E400: Anthony Pompliano on Power Laws, Conviction, and Compounding

23:54When you find one, hold on. And maybe not only hold on, but press the advantage. When I first started working with Mark Yusko, now almost 10 years ago, I asked him, I said, look, you were an LP in all these great funds and all this stuff. And I said, I just have one question. what separates the top three investors in the world from the top 1 % of investors? And without hesitation, he said to me, they press their winners harder than everybody else and they cut their losers faster than everyone else. It just seared it in my brain. I said, you know, how many? Antonio pressed the advantage. He knew SpaceX was a winner and he poured as much money into the company as he possibly could.

24:33And so it goes back to when you have a good idea, why spend time investing in 10 other ideas? The reason why you diversify is because you don't have conviction, right? And people will say, oh no, it's risk management. Well, I don't know. Go look at the best investors in the world. Stanley Druckenmiller isn't exactly the most diversified investor in the world. And so again, it goes back to, you know, people are like, oh, well, Rentech's got X number of positions. Like no, Rentech has one strategy and they're all in on it. And that strategy is really good because they're great at the quant investing.

25:04They don't have tons of other things that they're running around doing. And so you just start to realize like the concentration is a sign of conviction and therefore conviction means that you've done the work. Now, are there people who get blown up doing that? Sure. But usually what ends up happening is the only people who are willing to concentrate are the people who end up being right over and over again, which feeds back into why do they do that? It's because they've built the human intuition. Their human algorithm has been trained over time to find these opportunities. And so if you've got that skill set, if you've got the capital and conviction to go and do this, then concentrate.

25:39And that's ultimately how you drive these immense winning trades. It's an important distinction there. When I asked one of Antonio's closest friends, Ron Descartes, a mutual friend of ours, how he was able to invest 30 times in SpaceX, he said something that surprised me, which is he understood the business technically better than anybody else on the cap table. He was in the weeds. He was at the company. He wasn't selling it to the outside world. He was making his own conviction. I remember having a conversation with some of the guys at 137. This was maybe four or five years ago at this point.

26:12and I think Justin was there, Christian Garrett, a couple of these guys. One of the things that he said to me was, SpaceX has a free walk to a trillion dollar valuation. The company was maybe like a hundred billion, maybe 150. And I remember having two reactions. The first was, I don't know many people who know this company better than them. So they've done the work. So like the second you hear something like that, you're like, I better pay attention. At the same time, what a bold statement to say, free walk to a trillion. Well, in hindsight, why were they so bearish? Right? Like this thing ended up being two trillion.

26:49And it happened in a very short period of time. And I remember asking them, why do you think that? And they had very specific answers that were rooted in a model that they built that had very conservative assumptions that they thought could be much higher than a trillion, but that was kind of the thought process of free walk. And so when you hear that, you say to yourself, man the only way you build the conviction that those guys had that they don't sell they own one percent at the ipo is they had done the work and so i think that there's an entire generation of investors especially young investors that it's kind of like uh you know making an investment is almost like a lottery ticket maybe it works maybe it doesn't i don't know anybody that i respect in the investing game that's how they treat it they have very specific reasons for why they make the investment, they have very specific thoughts about the industry or what their specific thought process is, and they invest accordingly.

27:43It doesn't mean they're always right, but they can sit and debate with you the nuances in a way that I think most people would not really understand. It reminds me of old school venture. It used to be the scientific method. You would put in a seed investment wanting to prove out these three to five things, and then they would come in and then you'd prove that out. Now you would have a series A and then you would prove out more. So Series B. Now you have people coming in. Sequoia comes in at Series A. So now somebody comes in three months later and marks them up at 2x with no traction other than just basically making a bet on Sequoia.

28:14And the reason why people do it is because it's worked, right? And so it goes back to it's great to do that in 2021, but were you able to do it in 22 and 23? What do your vintages look like year over year? What do your returns look like over longer periods of time? And I think that's one of the key pieces to this is, at least for me, whenever I'm evaluating a fund manager, show me what you're able to do over time. Doesn't mean that I won't invest in a first fund. Doesn't mean that I won't back an individual. But ultimately, that is the durability. Can you continue to do this? Maybe I'll give a good example.

28:51I'm a LP in a pre-seed seed fund. There's a gentleman named Adam Besvinik. He's Looking Glass Capital. And I recently introduced him to somebody who is a very successful entrepreneur, somebody who already has been able to build a fairly large business that people would have heard of. And this guy was raising a seed round, is raising a very large seed round. And Adam basically responded and said, Hey, this is outside of my model. I have very specific ownership target, very specific check size, very specific valuation range that I'm looking for. I think he even says something like, I'll get on the call with you and would love to be helpful, introduce you to people, et cetera.

