Blake Hall - Combat, Service, and Innovation - [Invest Like the Best, EP.408]

23:40I'm going to get emotional about it, so I'm sorry. But we raced a few of the guys who were critically wounded to the green zone, to the combat sport hospital that was there. And Phil was just unbelievable. When we finally, when his men were taken care of, he was so concussed, he was puking. And he knew that he was about to just pass out. And he just grabbed me by the lapels. And he said, Blake, my guys, take care of my guys. And that for me, it's just, that's what it is right there. His men love him for it, that when the chips are down, you care more about other people than yourself. And his like will, even though he was physically really banged up, got him through it.

24:17And I think, man, America is super lucky to have leaders like Phil Schneider. He was decorated for heroism for what he did that day. I have a question, which is a hard question to ask and maybe an impossible one to answer, but I'm asking it because I want the way I think of you is like you've gone a level up and the way that you started ID.me was to serve this community in a deep and real way. And we'll tell that story in a minute. But this is also abstract for us that haven't been in service, certainly not in such incredible harm's way. I'm just curious to help people understand the people that are doing this for us, the nature of taking life or seeing life taken amongst your friends as the ultimate stakes and try to help people understand those stakes.

24:57Because I'm sure the answer is there's no way of understanding it unless you go through it yourself. But this is the ultimate sacrifice that so many people put themselves in this kind of harm's way. Do you have a closing thought on just the nature of that life, of living that experience, that people can understand why this group is so critical to support? Yeah, I'll try to do justice to it because I lost some wonderful friends who are just amazing people that gave their lives for this country. Richard Henkes, my interpreter Roy, who died with the platoon that followed us, Garrett Slaughter, Ryan Dennison, just wonderful people.

25:33And if you serve this country, it's because you believe that people have a right to live free, life, liberty, and the pursuit of happiness. That's the core of what we enjoy, but it is protected at great cost. And you want to protect the weak and the vulnerable who are being oppressed, truly oppressed in terms of values and what they are allowed to say or do. And the way that manifests, we would have, there was an Iraqi woman. She was Sunni and her husband with Shia and as the sectarian violence was going, some of the al-Qaeda militants who'd moved into this neighborhood called Amaria, they liked his car and they just pulled him out of his car a block away from his house, shot him in the head, and then just had his silver Mercedes that they would then drive around.

26:16And she had to like basically look at her husband's murderers every day. And so she took her three kids and she walked down this super dangerous road to the Baghdad International Airport for maybe seven or eight kilometers with like a three and a five-year-old. And she just showed up and she said, I want justice. Now we let her down. The legal system let her down. Everything checked out. We caught the guys she talked about, found a lot of evidence. They were tied to Al-Qaeda. The car was there. We lost the war in our prisons. Why you serve is for that woman. And that if you believe human rights are universal and what America has is special, then it is worth defending.

26:52And therefore, politicians have a sacred responsibility to make sure that our military is used judiciously and to protect our way of life. Because the men that I just talked about who gave their life, they were just exceptional men who could have had amazing lives, could have had families and accomplished great things in industry, and they sacrificed everything for all of us. And you can't help but be moved by that. If you go to Army, Navy, and you watch the cadets and the midshipmen who are literally willing to give their life to protect our way of life, it's the most noble thing that you'll see.

27:29And I believe firmly that humans are meant to live free and to be a part of a group whose very nature is to be selfless is an incredible thing. And it's an incredible thing to be around. I think a lot of Americans are jaded. If you spend some time around our military and folks who put the whole country and our way of life above themselves, you won't help but be inspired and start to feel patriotic about why America is so special in the world. I'm so grateful for this first 30 minutes and you sharing all this. It's an incredible, incredible story. I and we all listening, I'm sure, are so grateful for what you and your team and everyone else like you did and does.

28:07I think it's the perfect bridge to set up why you started the business that you're now leading. Originally, yeah, I want to hearken back to that 12 versus 15 months and the sort of the benefits that were supposedly accessible to the people for those extra three months that they deployed, but how hard those are for our veterans to get. And that kind of original intention and nature of your idea for this business. So maybe you can bridge that story for us and tell us what you did originally when starting ID.me, why you did it and who you originally served. The closing chapter in Iraq, which was the last thing that we did, was we were asked to target a vehicle bomb network that had set off, I think, at least 17 vehicle bombs in Baghdad.

28:47It killed thousands of people. And the British SAS had been targeting them, had not been successful for various reasons, and asked us to help. And over the next two weeks, actually, I think it was like 10 days, we caught nine of the top 10, and the entire level of hierarchy underneath it, it was gone. The last thing I did in Iraq was I stood in front of my 32 guys, all of whom came home, thank God, to their families, which I'm grateful for every day. And I said two things. I was like, I'm pretty sure we all know Iraq. The story of Iraq probably isn't going to turn out the best. But I was like, but for what we were asked to do, the math is pretty simple.

29:21This network killed thousands of people. And if it continued, it would have killed thousands of people more. It doesn't exist anymore. Intel folks come in and said, we've never seen a network taken down this fast ever. And I was like, you'll never see the faces of the people that you saved from the car bombs that didn't go off. But man, what an amazing thing to tell your grandkids about that you made a real difference here and an impact for those people. And you go from that, and I didn't believe America's, and the strategy was making the world better because we were just creating these power vacuums and everything else.

29:53And I didn't want to be a part of taking life or risking life if I didn't feel like we had a strategy and a specific end that made sense. And so I didn't feel I could continue to serve in the military because there wasn't a strategy. But man, I missed the purpose that I felt. You don't have to question the meaning of your life when you're trying to get to a terrorist in a phone before a car bomb goes off in a market full of innocent civilians. So went from that scene and got into Harvard Business School because my battalion commander refused to write me a letter of recommendation unless I applied to Harvard.

30:28I was like, sir, I was like, I haven't used a three syllable word in the last year. I don't think I'm ready to write an essay for Harvard. He's like, you're going to apply to Harvard or I'm not going to write a letter of recommendation. So all of a sudden I'm in Cambridge, Massachusetts. I'm 26 years old. The biggest decision is like where to go on Friday to have a beer with my friends. I just couldn't shake it because I'd seen, I'd been exposed to so much. And I just knew that life is short. You don't have a lot of time. None of us know how much time we have. War had just infused lightning into my bones.

31:01Every time you get one of these kill capture alerts, it's just a flood of adrenaline. So in some ways it makes you an addict. And so I realized, oh my gosh, like I've basically been turned into an addict by this 15 months of like really high intensity tempo. I want to make an impact. And what combat taught me is that you can't take anything with you. So material stuff, like who cares? What matters is making a positive impact on someone else's life. And looking for that sense of purpose, I started to see stats around there was so much goodwill trying to get the military suffer from identity theft at rates that were nearly twice as high as the general population.

31:36And I can walk you through the story. But that ultimately became the thing that I gravitated towards because I felt it was a worthy mission to solve with my life. And that if something happened to me, that if God forbid, I were to die, I would do it trying to accomplish something that mattered, and not being a cog in the wheel at a consulting firm or in banking, that's just making capitalism work a little bit more efficiently. And so I think just the nature of risk was quite different. I thought risk was going into an organization where I didn't believe in the mission, I felt like I was wasting my life.

32:11I didn't really care about the financial side nearly as much because how could you after coming out of combat? And so I'm super grateful for that. But it was very schizophrenic to go from a time in your life where you're like 70 years old, maybe in normal time, your friends are dying, you're contemplating your own mortality. Most of us will get there later. I kind of had already been there and then felt like a time traveler coming back. And it really just shifted my whole mindset. And it's why I started ID.me because I felt like it was a worthy mission to improve people's lives. I didn't know it would grow to become a multi-billion dollar company like it is today.

