a16z General Partner, Katherine Boyle: American Dynamism and the Rise of Defense Tech

0:01I actually think that when we talk about things like polarization, when we talk about things like where is the culture, the online world matters more. If you're terminally online, you're probably a better predictor of the future. Hello, and welcome to Giant Ideas with me, Cameron McLean, and me, Tommy Stadlin. We're co-founders of Giant Ventures, which builds and backs purpose-driven companies. At Giant, we're lucky to meet extraordinary people with Giant Ideas that are changing the world. This podcast brings you behind-the-scenes access to those ideas and the inspiring stories of the people behind them.

0:35We explore how one giant idea can kickstart a billion-dollar company, shape culture, and transform life as we know it.

0:48Today on the Giant Ideas podcast, we're joined by Catherine Boyle, General Partner at the venture capital firm Andreessen Horowitz. In 2022, Catherine unveiled her thesis, Building American Dynamism, which transformed the tech landscape in the US. American dynamism is defined as embodying the spirit of innovation, progress, and resilience that drives the United States forward. Putting her money where her mouth is, Catherine co-founded Andreessen Horowitz American Dynamism Fund, which invests in companies supporting the American national interest across aerospace, defense, manufacturing, energy, and critical infrastructure.

1:22She's backed the wildly successful defense tech company Anduril, SpaceX, and many more. Catherine previously led seed investing at another top firm, General Catalyst. She's a big advocate of free speech. She started a career as a reporter on the Washington Post, and she now serves on the board of the Free Press. Business shapes the Trump agenda so fundamentally, and I think Catherine is one of the most influential thinkers in America today. Well, Catherine, thank you so much for joining us here on Giant Ideas today. Despite my accent, I am actually proudly half American myself. But let's start by asking you about your upbringing and what being an American means to you.

2:01Yeah, so my upbringing. So I grew up in northern Florida in a college town called Gainesville. And, you know, it's interesting when I think about sort of my background, what an American means to me. I mean, I had a lot of family who served in the military. I'd say the most unique thing about my background is actually my father was a Jesuit priest. before leaving the Jesuits and deciding that he wanted to do something else with his life. And I feel like when I look at my investing career, I was a journalist before I was an investor. When I think about sort of my nature, I think it all comes from the fact that he was deeply trained in the Socratic method.

2:38When he was in the Jesuits, it was the late 40s, early 50s. And there was sort of a way of being in the Jesuits where they asked, you know, it was all Socratic method. It was all argument. It was all sparring. He often described it as one of the best sort of times and decades of his life. And when I think about sort of how I was raised, I was raised in a Socratic household. I don't think I don't think my family knew how to have a conversation without making it into an argument or a sparring match. And that is actually proven really good for for an investing career where where, you know, a lot of I think a lot of the big ideas and a lot of the important things that are that are debated are often controversial, contrarian.

3:15And you have to kind of see where the puck is headed and kind of hold your own on sort of what's happening. And I think that when I think about my background, that's probably the thing that stands out to me the most, is that a lot of the jobs that I've had, whether it be journalism or investing, are deeply tied to that Socratic method. Catherine, we're here today to talk about your giant idea, American dynamism. Tell us a little bit about what was going on in 2020 and 2021 that led to this thesis emerging. Yeah. So, you know, it was actually earlier than 2020 or 2021, because my background is I spent a decade in Washington, D.C.

3:51I was a journalist and left the Washington Post where I was a reporter and moved to Silicon Valley right as I thought the paper was dying. It was 2014. I left just as Jeff Bezos was buying the paper and sort of reviving it. And so I had this view that, you know, every industry was being turned on its head by technology and I should go learn about technology and the epicenter of it. So moved out to Silicon Valley and I had, you know, I'd lived all over the world. I'd lived in Europe. I had traveled all over the world. And when I got to Silicon Valley, I described it as the worst culture shock of my life.