29:32It's just, it doesn't fit my model. That's a lot of discipline, right? Now we'll see if he's right, but I've been very pleased, I think, with somebody like Adam who's able to use that discipline and say to himself, I know what game I'm playing. I will still be a great participant in the venture ecosystem and help founders and do all this stuff. But my strike box is very specific. How many investors are willing to do that? Right? Not that many. And so I think that that's really goes back to this game of, you know, do you understand not only what you're investing in, but do you understand what the math needs to be for it to work for you?

30:09Do you believe your own model? But also, are you willing to turn down things that are attractive that are outside of the model? Right? I think that's usually the hardest thing is, you know, how many times does somebody invest in something because they could make money, but it's a lack of discipline. So you spoke a little bit about durability, asymmetry, and volatility. Let's talk about luck. You don't think luck is a real thing. Why is that? Well, because it doesn't exist. Luck's not real, right? And I can prove it. If you and I go outside, walk across the street, we both get hit by a bus. Let's say we both lose our right leg and we're sitting in the hospital.

30:45Somebody comes and shows up and says, what happened? I said, man, I was really unlucky. I was walking across the street. I got hit by a bus and I lost my leg. And then they walk over to my bed and they say, hey, what happened? I said, man, I am so lucky. It's walking across the street, I get hit by a bus, I lost my leg, but I'm alive. Exact same situation, exact same outcome, two completely different views on were we lucky or unlucky. And so what you find is that luck is actually a psychological concept. And there's a lot of academic research that shows that you become quote unquote luckier by telling yourself you're lucky.

31:16What most people ascribe to luck is simply probability. And people don't like to talk about it from a probability standpoint because it's outside their control, right? It's something that they don't really understand as much. It requires them to have the self-awareness that this luck thing is more in their mind. But once you understand that, you say, the things I can control is I can increase the probabilities of accomplishing the things I want or having certain situations occur. So increase the probability surface. But also, luck is just in my brains between my two ears. And so I can make myself quote-unquote luckier.

31:51I can make myself view things from an optimist's positive lens. That's a whole different ballgame. And so I think that people generally like to think of, I'm either a lucky person or I'm unlucky, or this thing happened because I got lucky or I didn't get lucky. But no, it's just the way you think about it. And so luck is literally not a real thing. It's just a psychological concept that we use as a crutch. If you can get to the point where you understand that, now it's a weapon to be used rather than something that happens to you. So it returns the agency to you as an individual. And I think that we live in a society where there's a lot of people walking around both saying I got lucky and a lot of people saying they got unlucky.

32:32Well, both of them are wrong. What's an example in your own life where you've weaponized luck and you've made it self-fulfilling? I wake up every single day and say to myself, I am the luckiest dude in the world. Given what I did in my life, some of the experiences I had, some of the opportunities and challenges, et cetera, to end up where I am, there's no way in hell that's supposed to happen. But I wake up every single day, say to my wife, I say, it's incredible that not only I married her, I have amazing children, I get to do what I like to do every single day for work. I'm not somebody who ends up spending a bunch of time doing a bunch of like nonsense stuff.

33:12It's pretty much, I like work, I like my family. I do those two things. It makes me happy. I have a million friends who from the outside, everything looks like amazing. And I talk to them. And I think my relationship with a lot of friends that I have is kind of just like a no bullshit person, right? It's like, look, you can sit here and post whatever photos you want on Instagram, but what's going on, right? A lot of them will just tell you, I'm stressed out. I'm unlucky. You know, I don't like what I'm doing, you know, whatever. And so I've been in those positions before, right? It's not like I'm immune to it.

33:52I'm human just like everybody else, but I've been able to get myself to the things I wanted to be doing, you know, that I'm energized by. It's a pretty fortunate position to be in. And so I think that just literally every single day you can wake up and say to yourself, man, this is awesome. I'm kind of living the dream life that I wanted. But what else do you need, right? I don't care where you're waking up or what you're doing. You can say that. you're on the top 0.1 % of people in the world. And I get as a philosophy, that's a feel good strategy, but how does that make you more productive? And how does that increase your success in your life?

34:27If you're working on things that give you energy, you're spending time with people that give you energy. You're playing to your strengths. Of course. And also I think on top of that though, is people I think drastically underestimate this concept of everyone focuses on what you want, but no one focuses on what can you attract. And that's a subtle but very important difference. So maybe a great example of this is take somebody who's in their 20s living in New York and said, I wanna get married. Okay, well, what are you doing to achieve that goal? Most people immediately start talking about, I go to the bars every Friday and Saturday night, I get on the dating apps, I talk to my friend, and it's all about the things that they are doing outwardly chasing something.