32:45I just wanted to help the military community that I came from to start. But that's the bridge for how I got from the military to running this technology company. Can you tell us the story of the earliest days and the very first things that you did and for whom and why you cared about those specific things at the start that's grown into this big thing? First thing, I just want to be honest there. I had no idea what I was doing. All I knew is I spent a summer at McKinsey. And the McKinsey people were wonderful, built a business model. The first phone call at this telecom company, they say$17 million.

33:17And I went home that night. And I was like, I don't care. It didn't move the needle at all. So a few things happened. I saw that there is this need for a better solution for the military community. I started to dig into that. I naively did this as a academic project my second year at business school. I said, let's incorporate. I'll solve this problem. It'll be easy. And then I'll be on with my life. Literally looking back, you couldn't have known less about what it means to run and start a company and to make sure that it is built to last. And so a few things happened. One, this is more of the luck part of it.

33:51My brother insisted on investing$20 ,000. And I love my older brother. He's just like the hardest working guy. He works his tail off. And I actually begged him not to. I said, please do not invest money, Russ. No. And he insisted on it. And I was like, do you know what this is going to do to my stress level? I've been a lifeguard and I've gotten shot at and I've mowed some lawns. Don't do this. He said something to me. He said, you've never failed in anything you've done in your life. I was like, that's so messed up, man. But he insisted on doing it. So he invested a$20 ,000 check into me. David Tisch was one of our first checks in.

34:27He ended up becoming really impactful. So he's a box group, one of the best angel investors in the country and then was first managing director of Techstars New York. And what David Tisch did that I really am grateful for is I was talking more about business development and relationships. And he pointed me to this book, Steve Blank, Four Steps to the Epiphany. He said, you really need to read this book to understand how to build a company. And it's wonderful. It's basically like the scientific method for how you build a company stage by stage. And he introduced me to some other folks. And one of my classmates invested$80 ,000 in me.

34:58What was pretty crazy is even like a year into it, as I was raising our angel round, where we put together, I don't know, roughly a million dollars and a convertible note, I would continually have investors that listen to the pitch. And they would say, I'm going to invest and I'm going to invest like 50k or 75k. And they would thematically tell me two things. They're like, I don't think because the initial name of item was TroopSwap. They said, I don't think that this business model is going to be successful. But then they would say, I believe even you. So I'm writing the check. And then they'd be like, by the way, here's a picture of my daughter.

35:30This is her college fund. And it's like a baby. It's like, what is that? Completely wild start to this whole thing. And so tell us what was that pitch? What were you pitching them with TroopSwap that became ID? I've just been fascinated by how big companies start and all the big companies actually start in a pretty focused way. So Facebook started just for the Ivy Leagues first, and then students then grew up. Dan Rose, who's on your show, talked a lot about that, that you're only a student. And at some point, they opened it up to everybody. And I think their users increased by four or five X.

36:04Uber started with affluent riders and black car drivers, right? Very tough. Pinterest started with Midwestern moms. Paradoxically, to get big, you have to focus small. And so I thought there was a void in the market around Craigslist in terms of trust. And because military families move so much that you You could have gated community of maybe military and then students. And that would actually be a way to disrupt the sort of peer-to-peer classified and like marketplace space. And so a few things happened as I was giving this pitch. USAA and military.com loved it. But then I called them back and they're like, yeah, fast for us is like two to three years to give it a pilot.

36:39So that sucked. And I was like, I'm not, it got to a low point in 2011 where Kelly Perdue, who's David Tish introduced us, was our first board member. I was like, Kelly, I was like, I don't know if this is going to work. And he said, Blake, and look, that takes a lot for somebody who's been through ranger school or whatever to be on the verge of, I do not quit at anything in my life. So he said, Blake, first, never say that to anybody ever again, especially to investors. And he said, chin up, we're going to get through this, which I'm super grateful. Your best friends in life are super positive when the chips are down and they're for you.

37:10And maybe when your head's getting too big, they're pulling you back down to earth to ground you. And Kelly's been that for me. So basically had this learning, which was we couldn't get enough distribution to get the buyer and seller part going. But we were also spending three fourths of our time on identity, on actually making sure that somebody signing up was in fact a member of the military community. As we talked to different marketers from various firms like Microsoft and Under Armour, they said, we're not really interested in your app or some gated garden for whatever, like you don't have enough users to have it be meaningful.

37:40But your ability to actually know if someone is a part of a particular community is really important and valuable. We would use that within our own channels. And so a few things happened. I saw that on Veterans Day, veterans to get like a free blooming onion at the Outback were taking in their paperwork that has their social security number on it. And they would show this form with their social to a stranger to get a fried vegetable. No wonder identity theft is twice as high. You're showing your social to strangers all over the place. And then I talked to this marketing manager at Microsoft, and they were delivering e-learning vouchers to veterans in person and making them bring their paperwork in.

38:19And I said, doesn't the in-person redemption defeat the entire point of e-learning? And she said, yeah, we know it sucks, but we don't have a way to know on our website if somebody is a part of the military community, so we're not able to keep it safe. And because we're not able to keep it safe, we can find distribution to brick and mortar channels. And I said, and if you had a way to keep it safe, she said we would bring it online. And then these different retailers said, by the way, it's not just military, pretty much every segment, it's students, it's teachers, it's first responders, it's social influencers, it's beauticians.

38:49And that was the aha moment where I said, wow, it's not an app, it's a utility. It's like what PayPal was for the early days, the internet with payments, that we could be this identity utility. And if we're spending three-fourths of our time on identity and login, trying to build an app. If we could build this utility, then all these other developers that might want to create experiences based on trust could just use us and then build on top of that. And that's actually the right thing to do. So there are some key moments in terms of how we did the pivot that I could talk about, but that was the learning.

39:24I have one question going back to something you said earlier around the book that David gave you, the four steps to the epiphany, the Steve Blank book. Is there anything from that book that you, looking back on that time, find to be the most valuable that other people out there should think about? Yeah. So the four steps, just really quick, so maybe I can give you the cliff notes. The first one is just pure scientific method. Form a hypothesis that there's a problem worth solving and what that is. And then the way that you validate the hypothesis is that people are willing to pay you for the solution to solve it.

39:55And so until you've done that, you don't earn the right to even figure out if you've got a scalable company. So this constant iteration, this is what most founders struggle with. Am I even working on a problem that matters? You could convince yourself that your baby's not ugly and like every day, but the only way to really validate the problem is meaningful and your solution is the right one is to get people to pay you. And then Jeff Moore has written all this other literature around what part of the market to target. So the first two steps are, I have a hypothesis about a problem and my solution for it.

40:24And then step two is I validated it because somebody paid me to solve it for them. Now, once you've passed step two, it's four steps, the epiphany. Step three is how much revenue do I get from that customer when they pay me and for how long? And then how much does it cost me to acquire them? And those are your unit economics. You can see companies that skip the stage from two to three. This is living social. Raised a billion dollars here in the DC market, went to zero. Because if you violate the four steps of the epiphany, if your unit economics are upside down, you're just going to set money on fire.