4:19It felt like I was in a different planet. You know, the things that Washington thought were technology. When you think of what DC cares about, you know, aerospace defense, these sort of big categories of innovation. Getting to Silicon Valley in 2014, everything was apps. It was, you know, it was, it was every, you know, no one read the newspaper. I mean, that was something that was really shocking to me. It was like, no one cared about the news cycle. It was this sort of little divorced area of America where the ideas and the things that were really important to the rest of the country or even the East Coast just didn't make it to the West.

4:50I now see that as a feature of the system of the country being so big and Silicon Valley being so kind of, you know, I would say different and able to kind of build and work without, you know, thinking about sort of the ideas that are on the minds of everyone in Washington. But I still cared very deeply about Washington. I still cared deeply about sort of what are the issues and the things that America cares most about. And what I saw was that people weren't investing in those. There was no category of investment that was focused on, you know, the sort of national security risks that were kind of bubbling up at the time.

5:22There was no sort of investment firm that was really talking about these big areas that really do need investment from the private sector. So I joined a venture firm in 2016, started investing heavily in these categories. One of my first investments was a company called Andrel Industries, which I think was one of the kind of first early loudest defense companies talking about the need for private sector capital to go into autonomous weapon systems. But at 2017, when we were investing in those areas, I can tell you like that was not a popular thing to be talking about. And so the idea sort of of American dynamism, of us starting the practice in 2021, of really saying and signaling that Andreessen Horowitz is going to be investing in these areas, like that came from, I would say, you know, almost a decade of realizing that this is an area that really needs to have a dedicated practice where the founders are equally excited and enthusiastic about supporting the national interest.

6:20But it was definitely a journey to see Silicon Valley move from not being at all interested in these categories to post-Ukraine saying, this is the most important category that we can be investing in, and we need to start building for the national interest. Fantastic. So Catherine, maybe to define it for us, what does American dynamism mean to you as a broader philosophy for a country, if you will, And then what are the specifics as it pertains to the investment fund? What is American dynamism as an investment thesis? Sure, sure. So we always say like there's a very specific reason why we named it American dynamism and not defense tech, deep tech, hard tech, sort of naming it after the technology.

7:00And it's because dynamism is a word that can mean many things. But most importantly, it means movement, means growth. It means constantly moving into its directional as well. It's growth in a positive way. And so I think the sort of naming of the practice as American dynamism is understanding that the national interest is important. The interests of our allies are important. But also, we need to be focused on the things that are positive. So not just saying, OK, we're only going to invest in defense, but we're also going to invest in things that Americans care about, like education. They care about housing supply.

7:33They care about transportation. All of these categories that really, I would say, are sort of the focal points of sort of almost American policy, I would describe it as. We always say, you know, when we first announced the practice, founders said, OK, like, am I an American dynamism company? And we would always say, if there is an executive department in Washington that exists to regulate your industry, we would classify that as American dynamism. And I should go a step back and also say, you know, a lot of firms have, you know, marketing around, you know, saying that they care about these issues or, you know, or a thesis around it.

8:08But I think what is very unique to Andreessen Horowitz is that we build products for our founders around a certain category of innovation. And so the thing that we realize and the reason why it's a separate fund, why it's a separate practice is because these companies are different than traditional consumer companies or enterprise companies. They have to start thinking about government affairs and lobbyists when they're a seed stage company. And so one of the reasons why we decided that this is not just a thesis or something that, you know, I'm deeply interested in investing in, that it's actually a category of innovation is because we saw a host of founders saying, OK, we want to build in the national interest and we want to sell the government.

8:45But they need products to help them do that. And what we mean by product is, you know, we support our founders. We try to bring them to Washington as early as possible. We try to make those introductions to the DOD. We try to help them understand, you know, what does that first key business development hire look like if you're selling to government? So it really is not just a thesis. It is an investment category where there is a product motion, a business development motion, a government motion that these founders have in common. That is what we're super excited to help build as the American Dynamism practice is to really help founders understand that that seed through series C stage, where a lot of these companies flounder because it's so hard to figure out who is the person in the DoD that can help me or who are the people in Congress who care about my issue.

