That's a lot of money on healthcare billing. 120 billion of that is actually paid as revenue to companies doing it for you. 160 of it is internal. The systems here, they have the things themselves internally and that's also a 15 to 25% margin business. There's also at least two businesses I know of there at scale doing over 50% margins and they're doing it with AI and to break in. So you have this all over the economy where you're actually competing directly.
No, we had a great interview with Robert Smith, the Holy Grail Investing podcast, Tony and I did and we talked about how software companies are actually being disintermediated by software. So even the companies that they have, they're concerned on some of them that literally they are not adjusting fast enough to what the customer's needs are. So the customer is actually building it themselves and that obviously disintermediates them. So that's.
I think that's right. I think the really simple SaaS companies you're just going to redo with the AI. I think the more advanced SaaS companies though are going to benefit from AI because they own infrastructure they can use to create AI on top of. So it's going to be a bipartite distribution. Some of these are going to get crushed. Some of these are going to do much better because of AI.
And that's somebody earlier today. I can't remember who it was but they talked about how many professional services companies and other things are going to be really really changed and threatened by AI simply because oh yeah there's just so many things that can do what they do. It's a big question for the Indian economy actually of the five super giant obviously service companies Infosys etc those guys and the question is like how much are you going to need hundreds of thousands of bodies for some of these things in some cases the high-end ones might even be able to do more but it's going to be tough I think for the long tail of those right.
So you've emphasized obviously power and energy is the core building block for it but why is that constraint so underappreciated how important is it that we win this AI race that we obviously have to win.
And this is where I think you can go back to Dario that I think there is something true here where even I don't believe it's the whole existential thing. I don't believe it's a new god or whatever, but I do think you're going to have the equivalent of thousands of very high IQ actors that you have access to if you get there. And if you get there first, it's geopolitically extremely relevant, right? So if you can imagine the bad guys having that versus using it against you, that's probably not very good for us. I don't know how much you want to go into warfare here. So a lot of the defense companies we talked about and we talk about sea and land and air and cyber and those are like the traditional ones cyber being newer. Like the fifth one you might call is cognitive and there's all these ways in which you can basically strategically map out all the information about people in a country and figure out how to influence them and how to influence their culture and influence decisions they make. And if you're really really smart you turns out you could do that very effectively against another culture. China has an official branch of their military that does this and tries to figure it out. If that's going to be powered by a huge number of the smartest entities, that's actually really scary if they get it first. And there's probably lots of ways of conducting warfare, whether it's in the biological world, whether it's other things that they could do to us if they have so much more intelligence before we do. So, it's probably we probably want to have this before them. That's the thing.
Yeah. Know, we need to win this race. That's for sure. Yeah. But so when we try to separate substance from storytelling, which obviously is really hard, but what are the clear signals that AI is really truly core to a business and a high ROI rather than just hype. So when somebody, you know, business owners in the audience, they're trying to decide, okay, what do I invest truly in in order to get a good ROI? How do they go about doing that?
You know, so I think so Palantir's had a very strong few years obviously, and I think a lot of the problems we solved are particularly relevant for this world. And the thing that was I think the framework that was really helpful there that we're applying is we have what's called our dynamic ontology and it's an ontology of data but it's an ontology of processes and so the lesson from been deployed now at a lot of the Fortune 500 and what they do is they'll come in and map out all the data in your organization which making sure it talks to each other make sure you know what it is and you'll map out all the processes that exist in different parts of your organization. So for any company, whether it's a wealth management or alternative investment firm or whatever else you're doing, you're going to have a certain number of processes for everything. And it's going to be a pretty big tree depending if you're working with a client or making a decision or make hiring someone or firing someone. And so what you do is you map out all these processes. And there's certain things where you still definitely want people involved and you need people to be involved, but there's a lot of these things where the computer can now the agents can now do most of the work for you or could do most of the work for you with a quick check for a person or whatever it is. And so for me it's all about productivity and it's all about applying the agents to the areas where you need more productivity where that speed or where that accuracy is valuable to you or where just not having to hire people is valuable to you and I think you're just seeing this productivity go off the charts in a bunch of areas. It really is a question mark two or three years ago. Now if you talk to anyone who analyzes these things like it's definitely real.
Well, we you know, you probably don't know this, Joe. Laya's here, obviously, but most of you probably remember when we talked about it, but we did a five-year strategic partnership with Palantir to effectively overlay machine learning and AI across all of our business. And we did it in anticipation of the book launch because we knew that, you know, there was going to be probably a lot of leads come through the door as a result of the book. And it was either going to be a trickle or a tsunami. And you can plan for a trickle, it's hard to plan for a tsunami. So, we had to be prepared for that. So, I've seen actually, you know, this backend, if you will, work to where, and some of you in this room, I'm going to give you a little secret. You're actually communicating for the first three or four emails actually with Palantir's system.