40:54Groupon pivots from daily deals to e-commerce. takes a haircut from 20 billion to five, but survives and is still around today because you can't violate the steps. And then if your unit economics are good, step four is really culture. And it's the Jim Collins, good to great, great team, great retention, focus, alignment, all the things that help you capture hopefully a disproportional share of the market. And so what's really amazing is you can't skip stages. This is why you raise a ton of money from investors in Silicon Valley, congratulations. You've just ratcheted up expectations. And if you don't fundamentally know your sort of ideal customer profile and whether you have product market fit or not, you can get really perverse incentives where folks try to move the revenue line up, even though the underlying unit economics are toxic.

41:43Yeah. The genetics of the business are bad and therefore screwed. I'm starting to wonder then about if we zoom all the way to today, if you can give us sort of an overview on the topic and the importance of identity. This is something that I met you through Mickey at Ribbit. And Mickey and I were having this long, fascinating discussion about the role that identity has played and will play as a sort of like primitive for millions of workflows and products and actions that we take as humans. And it was something I really hadn't thought all that much about. You take it for granted that like you prove you're you in a variety of different ways and some are janky and terrible and some are whatever, but I never really thought about it too much.

42:20Could you give us the sort of overview as you see it on the role and importance of identity as a function in the modern economy? Identity is how you make life safer and easier. And here's why it matters. So in April, the Government Accountability Office released a report on fraud in federal spending. It's just federal benefits. The federal level does not include federal dollars, the state or tribal level. They estimated that the government loses$233 billion to$521 billion per year to fraud. To put this in context, total aid to Ukraine is$65.9 billion. The US defense budget is$824 billion. So if you take about half, it's about half the defense budget lost every year to fraud, just federal dollars at the federal level.

43:08It's 2 % of GDP. An aircraft carrier costs$13 billion. So that's the magnitude of what we're losing right now when we have extraordinary debt of over$30 trillion in interest payments. And so it makes ransomware look almost insignificant by comparison. We played a pretty central role in stopping fraud during the pandemic. So there are seven states on record that have credited us with stopping$270 billion worth of fraud. And let me zoom in on the impact that we had. We went into Arizona in October of 2020. When we went in there, this is six months into the pandemic, Arizona had 570 ,400 new weekly unemployment claims in a state where there's only 7 million people, including kids.

43:53And the state agencies would tell us, we know it's fraud, not because we have any advanced tooling, but because the bots are filing the claim end to end in less than 60 seconds. Because all that you need is a name, date of birth, social, you could pinky swear that you're a Lyft driver and you could start collecting$600 per week. The week after we were introduced, it went down to 6 ,700 claims per week. And so then Michael Weishard is the director over there of Arizona DES at Hey Blake. He said, listen, we processed about 265 ,000 claimants that we're paying on a weekly basis. And he's like, I feel it's my job to make sure that we're not paying these out to organized crime and overseas groups.

44:32So we're going to run those six months worth of claimants back through y 'all in December. I said, okay. So when they did that, of the 265 ,000, how many do you think even tried to verify their identity? Oh, God, I don't know. Some crazy number. 92 ,000. Two thirds didn't even try. We were able to successfully authenticate, think about 86, 87 ,000 of the 92, which is our job. And then other service channels handle the rest. We were immediately hit with four denial of service attacks out of West Africa. We had, there's something called the DNS query, which is yellow pages look up. It maps out your infrastructure.

45:07So we had 2.2 billion queries from IP addresses around the world. And then we saw hundreds of millions of Yandex IPs, which is Russia's internet service provider. I've never seen anything like it before in my life. What's really devastating is that every name, date of birth, social that these criminal groups were using, that's a real person. If they need help, if the bad guy beat you to your own identity, you're done. The government agencies weren't able to tell who was friend and who was foe. So California shut down for two weeks at the same time. We enabled them to reopen. And so on and on. Then the fraud, it moved to Florida with the bot attacks in January.

45:43It moved to New York in like March. And that's ultimately why 27 state unemployment agencies adopted us in 15 to 18 months. Now, the crazy thing was I actually hadn't built it for fraud. Initially, it was more for customer experience to put people in control to help homeless veterans, international veterans get access to VA. Because when I left the military, you had to go into the VA in person to prove your identity. But now that the pandemic's ended, this next evolution is deepfakes, where in 2022, right before AI has three phases, like the LLMs and text, then the media with face and voice. And you've got like Sam Altman and Scarlett Johansson going back and forth about stuff.

46:18The Nigerian print scams are like at a whole different level. So in 2022, we had about 180 ,000 logins across our wallet that we saw were targeted by scammers for account takeover. The same 90-day window in 2023, it went up to 1.3 million. Holy cow. And so the net of all this, to your original question, which is like, why is identity so critical? What I learned in Iraq, what General McChrystal taught us is that it takes a network to fight a network. If you have an inherently decentralized enemy that is learning and asymmetric and amorphous against a centralized foe, the decentralized insurgency is just going to crush you.

46:52And so the only way to respond is to do what General McChrystal did is empower the edge, give local autonomy, redesign the organization to flood everyone with real-time intelligence. So now your network of good guys can respond in real time. And that's tough to do as a general. That's why he's so remarkable. He said, we need to get the captains and lieutenants and sergeants the tools and push the decision-making to them because we're really fighting a network. And this is a network war. And so as a shared service, we are the network of good guys effectively that are able to see patterns that other folks can't.

47:27So for example, we're over at the treasury and then we're over at these unemployment agencies. We were able to see 50 ,000 identities that have been used for unemployment went over to apply for business owner aid for owners of transportation companies. Get into like login or are you just contextually, you can't be unemployed and own a transportation business at the same time. But the thing is that signal, as far as what's going on with the same identity at different levels of government, that hadn't existed before. And so you appreciate this is why we're losing hundreds of billions of dollars a year is that we're getting picked off like one by one, where the attackers are just going to the most vulnerable agency.

48:04And unless you have authentication as a shared service to normalize and standardize trust, it's Blockbuster versus Netflix, it's data centers versus GCP or AWS, you need to have standardization and consistent security and feedback loops if you are going to withstand the assault of organized crime. And we ended up helping NBC News break the story that APT-41, which is China's economic warfare arm, was involved with directly attacking individual Americans to steal their unemployment benefits. And I've shared some videos now on LinkedIn as well of some of these deepfakes where these Chinese threat groups are targeting individual citizens to try to steal their tax refunds and defraud the Treasury.

48:47So the net of it is we're losing hundreds of billions of dollars a year. Those dollars also represent hundreds of thousands to millions of victims. And the money is flowing, in many cases, overseas. It's a national security issue. And then the other side is people hate managing logins and passwords. And if we can both make it safer and easier for people to interact online, that's become my life's work. Can you describe the building blocks of signing up to begin with to say me as a human being is like some like verification and authentication process? Those are different. How do you do that? What are the ways that I prove that I'm me?

49:23And I want to also ask about the non-IDME versions of this. I remember you telling me like a branded relationship with the customer like Apple might have or Google might have or Clear might have. So I want to talk about the ecosystem, not just ID.me, but the ecosystem of people that represent a way to prove your identity and get access to something or stop something. So what are the building blocks? How do you literally know a person is a person? Walk us through that. It seems it's a really important thing for the future. Time is one of the most important aspects of identity, and not just for technology, just for relationships in general.

49:54Think about the first time that you met your best friend or your wife or whatever, what you knew about them then and what you know about them now. So time and the frequency of how often you interact with someone and the quality of those interactions really informs your perception of their identity as it relates to you. And you have a lot more touch points. For time, you might know, I'll trust this person with anything. You might know, if I ask this person to do something, I'm going to prepare myself to be let down. And so what I learned in Iraq was a lot about how telecom networks work. And the thing about bad guys versus normal people is that bad guys do things that you can see in math related to time that make them stand out.