35:12Trying to get lucky. trying to figure out that I think this one's supposed to do. Almost never do I hear somebody say, I am working on myself to make myself the type of person that would attract the person I'm looking for, right? And so we have a lot of young people that work for us across all of our different businesses. And that's usually the thing I spend the most time talking to them about. Whenever it comes to anything in their personal life, whether it is how they deal with their family, how they deal with their relationships, how they deal with their careers, et cetera, is I just say to them, I say, if you spent half the time that you're spending on the external or the mental worrying on just putting yourself in a position to be the type of person that gets the thing that you want, it'll happen, it'll come to you.

35:57And so I'm just a huge believer on, you have to focus on how do you attract things rather than simply chase them. And so again, it goes back to whether it's your personal life, your professional life or whatever. If you are doing the things that you enjoy, you're going to attract certain things. People can tell, right? You interact with somebody and there's a coffee shop down the street that I go to during the day. And I walk in, every single person that works there, there's four people. They are having the time of their life. They're playing music. They're celebrating. They're smiling. They know all the customers' names.

36:33They're fist bumping people, right? You walk in, you feel good about yourself being around them. Do you think they're enjoying working there? 100%. It makes you want to go there more. It makes you feel good while you're in their presence, right? They are attracting people. The line is out the door. There's a coffee shop next door. The line's not out the door. I don't think the coffee's that different, right? It is simply that people want to be around folks who are enjoying what they're doing, have high energy, you know, are attracting that. And so I think the same thing is true in business, you know, name a great entrepreneur.

37:10People want to work for them. Customers want to do deals with them. Investors want to back them. They're attracting this stuff to them. And a huge piece of it usually is they're enjoying what they're doing. Managing risk for your business may be complicated, but your relationship with your insurance broker doesn't have to be. NFP and Aon Company can help you navigate insurance markets and negotiate with carriers to build the right coverage for your business, helping you turn your risks into leverage. NFP's advisors are total business partners who help you protect your business and connect you with solutions to your toughest financial and workforce challenges.

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38:53Whether your goal is to manage risk more effectively, attract top talent, empower your workforce, or grow your legacy, NFP is ready to help you succeed. Visit nfp.com slash how I invest today to unlock your full potential. They're energized by it. They have a certain aura about them. And people think that it's kind of like this woo-woo stuff. But when you're around it, I just say, look, what I'm looking for in my life is I want to be surrounded by winners. And we kind of have gotten away in conversation from just talking about there's winners and there's losers. And the winners, they win at everything they do.

39:28And it's not because they are smarter than people or whatever. There's some combination of intelligence, hard work, charisma, personal energy, whatever the thing is that they have put together. And they would be successful running a small business, running a technology company, being an investor, working on a construction site or whatever. And some of it is they have certain leadership qualities. Some of it is that they understand certain interpersonal communication. Some of it is that they have a certain propensity from an intelligence and personal curiosity, etc. But they put this stuff together and they're a winner.

40:01And so when you're evaluating talent, you just want to find winners because the winner will win whatever role you put them in. They'll figure it out. So if you're an investor that bets on people, find winners. If you're somebody who is backing managers, find winners. If you are hiring people, find winners, right? And if you go back and look, PayPal maybe is a great example of this, right? What did they talk about? We just found great people. Put them in a room and then we figured out the problems, right? A lot of companies, they seem to be doing the same thing. So I think that's ultimately, kind of again, somehow became taboo to just talk about like, we're looking for winners.

40:36I want winners working at our companies. I want winners running our companies. I want winners managing our money. I want winners around me all the time. And if you do that, it becomes contagious. It kind of builds us like a momentum snowball. And ultimately, I think that's where returns come from, happiness comes from, et cetera. I have a second master's in psychology and I like to look at everything through the psychology lens. And I think about when you say, be a winner. Of course, the question becomes, who doesn't want to be a winner? And then you start thinking, what is that other thing? Why aren't more people winners?

41:07Because they're scared. I think they're getting benefits from the loser mindset or the victim mindset. In many ways, winning or even sales, if you call it from that, sales and leadership, I think oftentimes are interchangeable. It's what Shelby Sapp, a friend of mine, calls emotional leadership. You need to first be happy, just to take the coffee shop example, you wake up, you decide to be happy, you serve coffee, and then good things happen from that, you build relationships. But if you don't first make that decision, in other words, you have to realize at some point, if I'm not going to be happy, it's nobody's job to come and make me happy.

41:46So I first activate myself, be happy, and then you see the second order effects. And I think the tragedy is a lot of people are still waiting in this victim mindset, waiting for somebody else to be happy, not realizing that it's a self-fulfilling prophecy. You know the secret? You can make a loser a winner, but you can't make a winner a loser. It's one of the hard truths of life, right? You can take someone who shows up to a business, to a fund, to a sports team, to anything in life, and they can never have been exposed to a winning culture, to winning energy, to leadership, all that stuff. And you can take them and you can teach them how to be a winner.

