Joe Lonsdale: Building Billion-Dollar Companies and Shaping Society

Joe Lonsdale is a billionaire entrepreneur and investor who has built multiple billion-dollar companies. In this wide-ranging interview, he shares insights on building successful businesses, investing in startups, and his views on politics, economics and society.

Building Billion-Dollar Companies

Lonsdale has co-founded or helped build several companies valued at over $1 billion, including:

• Palantir Technologies - A data analytics company now worth over $30 billion
• Addepar - A wealth management platform valued at $2.7 billion
• OpenGov - A government software company sold for $1.8 billion
• 8VC - A venture capital firm managing $7-8 billion

When asked about his "superpower" for building such successful companies, Lonsdale highlighted a few key traits:

• Optimism and the ability to see how things can work, rather than focusing on why they won't
• Strong strategic thinking and understanding of industries
• Forming strong opinions but being willing to iterate and improve them
• Building great teams and networks of talented people

He emphasized the importance of having debates and talking to people you disagree with to refine your thinking. Lonsdale also noted that it's critical to inspire people with the mission and show them how their work matters, especially when going through difficult periods in a startup's journey.

Investing in Startups

As the founder of 8VC, a major venture capital firm, Lonsdale shared some of his philosophy on investing:

• Look for opportunities enabled by new technologies or industry changes
• Focus on getting the best talent and building strong teams
• Understand the core capabilities of a company and adjacent areas they can expand into
• Be willing to take contrarian views and make big bets

He noted that recessions can actually be good for the economy in some ways, as they "clean out a lot of nonsense" and force companies to focus on what's truly important. During downturns, Lonsdale advises companies to cut costs, focus on becoming cash flow positive, and make sure they have enough runway to survive.

When evaluating potential investments, Lonsdale looks for founders who are willing to take lower salaries in exchange for more equity upside. He shared that a study he did early in his career showed CEOs with lower salaries significantly outperformed those with higher salaries at startups.

Views on Politics and Economics

Lonsdale was not shy about sharing his political and economic views during the interview. Some key points he made:

• He's critical of many government policies and regulations, arguing they often have unintended negative consequences
• He opposes proposals like wealth taxes on unrealized gains, saying they would discourage investment and innovation
• He believes the regulatory state has become too powerful, with selective enforcement of complex rules being used as a political weapon
• He's concerned about the decline of meritocracy in government hiring and the difficulty of firing poor performers
• He thinks recessions can be beneficial by forcing companies and the economy to become more efficient

Lonsdale emphasized the importance of having friends and engaging in debates across the political spectrum. He expressed frustration with people who are unwilling to speak up for what they believe is right due to fear of controversy.

Building New Institutions

One of Lonsdale's major projects is the University of Austin, a new university he co-founded to promote open inquiry and debate. He explained the motivation:

"We've had thousands of professors apply, amazing professors from top schools and other places who felt persecuted in many cases by the extremes. This is a diversity of perspectives, but it's confident people who are really liberal versus illiberal. Liberal in a traditional sense means open to pursuing truth and free speech and not shutting people down, whereas illiberal means they want to censor you, they want to shut you down if you have the wrong views."

Lonsdale sees building new institutions as critical for addressing societal challenges. He's also involved in efforts to reform existing institutions, like vocational schools:

"We figured this out, we spent a lot of time on it. You say okay, the state is funding all these schools. Starting next year, we're going to fund these things in proportion to the average salary of their students coming out. Suddenly they can't game that, they actually have to focus on student outcomes."

He views these types of reforms as more impactful than buying luxury goods: "Imagine like spending only a few hundred thousand dollars on lobbyists and lawyers and my team traveling and all this stuff... to pass one of these laws that just fixes this and helps tens of thousands of students. That's like so much cooler than any nice car I could buy."

Philosophy and First Principles Thinking

Lonsdale is a proponent of first principles thinking - breaking problems down to their fundamental elements. He explained:

"It's really important. You've seen this in lots of areas where you go back and you say what are our fundamental assumptions, what are we doing here, like why, what is our firm the best at, why is there an opportunity here, what are our core capabilities? These are really philosophical questions."

He believes this type of thinking is critical for entrepreneurs and leaders:

"It's a really good exercise to keep coming back to because it reminds you of things. This is why building a deck is really good for an entrepreneur, even if it's a small business. You want to put together here's 10 pages on who I am, what I'm doing, what the goals are, why it's going to be successful."

Lonsdale draws inspiration from philosophers and historical figures, mentioning thinkers like David Hume and Immanuel Kant as influences. He sees parallels between the American founders and successful business founders in their focus on debating and establishing core principles.

Artificial Intelligence

On the topic of AI, Lonsdale is generally optimistic about its potential benefits while acknowledging some risks:

"It's just so extraordinary over the next 10 or 20 years what AI can be harnessed to build and to accomplish and to create for civilization. It's like this amazing very positive tool. I guess I'm more focused on the positives and I tend to think that as we build it out and as it gets stronger, we can use it to figure out how to stop the negatives."

He gave examples of how AI is already being applied productively:

"We're doing it for healthcare billing. Healthcare billing wastes hundreds of billions of dollars for our country right now. It's just like this thing in the middle and we're making healthcare billing about four times more productive."

Lonsdale encourages young people to explore and experiment with AI tools, while also emphasizing the importance of finding work you're passionate about.

Advice for Entrepreneurs

Throughout the interview, Lonsdale offered several pieces of advice for aspiring entrepreneurs:

• Focus on what you're truly passionate about - you'll be better at it and harness more of your mind
• Be willing to take lower salaries early on in exchange for equity upside
• Constantly revisit and refine your core principles and strategy
• Learn to articulate your mission and vision clearly to recruit top talent
• Don't be afraid to debate and refine your ideas through discussion
• Look for opportunities created by new technologies or industry changes
• Be prepared to make tough decisions and cut costs during downturns
• Engage with important societal issues beyond just your business

He emphasized that building successful companies is extremely challenging, with many near-death experiences along the way. But he finds the process of creating new things and solving important problems to be deeply rewarding.

Conclusion

Joe Lonsdale offers a unique perspective as someone who has built multiple billion-dollar companies across different industries. While his political views may be controversial to some, his track record of business success and insights into entrepreneurship provide valuable food for thought.

His emphasis on first principles thinking, constant refinement of ideas, and willingness to take contrarian stances has clearly served him well. At the same time, his focus on tackling big societal challenges through institution-building and policy reform demonstrates an ambition beyond just making money.

Whether one agrees with all his views or not, Lonsdale's combination of business acumen and intellectual curiosity makes for a thought-provoking conversation. His career path shows the outsized impact that technology entrepreneurs can have, not just economically but in shaping societal institutions and debates.

Article created from: https://www.youtube.com/watch?v=c1GL6Wnyi84