50:37So you're probably not doing SIM swaps and changing your phone to different devices and porting your phone number that often. You probably change your phone every two to three years. You've likely had the same phone number for over 10 years now. And so that tenure when it comes to identity really matters. If we can look at records and see, oh, Patrick's phone number has been tied to Patrick since he was at Notre Dame. And then you prove possession of that phone number. And we can see that the phone number hasn't been ported because we can check with. That's really good. That'd be if some bad guy was like setting us up and like from college.

51:12It's almost like the bad guy. They deserve it. I started seeding this phone number in college and now I'm like 55 and I'm going to pass it in. The long con. Yeah. These guys aren't playing the long game. And so what's really interesting is most folks have a phone number with tenure. Now, it's not for everybody. You'll get to 85 to 90 % will have a long relationship. And then you'll have expats coming back to the country. Low-income communities tend to switch their phone numbers more often because they're using prepaid devices instead of subscription and maybe avoiding collections calls. So it's not perfect.

51:44But just on that one signal alone, you can go, wow, if you did have a phone number for 20 years and showed possession, we're pretty confident right away that's Patrick. So the basic premise is there's a big theme in security right now about moving away from passwords. And this is also why you want a shared service to do it. How long is it going to take each company to figure out how to do pass keys, which is just a fancy name for touch ID or face ID on your device? That why can't we use things that are really convenient on our phones and our computers to be able to securely prove that we're the owner of the login credential?

52:18It's going to take time. Whereas if it's more of a SaaS approach where it's already just baked in as capability, if you use a shared service for login, that one capability as we deliver it through our R &D is instantly available to thousands of different organizations. That's a much more efficient way where they just have to say, yeah, please turn that on or we turn it on. Cool, thanks. So that's login security. Identity can take many different forms because you've got your legal identity, which is where we've focused on proving that you're you. But then you also have different personas. One out of five doctors in the country uses us to prescribe narcotics and other controlled substances.

52:55And that is not sufficient for you to be Patrick or me to be Blake. We have to go out to different databases that are sources of truth for medical professionals. And so this is where I start to geek out because what you want to do is you have to be like, what's the source of truth for whether or not you're a medical provider? It'd be the federal DEA number, Health and Human Services as a national provider identifier, and then state medical licenses are issued at the state level. For military, it's obviously DOD, VA, and then maybe non-intuitively, the National Archives is actually the repository of military records down in St.

53:28Louis. And this is what we call the trust graph, which is maybe this isn't just for everybody. It's only for tax professionals or lawyers or for doctors or for HR staff and Social Security uploading W-2s and W-3s. So you have to figure out what's the source of truth for that claim. If you said, I went to Notre Dame, how would I know that? We can actually go back to the registrar at Notre Dame with your permission, and we could find a record in the registrar's database that shows that you went there, your graduation date, and your degree. So a lot of the connectivity you have to build is our connections into sources of truth.

54:06As you say something, we can instantly go out and see if it's true. And so maybe the distillation of all this is that if you're like, everyone knows if you're out at a bar, and if you walk up to a girl cold, you're fighting an uphill battle from the start. But if you, for both of you, because he's like, who are you? But if a mutual friend introduces you and says, oh my gosh, Patrick is amazing, and vice versa, then all of a sudden you're into an amazing conversation. That's effectively what we're doing. We're that trusted intermediary, kind of like Visa between banks and merchants, but for a lot more ID cards to say, hey, this person just said they're military.

54:42A merchant's like, I don't know, but we're like, no, no, no, DOD, we're good. And now they can have a trusted interaction in a way where they're both better off while keeping bad guys who didn't serve or do Dolan Valor stuff out. And I just think that's so amazing because when I came back from combat, there was so much goodwill. I couldn't go out in Nashville in my uniform without people buying me lunch. It's incredible. Often I wouldn't even know who did it. It's the waiter or waitress come over and just be like, hey, listen, someone picked up your bill. And to be able to provide infrastructure that allows that connection to happen without humans in the loop.

55:15So you don't have to always interact in person like it's the 1950s and keeping the stolen valor out is just really, really cool. We obviously won't have time to go into all the intricate ways that you've built this network. And I think the shorthand you provided is right. But would it be a convenient way for me to think about it that if I, Patrick, have an ID.me wallet, that there's some amount of work that goes into establishing that wallet and that wallet is related to me. And then there's some set of steps that I can deploy that wallet to check in and lots of different places and effectively create this layer of convenience for me that instead of going to the VA with my documents to get my extended 15 month deployment benefit, I can just do it digitally and much faster.

55:55I know it's more complicated than that, but at its most simple, that's a convenient way for us listening to think about it. When I think about what I want my kids to say to me when they grow up is, Daddy, did you really have to manage different passwords and logins that every website went to? In the same way that somebody who grew up before Visa or MasterCard would be like, Wait, you had to pay cash everywhere? That sounds terrible. So in Europe, this has already happened. There's BankID in Sweden and the Nordics and now our co-founder is Estonian. And in the Nordics and Estonia, they don't have a different login for different websites.

56:29They have bank ID. The average suite uses it five times per day. It's the same login for healthcare, for government, for banking, for commerce. And you control your own data. So the login security effectively is your wallet. And what we're creating is a digital twin to a physical wallet. The root of trust within your physical wallet is your driver's license. It's your government-issued photo ID. That's why government has been so important for us, because a lot of the credentials that we carry, they're public. These medical licenses, the state license, they're all published on public portals. There's no notion of a breach.

56:58They were meant to be public. The hard part is knowing that you're you. If somebody is going in to prescribe narcotics, is that really a doctor or is that somebody who's going to prescribe narcotics by the leader and contribute to the opioid crisis and everything else? So the more that we can just replicate exactly what your physical wallet does in digital form, it makes your life safer because we have the root of trust that you're you. And it makes it easier because you're in control of your identity. And when you want to get access to something, you don't need to reprove who you are. And our first mantra of user experience is never make the same person do the same thing twice.

57:33Obviously, everyone that's interested in investing has done some amount of time studying Visa and MasterCard as these gold standard business models. There really aren't higher quality businesses than these things because the network effect associated with them is just so incredibly powerful. And therefore, their margins are crazy high. I've heard you describe what you're doing as like Visa and 3D in some dimension. Can you just describe the business lessons that you've learned from Visa and why you think the way that you're building ID.me will be such a good enduring business beyond just the service that it renders for its customers?

58:05So I love how markets develop. I'm such a nerd for economics and American history are my double majors at Vanderbilt. So take Henry Ford. Henry Ford, maybe the most famous entrepreneur ever, invents the assembly line, invents the automobile. And he does the Model T and he's like, I did it. I did it. Everyone needs the Model T. And what's remarkable is at phase two of the market is Alfred Sloan, the CEO of GM, General Motors comes along and goes, no, Henry, they don't all want a black Model T. They want pickup trucks and minivans and they want different colors. And GM just kicks Ford's ass for the next two decades.

58:41Ford doesn't catch up until war or two. I think over and over you can see the 1.0 version of a market is monolithic, and then it just explodes and personalizes. So the same thing is true, like Facebook and Friendster and MySpace, pretty monolithic. And then just look at what we have now, TikTok and X and Instagram and Snapchat and threads, all this other stuff where the market is personalized. And so the V1.0 of digital wallets are payment wallets, where PayPal and eBay, like the hardest thing, the most ubiquitous thing on the internet early on to enable commerce was to pay for stuff. And actually, payments are interesting because most of identity is exclusive.