42:23How do you do that? One is it through exposure. They see the benefits of the winning philosophy. Of course, they're around it, right? How many times in sports has somebody been on a losing team, they go to a winning team, and they're like, oh, we do things differently here. And all of a sudden, they become this great player. That's why I have in sports, these coaching trees. You have the Bill Walsh coaching tree, the Bill Belichick. You start to see winning and you kind of internalize it very quickly. Doubt. So exposure is one. Two is setting a standard that demands winning, demands excellence.

42:53And again, that feeds into the culture, but that is a second component of it. And then the third thing is there's very specific things that you can teach someone. You can show them how to do this. And so once somebody has become a winner, has the winning mindset, has the winning culture, has the winning kind of standard of excellence, they never go back. Once you see it, you can't unsee it. And I think that's one of the key pieces is that people kind of think of these two groups says they're dried concrete. They're not. It's a one-way door. But how many times in history has somebody said, I went to work somewhere or I was on the sports team or whatever.

43:29I got exposed to this person, this culture, this team, this leadership style, whatever. It changed my life. I don't think that we've ever heard, at least I haven't heard, somebody who says, I was a winner. I got exposed to all that stuff. And now I'm here in this situation. Now, the exceptions are drugs and alcohol, gambling, right? Whatever. But if you take that same person and you cure that problem and then put them back on their two feet, then it'd be winners again. And so it just comes back to the exposure, the expectation setting, the leadership. You can take a loser and make them a winner, but you can never take a winner and make them a loser.

44:07And I think that once people start to understand that component, you can literally accomplish anything. How do you build that within a company culturally? really you're maniacally micromanaging every aspect of the business founder mode so you can call founder mode you can call whatever you want right but i think ultimately what you end up finding is this great idea of the source and i think of the sources uh this idea there's a gentleman uh graham who uh sees a lot of uh seed investment for his last name but he has this idea that when you go and you talk to a founder, you basically ask, there could be two founders, who was the source of the idea?

44:49He says, one founder had to call the other founder and say, I've been thinking about this thing. Do you want to do it with me? Do you want to spend some time trying to figure it out? When you find the source, you then have to say to that person, where did the idea come from? What motivated you to dedicate your time, your memory, your resources, your energy towards this thing? And that ultimately is the essence of the company. That's why founder-led companies do so much better than corporate management companies, right? All this stuff. But once you understand the source, you understand so much more about that company.

45:24Well, the same thing is true of almost everything in life. When you look at a company, let's say you don't have the opportunity to go and talk to the founder. But if you go and you look at who the founder is, that will tell you a lot about the business. If you go look at sports organizations, who is the source of the culture usually the coach right and so you go and you look at it why is it that lebron james can win championships and then not make the playoffs a lot of people will point they'll say oh it's because of the other players the new york knicks just won with a team that most people would say it's not like they had some huge super nominees it wasn't a super team right so again it goes back to so much of it is the source of that culture the source of that organization, the source of this, that is ultimately what drives, I think, a lot of the winning.

46:15And if you think of a business, how do you instill that? When Bill Walsh took over the 49ers, the first thing he did is he called the front desk. And he said, you're answering the phone wrong. Why would Bill Walsh, the head coach of the San Francisco 49ers, the two and 16 team or whatever it was, why would he be focused on how they're answering the front door, answering the phones. He said, because this is the first interaction that outsiders have with our organization. How you answer the phone sets the tone for how these people are going to interact with us. And then he would, throughout his tenure there, call down to the front desk, randomly, unannounced, and see, are you answering the phone the way that I told you to answer the phone?

47:00And he had instructions. How many people care about doing that? How many people think that they have the time to do that? How many people think that's important? So you just go through over and over and over again, every single little detail. It's hard. It's really, really time consuming, but it's also mentally exhausting to be the person who constantly is trying to figure out what is every single detail that I need to maniacally manage. So what a lot of people do is they hire great people and they say, go. And that solves a lot of the problems because you You have a great person. And that great person should have some component of this.

47:40But I do not know a highly successful entrepreneur who does not say, you know what? Hiring a great person is not enough. I have to hire a great person. And then on top of that, instill the culture and make sure that we're doing things a certain way and constantly stay on top of this. And so to me, actually a huge part of how do you get a winning culture is the durability. Do you personally have the durability and the energy to persist over a long period of time when all of these people who work with you do not have the same source of that energy or vision. It's very difficult. It's why, again, 5 % of the companies or less deliver so much of the value.