9:29If we can shorten that, what the DoD calls valley of death and really help them get through that process, that's going to lead to just a flourishing of American innovation in these categories. You mentioned Andro as one example, but maybe for the benefit of our listeners, maybe some other examples of companies that you think really typify this American dynamism view of the world? Sure, sure. So I should start by saying, you know, we classify it very broadly. So everything from aerospace, defense, national security, but also things like transportation, energy, infrastructure, all of the categories that governments around the world truly care about, not just US government.

10:05When you think about what is a civic duty, what are the things that governments really are supposed to supply their citizens? This is the category of innovation. And there's been just a flourishing of new technologies in these categories that can help people do their jobs. I like to point to, you know, defense is a huge area that we focus on. But public safety is also an area that has gone through a tremendous transformation in the U.S. for investors in a company called Flock Safety that was started actually in Atlanta, Georgia, which is, you know, not necessarily a well-known tech hub. It was started in 2018 by a second-time founder who went through YC and wanted to create a license plate reader.

10:43He was doing research on, you know, how do most crimes happen in the U.S. in particular? And something like 70 percent of crimes happen with a vehicle. So if you can track vehicles and not people, you can help law enforcement across different agencies, you know, share data and do their jobs. And so he founded this hardware device. He built a hardware device. It's a license plate reader that they put around city or around streets in Atlanta, Georgia. I think it's what, six, seven years later, it's solving 10 percent of all crimes in the U.S. because there are so many of these cameras all over the U.S.

11:17tracking cars, again, not people. And the stories coming out of what Flock Safety is able to do are incredible. I mean, they've solved multiple kidnappings. They've solved multiple unsolved murders. It's pretty incredible what this company has been able to do as a little company that had this idea of how can we support law enforcement? So we see that as a perfect example of, you know, it's an American dynamism company that's really focused on how do we support citizens in our local communities. The other thing we like about a company like that and Andrel is these are not companies that are based in Silicon Valley.

11:53These are companies that are based all over the country and they're building for very specific civic needs for the communities that they're born out of. And I think that's something that's different than, say, 10 years ago, where if you were a technologist in the US, and frankly, a technologist in the world, you would say, okay, I want to go to San Francisco, I want to go to Silicon Valley. I think that's very much changed in the American Dynamism practice. Thank you. That gives a good picture. I mean, Andreessen Horowitz became famous for backing software. Famously, Mark said, software is eating the world.

12:22A lot of these companies you're describing involve hardware. They're quite capital intensive. Obviously, the job at the end of the day for Andreessen and yourself is to deliver returns. How do you kind of square that equation when many of these capitals have to raise large rounds? It can be quite diluted for the early investors? How do you think about that investment opportunity and making that work? So I think it's a great question. So on both the companies, Anduril and Flott that I mentioned are software companies, right? Like the core of what they are doing is software, but they are also hardware.

12:52So we do like these sort of hardware software hybrids where the secret sauce of what they are doing is software, but say the government needs a hardware solution as well. There's sort of this meme of put the software in a box and that's how the DOD buys. And I think in many cases, you have the brilliance of a company like Anduril is that it's the same software suite and the same sort of autonomy suite across all sorts of different products that sort of unify what they're doing in their lattice core offering. So I think that's something that we take into account when we're investing. But then we've also invested in small modular nuclear reactors.

13:29We've invested in hypersonic weapons. Like we've invested in companies that I would say are hardware companies and we should look at them as investment opportunities that they are hardware companies. And I think, you know, when we talk about the dilution that some of these companies take, I think they do take more capital early on. But I think the interesting thing about these companies is they also reach a moat earlier that is very different than, say, software companies. Because if you're building something that is very complex, that requires all of the best talent to come together around building something that takes more capital, there are just fewer and fewer companies competing with those.

14:07And so I look at something like Andrel or Flock or SpaceX is obviously the canonical example where they become the dominant player much earlier in their life cycle once they achieve whatever their technical milestone is. And they're not competing in the same way that, you know, a lot of early stage software companies have fast followers. There aren't as many fast followers in the American Dynamics in practice because so many of these companies are both technically difficult to build, but also they do require capital, which means that they require people who are pretty good at fundraising. And I think that's been something for us as investors to look at.