59:17It's not about ubiquity. The reason that you have military ID is to separate you from everyone who's not military or a student ID is everyone who's not a student. Credit cards, everyone needs payments. So it's interesting. It's the logical place the market would start. But then it just stopped. And so there's been all this, let's just make it easier for young people to pay and everything else. And this very myopic view, I came in from outside the industry and said, no, when I think about my wallet and my identity, payments is just one part of it. And in fact, if I'm out buying something at a store and the cashier says, hey, can I please see some ID?

59:52They want to see my government ID. And when you realize that, you're like, okay, the root of trust is actually my driver's license or my passport. That's what authenticates and gives trust to every other ID card in my wallet that has my name on it. Because they can compare my face to me, they can see that the credential looks legitimate and doesn't look to be counterfeit. And once they trust that I'm Blake, well, now if I show a health insurance card that has my name on it, and this is why hotels collect your legal ID and your payment every time you go in because the stakes are quite high. So from a first principal's point of view, I'm like, if the root of trust is our interaction with the government, if everyone in banking and healthcare said, we don't want to be in the credential issuance business, that's what the government does.

1:00:33So you just bring over a government ID, whether it's an ID card, like a driver's license or a passport, and then we'll help you open up a bank account. I was like, well, that's how the market should work. That whoever builds a consumer-centric digital wallet that is able to be accepted by the federal government, and when you deal with the government, you're at the apex of risk and standards and incentive, then you can go back to the private sector and make it really easy for people to open up bank accounts and to check in at a healthcare clinic. I'll share one story that's super meaningful to me.

1:01:04When we first started working with VA, you had to go in person when I got out of the military, then we brought it online. And the more that I looked into it, I realized you had to have a presence in basically credit records in order for you to pass these federal standards, which I found deeply unfair for folks that effectively, like we've linked access to affluence. And so I went back to NIST and said, hey, you got to rewrite these standards to give an exception flow to people who are homeless, who live overseas, like homeless veterans are super important to me always have been, I want to serve the most vulnerable.

1:01:33One of the first gentlemen that we got through, he was 81 years old. He lives in Tokyo. His wife had Alzheimer's and he hadn't been able to get access to his VA benefits in years because there's no VA facility near him and he can't travel. And at the end of this video chat session, which was this exception pathway that we had, he began to cry. It was just the most touching thing ever. And so now we've had over 10 million Americans go through that process. The security and the inclusion gains that we drove in the public sector as a shared service, now, anywhere where the IDB button's at, if it shows up at a bank or a fintech or a patient portal, he would be locked out because most of those organizations use data brokers that are only focused on domestic folks and don't cover a lot of low-income folks.

1:02:17He would now be able to seamlessly prove his identity, so making his life safer and easier than what it was before. And when I think about what we get to do as a team, one, we get to protect people, which is like my core drives why I was a soldier, but we also get to give them time back. So Visa in 3D means once your core identity enables more access to financial services and healthcare, that's the next phase, but that will be done. We've already issued 65 million of these portable identities. On top of that, maybe your Netflix subscription and think about setting up an Apple TV or a Roku who box how long that takes you to authenticate to every single streaming subscriber, we could just turn that into API calls.

1:02:57So once we know that you're you, you could just tell us your subscriptions. If we could just fire off and say, hey, Netflix, Hulu, ABC, NBC, Paramount, whatever, is this person a subscriber? Yep, cool. Bound, authorize, out, done. Checking in at Vegas, just as a tactical example to close this out, was always like a happy hour. It'd be like an hour long wait. And all your friends are there waiting for you. And it's just so demoralizing when you're behind this long line. And we went to them several years ago and we said, hey, why don't we make this work more like airline boarding passes where you can just do it on your phone?

1:03:26The human agent's the bottleneck. Clearly it doesn't scale as you're turning over these huge hotels at five o 'clock every day. And today millions of guests use ID.me to check into MGM and to win properties and we save them an average of 15 minutes of their life, which is incredible. Sometimes when you look at the time savings of the access gains we drive for federal agencies, or like what it means to do authentication before somebody might interact with a different system. We're saving on an annual basis, hundreds of years of life that people spend waiting. And I think with my single life, that's really motivating in terms of giving people time back to spend it in a way that is much higher quality than standing in line at a DMV or at a hotel.

1:04:11And instead, they could be with their family and friends. there was another source of inspiration, which I found really interesting, which was Disney and how they think about authentication. What did you learn from Disney? So usually, if you're just curious about the world, you can go find examples of folks who've already solved the problem that you're working on, but maybe in a more local way. So what Disney did is really ahead of their time, if you're going into the park, you would authenticate with a biometric with your fingerprint in the magic band. If you're authenticating to the web app, you'd start with a password because that's what most people are familiar with.

1:04:43And then if you were on a mobile device and using their native mobile app, you would use whatever is on your phone with like touch ID or face ID. And so I think in many ways, Disney already figured out what's the most convenient way for you to open up your digital wallet based on channel. If you extend that to the call center, you'd be like, what would be the most convenient way, the safest and easiest way for you to authenticate? And so the natural things you use when you're calling someone is your voice and a device and a phone number. So the more that you can make that be the way that we recognize Patrick.

1:05:14Now, once that's done securely, then there's a host of other things related to it. It could be you've got tickets to the park, you might have a fast lane pass, you might have all these other things. And so when I saw what Disney had done, I said, all you really have to do is just make this accessible to everyone, democratize it through a network. And if we can build the same capabilities to allow for these really fluid in-person and online and call center experiences, then everyone will benefit, even if you don't have the R &D budget of a Disney. Even if you're like a little app developer that's like just getting going, has dreams of competing with the giants, but doesn't necessarily have the budget to make your login and identity experience on par.

1:05:58So I looked at Disney. I looked at Amazon as another one of amazing data about feedback loops. And the problem is that the newer upstarts don't have that data. But if people begin to take their own data with them, and they're starting to populate profiles of their tastes and their preferences, and if an app developer is willing or is able to have somebody give them consent to access some part of their identity graph, you could actually create a level playing field. You mentioned the attacks that you suffered when you came between the international bot armies and their pot of gold. What have been the ways that more legitimate entities have tried to kill you?

1:06:37Who do you threaten that isn't like an illegal attacker, but is like an incumbent U.S. company or something like that? And what's that been like? I had both sides. I mean, I had Russian callers calling me up during the pandemic and telling me where I lived, where my kids went to school. We had private security on the house when Christmas, where I had former Marines that were around it. So I've gotten a lot of death threats as we've cut off fraud. And for me, whatever, I don't care. It's my family that I care about the most. I think on the corporate side, we're disrupting these data brokers. And we went through an episode in 2022, just a couple of years ago, where these data brokers basically created a lot of misinformation and FUD.

1:07:16And I just had no idea how the media worked and how this whole dark arts work thing where lobbyists pull the wool over staff's eyes and get them to write a letter and get principals to sign it. The media covers the letter. They don't even care what's true. They won't even come to you to be like, is this accurate? They just cover the letter. And then it's the Mark Twain quote, like a lie gets twice around the world before the truth has time to lace up its boots. And that's exactly what happened to us on the way up. Phil Knight talks about that in his book, Shoe Dog, where once the incumbents don't have a product or a business model response, they start to come after you to tarnish the new technology as unsafe.