48:23It's just that you're stacking these things on top of each other. Then once you have that, then it's about having the patience to execute it over decades. How many people get bored, right? You seek novelty. Yeah, you get bored, right? Peter Drucker used to say that CEOs make acquisitions once they get bored of their core business. And that's one of the most destructive things. If I want to be healthy, I know exactly what to do. I'll eat the same thing every single day for a year, right? I design it, need it. It's a really boring way to live. So guess what? Ah, you know, let me put a little of this, you know, condiment on it.

49:00Oh, you know, it's Saturday. Let me get an ice cream, right? Next thing you know, no discipline. And so it just goes back to how do you build systems? How do you build a life? How do you build a routine that allows you to accomplish the goal, but also understand yourself? For those who want to build this winning culture and maybe are even committed to doing it over many decades, where do you get some leverage? What are some tools, whether literally tools or some framing in order to encourage people to seek excellence? To be clear, I'm still learning how to do all of this, right? So I kind of look at this as I've figured some stuff out that worked for me and our organizations.

49:40But also there's a lot of stuff that I talk to my friends, colleagues, peers about on a daily basis. I'm like, I can't figure this out. What do you guys do, right? And I borrow all the time. Depends on what the problem is, right? You know, a really important one was when everyone wanted to work remote all the time. And it was like, well, what are you guys doing? How are you getting people to come back to the office? Are you dangling a bunch of treats in front of them? Like, you know, everyone is, got to have some sort of carrot to come back to the office. Or are you managing with a stick and saying, you know, you're not going to be here.

50:14And part of the problem was like, nobody had a good answer. Everyone was doing different things and it was really customized to what their organization was. And some weren't going back to the office five days a week and they were doing three days a week. And there's all this stuff, right? So you have to sometimes take these other data points and customize them to you. But if you go and you look at like, what are the things? The first thing is, if I go and I ask everyone in your organization, what's the goal? Do they even know? Could they actually tell you, right? And some organizations, without a doubt.

50:47Other organizations, there's no way. So that's the first thing, is everyone even know what the goal is. And then what is needed to fulfill that goal? What are the inputs that we can control? How are we going to work? All of these things are intentional design of an organization. And it's not like they're taking the SAT. They don't need to sit down and take a written test. But it sure is helpful if they know what the goal is, if they understand some of the core principles that you have as an organization. And I think that if you go and you look at a lot of great organizations throughout history, and people always, I think, are scared to kind of talk about some of this stuff.

51:26But if you look at maybe take two extremes, let's look at the military, let's look at the mafia, and let's maybe look at NVIDIA. Most people wouldn't think that there's any sort of correlation between those three organizations. I bet you those three organizations are way more comparable than people think. So let's unpack it. Okay. Do they have a clear goal set in mind? Yes. Do they have clear guidance of their principles? yes the military has certain things you should do and shouldn't do the mafia has things you should do and shouldn't certain values video mafia omerta right and so you look through these things but then you say okay well what about the structure of the organization let's take the military how big is a company?

52:19200-ish people, right? How big was a crime family? 200-ish people. How big is a division inside of NVIDIA? 200-ish people, right? Why is it that the same organizational structure exists along these things? The person at the top, how many direct reports do they have? well nvidia i think he says he has 60 you look through some of these organizations like it's a bigger number than you would think it is it's not as hierarchical as you would think it is right i think at nvidia from jensen down to the low-level employees like there's only like four you know layers or something mafia is almost the exact same right look at you know a company or battalion commander depends on exactly right but like you start to realize like wait a minute how is it that people in completely different sectors in completely different organizations with for completely different approaches to the world, how do they all end up around the same things at different time periods in history?

53:20Well, maybe it's because what people start to learn over time is there are certain things that work, certain principles, certain ways of operating. And so again, now your responsibility is if you understand how to use these things, use it for good, do the right thing. It's a tool. Correct. But there's a reason why organizational structures, leadership, all this stuff, the principles become timeless, right? And so if you read Only the Paranoids Survive, was that book written in the 90s? How is it that's still one of the most recommended books for business? It's written before the iPhone existed.

53:54But just like the principles, right, are timeless. There's an entire philosophy. How is it Bill Walsh's book, The Score Takes Care of Itself? How is it that the principles in that book are still applicable today? They're timeless. And so it doesn't matter what the technologies are. It doesn't matter who the people are. It doesn't matter all that. It's just like, this is how humans communicate and operate. And if you can learn that way of managing, leading, etc., you can apply to anything. You look at those three organizations, they all have very specific reasons to exist. The military is obviously to protect the United States.

54:28NVIDIA is to pursue an AI future. The mafia is to grow and protect the family and the community. A fourth example, I oftentimes think about SpaceX, going back to this. I've also been his private investor for quite a while. And one of the idiosyncratic things about SpaceX is its mission. Said another way, it's very hard to execute the level of intensity that SpaceX has executed without that mission. Elon has created such a mission, which is to make humans interplanetary so that we don't end up all dying in a nuclear holocaust on planet Earth. It's one of the forcing functions behind their culture.