Not supposed to tell them.
I know. That's okay. They're in the room. They're in the know. But so, you know, for the first three or four times, you actually were getting a personalized response tied to you based on the information that we got from you until such time as it made sense to connect with the team. And then it actually recommended based on everything we could find out about what you told us, we would be able to put you with the right person.
I'm trying to have it help me with my email. I don't trust it.
Understandably, it helps me route it a little bit better.
Yes, indeed. But what that does though is you talk about efficiency and we talk about it so much in our investment management department. We talk about it so much in all of our departments about you have to try to identify where those efficiencies are. But as Ron, our chief operating officer, wherever he is sitting, will tell you, if you don't know what the process is, you can't automate it.
Yeah. Exactly. So the process discovery stuff's pretty fun actually for when you look at your own or dude because.
You know, there are very few people that would say process discovery is a lot of fun.
Be honest about what you're actually doing, right?
Yeah. It's scary actually because you go, we had take, you know, 42 steps to do something that really should take four.
That's the thing. Sometimes you do change the process after you map it.
Well, exactly. No, we absolutely do. And it's something to where I'm actually going to talk about this because of the fact that you have an amazing podcast that I enjoyed watching in preparation for this called the American Optimist.
And he has some tremendous guests on there but I have to say the last one and I'm hoping I pronounced it correctly. Joe Gebbia.
He was co-founder of Airbnb, right?
Started Airbnb. He's now full-time in the government working for the administration. He was part of effectively DOGE and he stayed on after Elon stopped right to continue to make efficient. Just briefly tell the story because most of the people in the room have heard about the mine right they've heard about the mine when people go to retire from the government how long it takes and take all the paperwork literally today paperwork and they put it underground in a mine.
Yes. Yeah. Speaking of mapping processes, that's one of the more comical ones is the giant underground.
But walk through what he told you on the podcast just because I think it's funny because I'm probably going to remember it about as well as you, but basically it took six months to retire and you didn't really know what you're going to get paid until you got your first check because they couldn't tell you. And the process involved, I mean, by the way, lots of fax machines and other things like that that probably shouldn't be used for this anymore, but they actually had to get the papers like printed and stored at the right part of the mine. And I think they even moved him around down there checking a few things too before you could bring it back up. It just doesn't make any sense at all. Was something that maybe made sense if these things had to be really secure for some reason in the 1950s. But it was like a totally insane thing and he's got it all digital now. But the thing he really told me which it makes sense but I hadn't really thought as much about is pretty much every one of these processes we were spending hundreds of millions or billions of dollars on consultants who would just always go years over and way over budget and their incentive was to go over budget, right? The incentives are very powerful. So you have a whole consulting class in DC where I'm sure some of them are good people but the incentive is to get it wrong and it take a long time. So fired a lot of these places and a lot of what we did is we created the nonprofit for the government because you're not allowed to hire people for more than like 200 something thousand dollars and there's a lot of great people who make that but there's a lot of really talented people who'd add something who make a lot more than that especially in the alts world and so these companies and so a lot of us Peter Thiel Elon Musk Joe and I and others donated a bunch of money to the nonprofit and there's a law where it lets you do this where Joe hires these people for the normal amount the nonprofit pays them extra and he has about 30 or 40 like top tier designers they're going through and just fixing all the US sites, fixing just a ton of things in government right now, making it all work better, which is kind of neat.
How long did it take them to come up with a solution to digitize that process that normally took six months?
I think they figured it out in less than like two or three months, right? It was pretty fast. I mean, the solution they come up with right away. I think they took them a few months to get the people to let them do it. Probably most of the delay is the people allowing you to do things.
Getting the permissions going off memory as well. Getting the permissions and getting everything approved and all that took two or three months. The actual work it took basically to design the system and to implement it and turn it live was four days.
Yeah, that sounds right. Yeah.
It's a very different incentive. Yeah.
Yeah. It's a different incentive.
People don't realize that a lot of things happening in our government these days is off by like 90 or 99% just because the incentive's all wrong. It's a big thing we got to confront and be honest about.
It is shocking. And so now people can actually know what they're going to get paid before they retire. They can actually do a digital process for them to be able to retire and it just obviously is so much more efficient and saves taxpayer money etc etc. Those are some of the things that AI machine learning in some cases are able to do and solve for. All right, I'm going to take a breath for a second and we're going to switch gears. Okay, we'll come back to anything that we need to cover there again. But you're not just investing in companies, you helped start a university. What compelled you to build the University of Austin from scratch?
All right. Let me offend. Fortunately, it's Houston, so I guess I'm safe here. It's a safe place for me.
There's people all over the world. Offend somebody. It's okay.