1:07:53Yeah, it's a fascinating experience. I'm sure you told me last time we talked about this, that you're a ranger and you can get ambushed once, but not twice. So what does that make you think about the future, about like part of this building an enormous business necessarily bumps into lots of other entities that are self-interested. So I'm curious about what you think about credit bureaus, the role that they play in all of this or other groups of entities like this that you may end up displacing and improving upon for the end customer. How do you think about that as part of your job that it's not just this idealistic, like we're going to build something really nice and everyone's going to be happy.

1:08:28Not everything is positive. Some you're taking share from somebody else in some way. How do you think about that as part of your job as a leader? Love that question, because that is a job of a leader. The job of a leader is to basically, from first principles, look at a team and be like, hey, you're fine, but the scope creep, you're doing way too many things. You need to focus on what you do best. And so that's how I think about credit bureaus play a really important role in the economy in terms of figuring out your credit worthiness and whether or not it's a probability you're going to pay a loan back based on your reputation, but should they be the gatekeepers of identity?

1:09:02Heck no. That doesn't make any sense. That's why you can literally look at who has a fine time with credit bureaus, higher income people. Who has a tough time? Why? Because they're underbanked or unbanked. And so why would you want to make those vendors the gatekeepers for identity? And so when I'm like, how would you really design it if you were to do it from just pretend that nothing exists? And you'd say, identity naturally comes from healthcare and from government. Your identity life cycle begins in a hospital where you're born, you get a birth certificate, and then the birth certificate is sent off and the Social Security Administration issues you a social security number.

1:09:35So when you literally just back up to cradle to grave, what happens cradle, you would go your financial life cycle doesn't really begin until you're, I don't know, 17 to 19 years old. So as an entrepreneur, I said, all right, credit bureaus are for credit underwriting, which is an overlay, the real identity should come from the government from healthcare. And that's going to take time because you're like building this new way of doing things while the existing world continues to putter along, just like Visa and MasterCard didn't get rid of cash payments overnight. They just gradually shifted the mix.

1:10:05But I really stuck to my guns on that. My running joke with the treasury was I've stopped measuring the sales cycle in terms of weeks and months, but instead by the number of children, my father.

1:10:19And all the board meetings you can imagine, they were like, Blake, should you do banking or maybe you should go into this other thing. And it's all given a lot of things, but not on this. Your identity needs to come from the government. What role do Clear, Apple, Google, other huge players like that play in this whole identity story to you? Yeah, I think it just depends on for what. So if you want to turn your mobile phone into a wallet, great. And so you'll see a lot of what Google and Apple are doing with transit cards and maybe your driver's license or your passport on your phone to get through a TSA checkpoint now.

1:10:53You'll see that in some places. That's all well and good because in person, the attack surface is inherently limited. Attackers in China obviously can't show up in mass in the Dallas airport. And deepfakes, there is no concept of deepfakes in person. You can clearly see if somebody's got a mask or something on or some sort of disguise. So if you just wanted to replicate exactly what a physical wallet does in its analog form, cool. And that's where a lot of the innovation has been going. The problem is really risk. When you start to put things online, where now the attack surface is global. So this notion of a physical wallet was designed for inherently local use.

1:11:33It just moves where you move. But now when you go online, you can literally go anywhere. Like an attacker in China can come attack American systems. You need a lot more capability. And so the limitation of the hardware manufacturer's approach, they have basically said, we're not going to be able to see anywhere the ID is used and there's no tracking and they'll put it underneath privacy. And I would say for physical interactions that are localized and for use cases where the risk is morality, maybe adult websites or kids in social media, all good. Client side's great. But when you look at financial risk, the way the market operates is quite different.

1:12:06Your bank can actually see everywhere that you transact. And for some reason, as a society, we've decided that's okay. Well, why? Because credit card fraud is a real issue. And we've actually decided that if it looks like your Visa card has a potential to be everywhere that you want to be, but if it actually starts to fly around, your bank can see that and go, hey, timeout. Let me go talk to Patrick, make sure this is legitimate. And there's consumer protection. So if you go, oh my God, and it was compromised, that's not me. In a client side model, when you start to deal with financial risks where the phone manufacturer can't see it, But imagine this.

1:12:40Imagine there's a 65-year-old woman. She's somebody's grandmother. She's about to retire. She's been scammed by one of these LLM-enabled AI scams that is really sophisticated. Her 401k balance goes to zero. And now this attacker out of probably Lagos in Nigeria isn't taunting her that he's ruined her life. And she goes, I need help. The reason banks can see that is banks can help. The reason that ID.me can see that is ID.me can help. We can provide recourse to the victim. We can also go back to the government agency and go, here's the audit trail of what we saw. This woman was not involved with any of this stuff or to the 401k provider in this case and say, this is what happened.

1:13:21And now there's feedback loops. There's learning about what happened. For some reason, people are losing their minds when it comes to digital identity that there are just different forms of risk. And what's good changes based on that risk. If you say it's decentralized, you can't see it. What you've actually said is there is no recourse for victims. There is no audit trail for the government. And if these really terrible things happen, you're on your own, which I think is unacceptable. So we actually think it's both. It doesn't have to be this monolithic trade-off. If you actually know what you're solving for, then if the attack surface is global and the risk is financial, you have to have a centralized entity like a major bank or a credit card network that can see things to provide feedback loops and protection to both customers and users.

1:14:09You start to deal with things where the risk is different, then all bets are off. But that's how I think about the approach, which is it's good. It's also limited in terms of what it'll allow you to do when it comes to online transactions. If you think about the, let's say, five-year hence future to give it not infinite time, but decent chunk of years, what's your dream for the state of ID.me and what it's doing for people on that time horizon. Yeah. In five years, I wouldn't want there to be logins that you would have to create at every single website you would go to. The same way that when you open up your laptop and you're just able to open up Word and you're able to open up Adobe and all these other systems, I think you should be able to open up Coinbase or Chase or Social Security or IRS's apps.

1:14:54And then the flip side of that is, as we are able to label and tag more content, we're able to help people navigate really difficult life events like disaster relief in LA right now. What's really interesting is every use case around like this is what is needed to access it. Like you've got to be a doctor for a prescription app or you have to be in a disaster zone for FEMA aid and everything else. There's going to be some access policies that we need to know about in order to make sure that you're you and that we've established trust at the right level. But also, how do we help you find out about those programs when you don't know about them?

1:15:28And this is actually the other part of the story. When I was first starting, there was about$750 million of combat pay that had been approved by Congress to soldiers who were stoplossed and voluntarily extended. Congress approved it like two more years. And at the end of it, about a quarter of a billion dollars went unclaimed because government just couldn't get the word out. All these service members had to do is fill out a form and they would get$5 ,000. It was crazy. And a quarter of a billion dollars of combat pay went expired. So the same thing is likely happening right now in LA. There's all these programs and things that can help.

1:15:58But if you're displaced, you're trying to get your dog or your cat and just figure out a hotel room, you don't have time to research FEMA or nonprofits and figure out what's going on. And so we have this amazing ability that if we're doing it right, that whether it's disaster relief, taxes, retirement, graduating from college, buying a house for the first time, we can help provide a curated view of here's all of the government and nonprofit and private sector offerings that are relevant to you. And when you want to get access to it, there's the ID.me button waiting so that you don't have to create a login and fill out forms and waste hours of your life, or maybe even have to go in person if they use a vendor that doesn't cover you because you live overseas.