55:10So they have this culture of the responsible engineer. And three things end up happening to people that join SpaceX. One is a lot of people, even the smartest people in the world, a lot of them at six months in, they burn out. They just can't take the intensity. They believe in the mission, but they just can't take it. Their brains literally just fry. Then there's a second group of people, people that are there anywhere from one to 10 years. So they see it as a tour of duty. Elon, I think, uses the same analogy of this military tour of duty. You work there for four years. It's extremely difficult to do, but you look back at it as the most formative part of your life and it teaches you all these lessons.

55:50And then there's actually an elite group, and this is a lot of the people around Elon, is they're there for several decades. And the reason that they're able to deal with the culture is because they believe so much in the mission that they're willing to, in many ways, sacrifice their lives and their livelihood and in some ways their mental health in order to achieve that mission. They're these lifers. And when I've talked to them, they characterize it as it's hard after you go from SpaceX to another organization to find meaning, the same meaning that they had at SpaceX. So I think oftentimes these people think of the MBA and this is my other master's is the MBA.

56:26They oftentimes think about almost businesses as these soulless entities where you could just like take a managerial style and plug it into a business and it's going to work the same way. But I think there's a mission aspect to it. And it starts from the founder and the founder's own belief and how congruent the founder is with that mission that you can't take away from the entire organization. Winning, right? What is the purpose? It's not passion, it's winning. Well, passion feeds into winning, right? If anyone hasn't seen it yet, they should go listen to James Dolan gave a speech to the New York Knicks as the playoffs were starting.

57:05And James Dolan previously was not exactly known as the most popular sports owner. It wasn't really known as - Or the most winning. Or the most winning, right? But he very much, I think, was criticized for the fact that the Knicks hadn't won, B1 divested the team, all this stuff. And you watch this video of him giving this speech. And I don't know if there's an official title for the speech, but basically he's like, for 10 weeks, I need you guys to lock in. And he even jokes at one point, he goes, I need you to go home and tell your wives. Right. We're not having sex for 10 weeks. Right. He's just like, is that true?

57:36I've seen that. Well, he jokingly says it to the team. I don't know if anyone went home and did that. Right. But, but he basically is like, I need your utmost attention and focus for 10 weeks. And what you do in these next 10 weeks is going to, if we are successful, stick with you for the rest of your life. Look what they went and they did. Right. So you look at that and you say, okay, that's 10 weeks. That is a microcosm of what Elon is saying. Elon is saying, I need you for four years. right? Elon is saying, but I'm going to dedicate 30 years of my life to this, right? He's already been at it for 25 years.

58:08And so you look at this and you say to yourself, wait a second, again, it doesn't matter if we're talking about sports, if we're talking about business, if we're talking about your personal life, whatever, the same things apply. That idea of having a specific mission you are very passionate about, it gives energy that leads to that aura that creates winning is a 5 % idea that delivers 95 % of value because it is applicable across disciplines. And so as you find these things, you just collect them and you say to yourself, that's a 5 % idea. What percentage of attrition do you expect for people that could never be winners or choose not to make the sacrifices?

58:47If you're losing people who can't be winners, it's probably because you're not teaching them how to do it. You shouldn't be washing people out if you're focused on how do we create this culture. So I think of a sports team. Sports team cuts people in the beginning of the season, but they're usually not washing people out in the middle of the season, right? They're creating that culture. And if you go and you look at some of these teams, they won with the same people that they started with. And so they're transforming the team and the organization. Again, you can take losers and make them winners.

59:19You can't make winners losers. And so now if you, in practice, of course you're going to lose people. Of course, some people aren't going to be able to make it, especially in intense cultures like SpaceX, right? Like you can't go 100%. But again, it goes back to the approach of, are you trying to wash everybody out? Or are you trying to find the people and make them join you for the ride? Some people you just can't convince to do anything. You can tell people to you, they're blue in their face, it's going to be good for you. They don't want to do it. They don't want to do it, right? Now, the beauty I think of great organizations though is they put it up front.

59:51I don't think there's anybody in the world who applies to SpaceX, who doesn't think that the culture is intense. I know what they sign up. It's a forcing function, right? It's like a filter. Is part of that as a manager is almost like a parent, you care more about the development than the rapport? I think I'm a better parent than I'm a manager. And the reason is because when you have a child, you have a monopoly on everything, right? You have a monopoly on the information that they get. You have a monopoly on the actions they take. You have a monopoly on the discipline. You have a monopoly on every aspect of their life.