I'll offend some of you. Listen, I obviously we hire a lot of people the last 20 years from the top Ivy League schools and from all sorts of great schools and I work with a lot of people in government and our culture I think our culture especially for a lot of our best and brightest is to teach them to be very very careful not to have opinions to be very careful to virtue signal to not be interested in the truth if the truth might bother some people and what that means is that in our cities and in our government like we're talking about you have all these things that are broken and that are wrong. But people just don't think very hard about them because they don't want to offend anyone. And so I think that's actually really dangerous and to me it's important. You know, classical virtues where our civilization was originally built on the four classical virtues and all of them are important. I think courage is especially important and especially lacking. So the goal is can we have one of our top universities in this country to not be run by communists and to teach courage.
Yeah, for those of you that don't know, we're very big about freedom, right? We respect everybody's right to believe what they want to believe. Lisa and I have the Freedom Foundation of Texas. It's a very important part of our family. So, we have the right to agree or disagree, but the most important thing is we have the right and the freedom to be able to talk about it in all settings.
And that's why the communist thing is important because there's people on the left and the right and you disagree and that's healthy. But when the communists take over these departments, they don't allow people to disagree with them. They lock people out. If you go to if you want to study education in the top 100 school, if you want to study sociology, if you want to study like the list goes on, like you are going to get one point of view. You're going to learn to hate markets. You're going to learn to be suspicious of business people. You're going to learn to be skeptical of America's history. And by the way, I think there's some things we should learn in debate for sure, but I think you need to be able to be given both views and be allowed to debate these things. And that's not at all how Harvard works. It's not how Stanford works. It's not how Princeton works, which is a big problem. And so we want to have a place. And Niall Ferguson, my co-founder, he's one of the great historians in the world. It taught at Oxford and Harvard and Stanford. And Bari Weiss, my other co-founder, created the Free Press, is doing really important work in our country as well. And when we announced this, we had 5,000 professors apply. 5,000 professors apply from a lot of top schools from everywhere. And people don't realize a lot of these professors who are mostly creative, mostly various sorts of moderate people, they're afraid to speak up where they are. They're terrified. They're attacked by the crazy people at their school. So there's really a need and really a gap here, I think. And it's just tough for people to admit they're all that matters being run by people that are a little bit crazy, but they really are in most cases. So we wanted to have another option.
That's great. Well, you obviously get to start from zero, which means you get the rare opportunity to design intentionally. So how do you go about building a university? I mean, you've got governance, faculty, curriculum, incentives, from the ground up. And you have to be thoughtful because you don't want to potentially have it become something that's not consistent with what your foundation.
Yeah. No, no, you need to be able to pursue truth and have an open culture and debate. We have a constitution which is rare for a university. We thought that was a good model to copy from the US to have something to appeal to there. And it's actually kind of nice because a lot of times the board's afraid to go along with something controversial, but then you can say even though this is controversial, we have free speech in our constitution. We're not going to say no. We recruited some really really top students. We have great professors in all sorts of areas. We have a great STEM side. We have a great side of the intellectual foundation of the west. You basically want students to appreciate the great debates of the last thousand years and where our traditions come from. If you ask I think like what is the foundation of our exceptional civilization here. I think there's really three things you have to have that you have to all learn if you want to understand our civilization. One is the classical world and classical virtues and the history there with Rome and Greece and everything. I think two is our Judeo-Christian heritage and how Christianity shaped the west. I think that's really critical to appreciate that and a lot of the wisdom from that and how it differentiated us from Rome and from other civilizations. And then three is the enlightenment and understanding the values of the enlightenment and understanding how Locke and Hume and all these other people kind of shaped a fertile ground that kind of led to our founders being able to create the constitution. And I think if you don't have all three of those, you don't get America. And I think if you don't appreciate all those, I think AI is going to change the world dramatically the next 20 30 years is that a lot of things are going to be different. But I think it's I think I don't think that means that philosophically we don't need to have the same understanding of these values that made us great because if we don't have those, then we're not going to know how to make sure we keep the things we need to keep as the world's changing.
You're a business person. So obviously anytime we get involved in something, you get involved in something, there has to be a definition of success. So, when you look 10 or 20 years out, what does success look like? How do you know that you've declared victory?
You know, the longer term goal is to have massive influence and force the other schools to be more like us. I think the way you do this is you steal away all the very top talent from the other top 20 Ivy leagues and make it a place where they're much more successful.
Yeah, we like big hairy audacious goals. We had this couldn't have been done 15 years ago, but I have over a hundred friends who are like in our talent network who've started the big unicorns and who are helping us and a lot of these guys are already hiring. Peter Thiel already stole away three of my students actually. He's hired full-time. So even though we only have two classes, which is good for the students, but we have a lot of people helping us and I think we'll see what we could do, but it gets better every year. You guys, if you go to Austin, please come by and check it out.
Very very good. We're going to zoom back out to focus on a theme that I mentioned earlier that we're excited about for our personal money. How do AI, defense, space, energy, and critical minerals fit together in a strategic landscape? And why do they matter more today than they have in the past?