1:16:38If in five years, we can be everywhere that you want to be to borrow a line from Visa for online use cases, and we're helping connect people to relevant financial programs and benefits that matter faster, then what an amazing impact and legacy to leave on the world. I would love to know how you decided what your business model would be and what you've learned about designing a business model alongside a valuable product. Because in your case, when you've got this network that's growing and the surface area of the network is so big, and there's lots of different stakeholders, you've told stories already today about how government's a beneficiary, how consumers are beneficiaries, how companies might be beneficiaries, how banks and other intermediaries might benefit from the use of this network.

1:17:19So there's lots of ways that I could imagine you making money by doing your job and having your product be in market. And you've chosen a subset of those or one of those. How did you do that? What are your principles that others might borrow for? Okay, I've got a good idea that's valuable. It's valuable to lots of people. I'm not really sure who should pay. And how did you get to that answer? And maybe just describe it a little bit for everyone. Yeah, I think maybe I'll start with philosophy and then I'll go into like how I did it Friday typically to separate the two. I think philosophically, I just don't believe in charging customers for anything unless I've created value that demonstrably makes them better off.

1:17:52So I never wanted my incentives at odds with my customer. And I view if someone buys our software, I want that person to get promoted. And if somebody uses our software, I want their life to be better for IDME having been a part of it. So that's where I'm coming from, which just goes back to service and purpose, which are core drives for me and for a lot of folks who are built that way. Now, I saw two things. When I saw that basically Visa and PayPal were the V1.0 of this market, I looked at how their business model was designed. Visa doesn't sell data. Visa sells trust and convenience. You decide if your money moved to a merchant when you want to pay.

1:18:26And what Visa did is they basically has a business model that adjusts to risk and value. The amount, the financial dollar of the transaction is the value. And then risk is, well, is card present or is it not present? Is it online? And then grocery, jewelry, very complicated business model that they've unpacked. On a more ground truth note, we were using a credit bureau. I won't say who back in, this was like 2015 timeframe and just for records validation. So just if we try to find a name, date of birth, social address in records, could we find it? And these credit bureaus will charge you transactionally.

1:19:00So every time that you query their API, you have to pay money. How does that manifest in practice? I saw there were two veterans. One was in his 60s. The other one was in his 70s. One had just recently moved. The other one had credit, even as an older person, just never had credit. These two folks tried 50 to 70 times each to prove their identity. It looks really cheap. It's like 25 cents an API call, or depending on what you're calling, it could be 10 cents an API call. But then you have to play it through in terms of, I can only imagine how frustrated those two veterans were with us at that moment.

1:19:32But then they're not done. They still haven't gotten access. So they either give up, which is the worst thing, or they have to go to the call center. There's probably a credit bureau waiting for them too that also doesn't have coverage. And then they have to go in person. By the time they get in person, just think about how you would feel. So that's awful. And what I realized is that for worse data coverage, they actually made more money. If they had the data coverage, it would have passed on the first attempt. But when they didn't cover somebody and that person tried to just repeatedly attempt multiple times, you might end up paying tens of times.

1:20:02So 50 times 25 cents. And I was like, you know what, that's just such a perverse business model where you actually make more profit and revenue for having a deficient product. I resolved, I said, I'm never going to have a business model that is misaligned with the incentives of this B2C ecosystem that we serve, that I'm only going to charge a government customer when we successfully authenticate somebody and get them access. And that actually makes sense for the user so that if we're not able to get somebody through who's not fraudulent, we suffer as a business and rightly so. Now all of our incentives are aligned in harmony with who we serve.

1:20:39I think it's value and alignment with stakeholders. And once you commit to it, those are some of the things from a values basis as a founder that I really enforce is sacred that we'll never violate. It's core to our DNA and who we are. You said something to me about the business, which I found so interesting, which is that you don't want diversity of values at ID.me. I want to ask a couple of questions about just the principles and the culture in that step four of the Steve Blank book and how you've thought about philosophically deploying those things. Maybe start with that one as an example and then riff on the other principles that you've established, like the one for business model there in building the business and the power of those principles.

1:21:14And if you don't screen for it, you're in for a tough ride. So I think e pluribus unum, out of many one, this is the whole premise of America, that what our country is struggling with right now, that everyone is welcome as long as you are committed to the fundamental American values of freedom, that you can criticize any religion, you can burn any book, and you will not be met with violence. People might have problems with that, just like I'll have a problem if you burn the American flag. But the fact that you can do that and not be harmed shows that you live in a free country. So when you let people in who fundamentally reject the premise of your country, your culture begins to suffer.

1:21:48Our country is suffering for that right now because we haven't been intentional about it. The same thing is true with the company. So right now, the whole country is struggling with this battle really between enlightenment values and postmodernism. And if you let that conflict into your company, it's like a wagon that has two hands pulling on the wheel. Is it merit or is it something else? What are we really focused on driving? For me, what I loved about the military, what I loved about growing up, what I loved about fairness and what my dad told me, three rules that his grandfather had given to him.

1:22:17And one of them was never think that you're better than the men that you lead. And that we come from different backgrounds. We come from different places, from different experiences, but we're all army green and your job is to treat everyone fairly according to the same standard. And that's what I loved about service, that if you listen to my guys talk to each other, part of you would be like, oh my God. But the other part would be like, these guys would all take a bullet for each other. They're brothers. And so true intimacy is being able to be open, not malicious, to love each other, joke and have a good time and not have folks throwing yellow cards because you said something just ridiculous.

1:22:53So if you want to move fast, you don't want ideological tension. I'm really deliberate about that. We published some value statements about our commitment to really classic liberalism. Everyone is equal before the law. It's not good or okay to be racist in any direction. And just like you would want your kid's elementary school teacher to treat everybody, not giving preference, but teaching kids about character and you're responsible for what you do. And that's all that matters. crazy to me that that's even a question, but it's therefore even more important that you screen that out at the beginning.

1:23:25Once you move past ideology, you're looking for, I basically designed our cultural values around all the patterns that I'd seen across my time in the military about what makes for effective teams. So you can imagine selection as a triangle where one point of the triangle is skills, one point of the triangle is capability, just raw sort of intellectual potential. The other one is your behaviors and habits. And you can hear this echo too, Aristotle. We are what we do. Excellence, therefore, is not an act, but a habit. FBI profilers, the best predictor of future behaviors, past behavior. We defined our cultural values.

1:24:01First rule is don't be a jerk. And what we mean by that specifically is if you are not emotionally self-regulated, if you can't control your fight or flight response, you're not welcome here. Because ultimately, that's when we do things that are really mean and cruel is when we go into fight or flight. And actually, there's a lot of research too, that shows that really good CEOs and rangers for that matter are able to move out of fight or flight very quickly. It is briefing after ranger school from a Delta Force recruiter who showed us the cortisol profile of a ranger graduate versus general public.

1:24:27And he's like, here's the profile of somebody who's exposed like a life and death traumatic event. And it's three or four days before it goes back to normal. Here's the profile of ranger school graduates. And it was like a 30 to 45 minute rebound effect that after near life and death, you and I could be talking like this and it's fine. So anyways, so there's that. There's always compete with the grit. We don't hire pessimists here. We love critical thinkers, but we want optimists who can believe in a contrarian point of view if they have first principles conviction. I think you want to be really intentional about that to make sure that as you scale, you don't end up sideways.

1:24:58And you need only look at Paul Graham and the whole Google Gemini thing was going on where you wanted an image of George Washington and God forbid, show an actual historically accurate picture of George Washington. That's a great example of if you emphasize things other than truth and merit and excellence, you end up with pretty bizarre outcomes. I've been pretty ruthless about enforcing culture because I know what it is to be in an intimate, close team where everyone's treated fairly as an individual, don't care about anything else other than performance. And I want that for everyone who works here.