1:00:30When you're dealing with peers, you don't have a monopoly on anything, right? Because they can leave. They can go do other things, whatever. So in the military, there is a hierarchical leadership where it comes from, I have a rank on my chest. You have a rank on your chest. If I outrank you, you listen to me. You may not like me. You may have a problem with me, but it doesn't matter. If I tell you to do something, you're going to respect the rank and you're going to do success That's how the military is set up. It's very similar to a parent and a child. How many people say you're going to do it because I say you're going to do it?

1:00:59It's not democracy. Try to do that in a workplace. It doesn't work. So you can't use hierarchical leadership many times in a workplace, especially with people who are experienced, who are successful, who have self-respect, right? All this stuff. The people you want, you can't do that. You have to have influential leadership. So you have to explain to them, what is the mission? Why is it a worthy mission? What is your role in doing this? What are you going to get out of this? How is your contribution going to help us achieve the mission? All of that influential leadership is way harder. It is so much easier just to say.

1:01:32It's like a minority deal versus a control deal. Of course. Are you selling your employees on that before you hire them or once you hire them? And is there a way to suss that out before you bring somebody on? I think that is different for each company, right? Take, for example, the people who are very, very closely with me, people I've been working with for a long time. Each one of them did not come in in the roles that they're in. They have risen up over time and they've been, I got a little bit of exposure to him or the people around him. Okay, a little bit more, a little bit more. And then eventually it's like a double opt-in.

1:02:05This person is good. We've kept giving them more responsibility. They've now risen to the level where we want them to run something or be in charge of a large portion of something. At the same time, they would have left by now if being exposed to me a little at a time, they were like, I don't enjoy this. So it's a double opt-in. We have some people though that join our businesses that they may not interact with me at all on a day-to-day basis. But that's actually part of the challenge. How do we communicate what the culture, what the standard is, what we want to occur inside these businesses? So over time, as everything has gotten bigger in terms of the number of companies that we own, the operations, all this stuff, I have to be more intentional about it.

1:02:49And so that person that, you know, now works at one of our businesses, well, do they know what the mission is? Do they know what their contribution should be? Are they going to see someone maybe not upholding the standard and say something? Do they feel like they're empowered to do that? Well, the only way that they're going to do this, they feel like this is part of their company too. Because if they feel like they're just being rented as a unit of labor inside of an organization, but it's not really theirs, they leave the trash on the ground and somebody else pick it up but if it's their component, if they're part of it they push the chairs underneath How has it succeeded for you to gain scale in how you apply the culture?

1:03:37I want very, very small teams Most of the companies that we own and operate are not large headcount wise but they serve a lot of customers. We have a public company I think there's 11 people that work at the company, but it has$50 billion in assets on the software platform, serves tens of thousands of users. And if you think about from a scale perspective,$50 billion in assets would make it like the fifth largest fee-taking RIA in the country. 11 people work there, including myself. And that's Sylvia. Tell me about it. Yeah. This is a software product that we just believe personalized insights is coming to every industry.

1:04:18And so if you had a young kid, you wanted them to learn, what do you do? You give them a private one-on-one tutor for education. If you need someone to be healthy, what do you do? You give them private one-on-one healthcare. In finance, how do you get someone to accelerate their net worth or grow their assets? Private one-on-one personalized insights. And so the reason why we think that's interesting is almost all of the personal finance space is focused on saving money. But there's a growing cohort of what I call independent investors, kind of the upper middle class of the finance world. There's big institutions at the top.

1:04:50There's the people with$5 that are on Robinhood or the meme stock traders or whatever at the bottom. But this upper middle class are usually wealthy, multimillionaires that are digital natives. They don't really consume the mainstream media. They're getting their information online from podcasts and newsletters and Twitter, etc. They don't really work with RIAs or financial advisors. Maybe they have one, but they like to be in control and make the decisions and kind of live or die with success or failure. And then they've convinced themselves that their W-2 is not going to help them achieve their financial goal.

1:05:22And so they now are going to use their personal assets. They are going to invest to be able to achieve that financial goal. So they think independently, act independently, and are chasing independence. Put that together, that cohort of people is very underserved. And I know because I am one of those people. And so we started to build a product for me where I was taking screenshots of different accounts and I was uploading it in chat GPT and I was asking questions. And it was so annoying to have to then go screenshot again the next day and do this. And it didn't have memory and all this kind of stuff.

1:05:54And so we had an engineer that worked at one of our companies. And I said to him, I said, can you just build? At first, it was just a dynamic dashboard that tracks my net worth. That's all I want. And he's like, well, that thing you were doing with AI, I can actually build that too. So that led to Sylvia. And today, the average user asks Sylvia 15 questions per week. So you sort of think about that. We were processing at one point over 100 billion tokens per month. So the scale of this thing was, you know, exploding. One of the things that I've loved getting to know you is you take these very sophisticated concepts and you're able to package them in such a mainstream way.