14:42We have probably a different methodology of how we assess investments than, say, our AI team or a crypto team or a bio team, because it is a very different category of innovation. Catherine, if we think about the kind of social acceptability of defense tech, I think it's undergone a huge transition, particularly after the Ukraine war. So I guess previously institutional investors into venture funds like yours or ours, often they would say, you know, you can't invest in three things. You can't invest in porn, gambling and defense. And defense would be right down there as something, you know, seen as a real negative, a social negative.

15:14And I think a lot of people after Ukraine said, actually, hold on a minute, you know, before solving climate or health or these other themes that are traditionally associated with impact, I think some people are, you know, waking up to the fact that the fundamental layer of democracy is defense and a real interest in funding European and American defense. How have you seen that evolve in terms of the acceptability of defense tech for the investors in Andreessen and then just more broadly in the venture ecosystem? So I will say it's evolved greatly. So having been a seed investor in Anduril, I can tell you that there were founders in Silicon Valley who called me when they found out I invested in Anduril and said they would never work with me.

15:56There were co-investors who called me names that I shouldn't repeat on family-friendly podcasts. There was a lot of anger and heat and sort of vitriol pointed at the people who were early defense investors. And I think, you know, to the credit of some founders who called me, they actually called me years later and said, actually, now I understand. And I give them credit for that, for saying, hey, like, I didn't realize it at the time. And I think that says something, too, about kind of the world we were living in, where people thought we were in this sort of post-history, post-violence world. And Ukraine did change the calculus and wake people up and make people realize, actually, this is the most important thing is defending, defending, you know, the national interest, defending our countries.

16:40And we have to have technology do that because we don't want to be fighting a 20th century trench war like that. Like we want we want to use technology to deter violence, to deter these types of conflicts in the future. And so in some ways, I think, you know, the early companies in our portfolio at Andreessen Horowitz. So we were early investors in Shield AI. We were early investors in Anderil. You know, in some ways, their theses about where the world was headed, you know, were 100 % true. And that sort of led to, you know, I think, you know, a lot of other firms and a lot of other people recognizing this is an important category to invest in.

17:15And here are the reasons why. But, you know, we invested in Shield AI in, I think, late 2016. You know, so I don't think our investment, you know, our limited partners or our firm really had a problem with defense at that time because we were investing in it. But I think more and more firms are now seeing sort of what the thesis of those companies were. And so I, you know, I think in many ways it has been a 180 for Silicon Valley. I don't hear anyone say, you know, the things they were saying in 2017, but it did take this sort of dramatic wake up call for people to realize actually investing in defense deters violence.

17:53Having, you know, having these having, you know, autonomous systems will help save lives. You know, and I think that was something that people just didn't want to listen to until they saw, you know, a ground war in Europe and how destructive it can be. In many ways, that's a return to kind of the roots of venture capital, right? Which did have strong, strong, strong connection to the military when it was born in the US in kind of the 1950s and such. But do you think you kind of got to that worldview sooner than others? Because partially because you're familiar ties to the military and what have you?

18:24So, you know, I think it's partially familial ties to the military, but I also think, you know, there's something specific about having spent so much time in Washington where a lot of the people who I think understood the category of investment didn't see it as controversial because they lived in Washington. If you live in Washington, D.C., or if you spent time living there, you know, it's like you take the metro and a lot of the people who are going to the Pentagon are on your metro. They're in uniform. You are surrounded by people who are working as part of the Department of Defense. It's not sort of seen as a political thing.

18:56I mean, what you know, we always say, like, if you live in the only thing that people across the aisle, Republicans and Democrats agree on our national defense. It is not controversial to support the U.S. military. And if you see it every day because you live in Washington, it doesn't feel controversial. And I think that's sort of what I was sensing when I came out to Silicon Valley is like, you know, there is no there's no, you know, there's no military presence in San Francisco anymore. more. It's not something that sort of the West Coast sees every day in the same way. You know, these issues of national security that may be talked about over brunch in Washington, D.C., because your friends or your neighbors are involved in that community, it just doesn't exist or didn't exist in Silicon Valley.