1:06:29If you understand humans and you interact with them, then you actually work the other way. So I don't start with this big idea. I actually start with just like, what's the thing? So the doublecheckyourdoc.com was literally, my wife and I went to the doctor when she was pregnant. The doctor screwed something up, scared the hell out of my wife. My wife took a scan, uploaded it to one of the AI models and asked it. And it came back and was like, basically the doctor completely messed this up. Here's the truth. My wife took it, put it back into the doctor's system. It was like, you know, just out of personal curiosity, like, what's this?

1:07:06And the doctor called and apologized. And so you look at that and you say, well, if that's valuable for us, you know what else people do? If you go to the doctor, what do you do? You text your significant other, your friend, whatever. You're like, yeah, the doctor told me, you know, my foot's not broke. It's just a sprain, whatever. And your friend, you know, pontificates as an armchair doctor. He's like, I don't know, man, you look pretty purple to me, you know, or whatever. Well, like people want to have a conversation there. So it's like personal experience plus understanding. You're like, well, can't the AI just do this?

1:07:34Oh, and then you start to realize like it's actually applicable across every single aspect of your life. It's true about finance, health. And so you kind of form this worldview, but it's very bottoms up. I think it's a much more accurate way to do it than a lot of academics that kind of come top down. I'm not the biggest fan of the academics usually because I tend to think that the theory when it meets the real world, and lacks a little bit of effectiveness. If you could go back and you could only give yourself one piece of timeless advice when you had just finished your six-year tour of duty at the military, what would that be?

1:08:06Go bigger and take bigger risks. Right. What do you mean by that? Well, it's just as hard to build something big as it is small. You get paid way more for taking big risks than small risks. And most of the things that you're worried about when you take those big risks are completely not worth worrying about. There's almost an argument that doing something bigger could be easier than doing something smaller. Of course. Again, it goes back to, what do people want to be associated with or surrounded by? Winning. Well, what do winners do? They go big. And so people, why do they like Elon Musk? He goes big, right?

1:08:41Why do people like certain types of individuals, whether they're investors or founders or whatever? It's big. And so there's a significant advantage to scale. I just think that when you're starting out, you're much more worried about your batting average than your slugging percentage. And I think what you learn over time is the slugging percentage matters way more. You know, Stanley Druckenmiller, it's not how many times you're right or wrong, it's how much you make when you're right. It's all that matters, right? Same thing is true in business. You know, I always laugh. Mark Cuban, I think, is famous for saying, like, you only got to be right once.

1:09:12If you're right one time, people, when they write your bio, they don't write the 20 startup ideas you had that didn't work. They write the one company you sold for a billion dollars. Everything else kind of gets washed away. It goes back to that asymmetry. You find a great deal, you make it worthwhile because it might be once a decade. If I had to sum up my entire investing philosophy, it is that scarcity is value. And what are you looking for with scarcity? You're looking for public companies that have durability and asymmetry and all this, right? They're scarce. There's not that many of them.

1:09:42Find them, hold them, and don't let go. I think something like Bitcoin, very scarce, right? Both in terms of the number of Bitcoin, but also the idea of Bitcoin, the network, et cetera. Hold it, don't let it go, right? Ideas in life 5 % of the idea is delivered 95 % of the value right when you find one of these ideas They're scarce hold them to let them go sear it into your brain, etc And so it's the same idea of applying scarcity And it's looking at the world as when you find something that is valuable It is unlikely that that is plentiful and you never know when you're gonna find the next one Do you apply that to people as well in organizations?

1:10:15Of course How many people in your life? do you think deliver you 95 % of your happiness or 95 % of your returns or 95 % of whatever the thing is that you measure, right? You could be somebody who says, I actually don't care about my professional accomplishments. I live for Friday night, which is how many of those people in their life deliver 95 % of the fun on Friday night? It's probably 5 % of the people, right? So like this idea of a power law exists all across the world and all these different disciplines and all these different facets of your life. if I could tell people, especially in the investment world, one thing that they should go spend more time learning about is this idea of latticework.

1:10:55And Bill Miller, famous investor, is really the one who popularized it. And Bill's entire thought process around latticework is you can take things from biology or geopolitics or finance, where you can weave it together into this worldview and understanding. And as I've done that and taken things from all these different disciplines and tried to put it together into the worldview, scarcity and power law. If you put those two things together, to me, that's where all the value lies. And so, you know, you can look at it as durability, volatility, asymmetry, all that. But like, at the end of the day, you're looking for scarcity and you're looking for things that are going to continue to persist for a very long period of time and just kind of get yourself in the way of them.

1:11:35You don't even have to be that smart. Just get in the way of them and they'll do all the work. Anthony, this is an absolute masterclass. Thanks so much for sitting down. Yeah, thanks.