19:39And so I actually think it's more a function of the fact that, you know, American innovation really comes from this small community in Silicon Valley, or it had come from the small community in Silicon Valley where certain ideas took hold and where people, you know, it was sort of, I would say, a homogenous group of people. And what is great about American dynamism as a practice is now we have companies, you know, I have two companies out of probably two dozen that are based in Silicon Valley and San Francisco. The rest are based all over the country. And that is very good for American innovation because the ideas that matter to people who live in Austin, Texas or Atlanta, Georgia or Washington, D.C.

20:13or New York City are very different than the ideas that matter to San Francisco and Silicon Valley. And I think that that's a huge part of it. The people who kind of understood that national defense was important were people who were already steeped in that community or lived in Washington and really understood that it's not a controversial thing to care about. Claire, well, shifting gears a little bit, you talked about AI being an arms race with China and Mark Andreessen recently called Deep Seek a Sputnik moment. We had Mustafa Sullivan on the podcast more recently. And he kind of took the view that that's a bit of a red herring.

20:44Nation state shouldn't be in a war over AI. The real kind of potential bogeyman in the room is that proliferation of power. So why do you think that we're in an arms race and that's an important thing for America? Yeah, I think it was a Sputnik moment because it wakes people up. And the interesting thing about what I think people mean by what Mark meant and also my partner, Alex Rampell wrote an amazing piece for the free pass that I think is worth reading. The Sputnik moment is actually, you know, if you look at what happened after that, the amount of investment that went into U.S. agencies, you know, during the space race in the next six months after the Sputnik moment was extraordinary.

21:28I mean, the billions of dollars that went into science research, into STEM education, that went into building DARPA. All of that came within six months after the Sputnik moment. And so what I think actually, and probably bears going a little bit deeper into this, what I think, Mark, and what I mean when I say that it was a Sputnik moment as well, is that I think we're going to see an extraordinary amount of investment in the U.S., both on the public and the private sector, in AI because of this. And that will be exceptionally good for American innovation. And yeah, I mean, I think of things, you know, I co-founded the American Dynamism practice.

22:07I think of things in terms of national interest. That's my perspective and worldview. And I think that this is going to be incredibly good for American AI and that it was a Sputnik moment and that we're about to see a ton of not just private investment, but public investment go into these categories with the realization that it is so important. Catherine, you wrote recently that it's the first time in your adult life that the right is truly ascendant in America. Our advisory board member, David Miliband, spoke on giant ideas about the difference between a polarised society and a balkanised society, where a polarised society, you disagree fundamentally with the other side, and a balkanised society, where you see the other side's views as a threat to your way of life.

22:45And America, to me, feels pretty balkanised today. But I thought it'd be interesting to explore with you if the differences are truly so stark. So there's a really interesting example that you tweeted about that I'd love to unpick with you. So you retweeted a photo from an FBI building where a word cloud on a wall is being painted over in this kind of thick gray paint. And the words on the wall are things like integrity, leadership, stability, initiative, as well as diversity. And I guess diversity is the key word there. And you write that it reminds you of the scene in the gangster movie Casino, where I quote, the feds come in, there are desperate attempt to escape fate.

23:24It's two minutes of an elaborate, decades-long unwinding of a scheme. And the guitar, the organ, it's a southern wake for the bitter unraveling of something the viewer knew wouldn't last. What did you mean by that? So Casino is one of the best films ever made. I'm a huge Scorsese fan. I would encourage everyone listening to watch it if you haven't seen it. But what I'm really talking about is catharsis. So that film is, you know, it is basically a build up to this extraordinary scene where everything unravels. And the juxtaposition of everything unraveling with this, you know, beautiful, sounds like a Southern wake if you know the song.