1:25:32It's a wonderful environment. It's what I loved about the military and what I'm really passionate about enforcing here at IDME as well. What were the two other things that your grandfather told your dad? Yeah. So his other rule was, if you have a choice of unit to go to the one with the worst reputations that when you leave, you can see the difference that good leadership makes. And then he had one that was quite specific to his experience, but he said, never let your name be associated with S4, which is supply and logistics. He had fought his way up through Frianzio into the Alps and it was wintertime and everyone in the Alps on the front lines, they all had frostbite or frost nip of some form.

1:26:08And he got pulled on a detail to go all the way back to headquarters for something that they needed to do. And so he's in the back of this truck. And as they got further and further back, he started to see jackets and gloves and fur-lined parkas until they're back at headquarters. Everyone's got the latest, greatest cold weather gear and there's heaters and stuff. And meanwhile, he and his brothers who are in the Alps on the front lines have none of that. So I think there's more general lesson there to be extrapolated, which is leaders eat last, always serve those who you're responsible for, who are at the tip of the spear before you take care of yourself.

1:26:42And that's more, again, back to caring and selflessness. But those were the three rules that he gave to my dad after his experiences, 66 months in combat. I love it. On the topic of performance, you turned me on to something I hadn't heard of before, which is this stratum concept behind levels of leadership. Can you explain what that is and how you found it useful? Our brains hear the same words, but it interprets it into different meanings. So maybe the easiest example would be like if you asked Thomas Jefferson or your average high school student about what's the purpose of education, you would get two very different answers.

1:27:14Jefferson's going to be talking to you about how an enlightened citizenry is indispensable for the proper functioning of a republic. The high schooler is probably talking to you about whether they should go to vocational school or whether they should get a bachelor's degree or join the military. It's very tactical. And so at root, what you're screening for is you're screening for linear versus conceptual thinkers. And what's amazing is that so for our overall selection, we have the triangle, which is skills capability is sort of your habits and expressed values in terms of behavior. Maybe your childhood, we can fix a lot of things.

1:27:48I can't fix. So we want to screen for that. Then And for executives, you have, it's really like the cognitive equivalent of speed. And so people talk a lot about systems level thinkers. Well, what do they mean? So the first thing you want to do is you want to separate linear from conceptual thinkers. And so this theory of stratum, we have these two trained psychologists that administer interview tests. You could ask a Rorschach block question like, what do you think about a bachelor's degree? Should we legalize cannabis? Do you think that it's okay to paint your house pink or that you have to buckle up when you drive?

1:28:18And what's amazing is that thematically, you will get similar answers from the same person at a certain level of thinking. So for example, if you ask somebody about buckling up when you drive or pinning your house pink, they might say like, yeah, it's annoying, but it keeps you safe. And I think it makes sense. And people should buckle up more often. You're in a conversation about buckling up when you drive, and we should probably be more responsible about that. The systems level thinker will have a totally different answer. They'll be like, that's bullshit, because it's the same question. So they reject the frame first.

1:28:47They go, what we're really talking about are what are the limits of individual freedoms when it comes to some broader impact on the surrounding community or public. And so maybe let's just talk about that. You could talk about cigarettes in public, too, right? So let's talk about that. And now you're into a completely different conversation. So what's true thematically is true systems level thinkers, they think over different time horizons. So think about Elon Musk. He's thinking over millennia. He wants to make humans multi-planetary. And all of his actions day to day are guided by this overriding mission to get folks to Mars as a broader bridge to being a multi-planetary resilient species.

1:29:24Who thinks over? And when you think about your CEOs of oil and gas companies and everything else, and they're riding these broad macroeconomic trends responsible for geopolitical dynamics across different cultures, they have to be good at so many different things. And so what's remarkable is stratum four is the shift from linear thinking to conceptual thinking. But the thing about stratum four is they'll be able to start to feel concepts, but they wouldn't be able to go to a whiteboard and explain to you how they influence each other. So for us, like stratum four is where we want our VPs to be who are on the road.

1:29:57But keep in mind, it takes maybe five to 10 years to move from one stratum to the next. Stratum 5 is when you can not only see concepts, but if you went up to the whiteboard, you could organize them and you could make it really simple. That's where you go, hey guys, it's really this. This influences all this other stuff. And so what you'll typically find with like Stratum 4 thinkers is just a lot of detail. But what you'll continually have to go back to is, hey, listen, I love the math. I love the work. What's the headline synthesis? If you find yourself talking for like, you're like, look at this Excel spreadsheet and they haven't taken the time to just give you the headline number, you're probably talking to a stratum three or a stratum four worker.

1:30:33And it's just how their brain works. Stratum fives were simple. And then stratum six and seven is where you start to deal with like how concepts influence other concepts you're thinking over very long time horizons. So to be on our executive team, you have to be at least stratum five because you have to take a very complicated thing and make it clear. And I just noticed that as we were scaling, I would have different conversations with different executives. The higher stratum ones would come to me and be be like, Blake, I got 99 problems. Everything's burning, but these are the three that matter.

1:31:01Here's how I see. If we execute on this, it hits that. Is that aligned? I'm like, yeah, that's aligned. Or if it's not, we just revise it a little bit, we go. The other ones, I'd be like, what are you working on? And then you go, what's important? They go, all of it's important. And I'd grade three, I'd be like, actually, these things are grouped under that, and this is under that. And what I was actually doing, we had a chief people officer with background and talent had spent some time at Bridgewater. He would actually be able to predict what would happen And after I had conversations with executives, I'm like, I couldn't make it more simple.

1:31:29He's like, that's not what he heard, though, because his brain works a different way. He just heard you giving him more work and he doesn't know how to approach it in a more creative way, in a way that scales. It was to the point where it was consistent enough. I was like, what am I missing? And so now that we screened for that, it's remarkably predictive. I think the closing thing is it teaches you to be much more empathetic because I believe that most people show up to work trying to do a good job, working their best. Once you understand stratum and how their brain works and whether if they can see the field or not, a physical analogy would be like if you had a sports coach that asked kids to sprint and there was like, Tommy's running as hard as he can, but he's slow.

1:32:04And the coach was like, Tommy, if you only cared and if you tried harder, you'd be fast. The kid would be like, what the hell? That's just mean. So once you understand it's not a effort thing, it's not a trying thing, it's a capability thing. Their brain doesn't work like yours works. it's cruel to try to do it because it's immutable. You can't train for it. It's literally, it's like your whole life, you're grooved into this pattern and it changes very slowly. So I think, honestly, that assessment, as well as getting the skills assessment, culture kind of takes care of itself over time. If you bring in a jerk and nobody in the company is a jerk, those people get put on an island pretty quick.

1:32:41It's like an immune system response, but it's so hard. And the most common mistake that I've made is to promote and over-title people not realizing that doing a great job just means hanging on to title and hyper growth because the business is growing faster than most people. And that has its own thing where folks who would be fine in one position when they're over titled, they become insecure and realize that they're not effective. And so what they'll naturally do is a defense mechanism is start to set like other people up to take blame. It's really hard. It's really hard to be a manager. I have so enjoyed you teaching me and now us about not only your story, but the system that you yourself are building and working on the potential implications of it.

1:33:17I think your story, my obsession with this notion of life's work, and it's stories like yours that I'm always trying to find more of to be able to show people as examples. Obviously, no one's going to live your exact story, but the authentic nature of it, the unique nature of it, the way you've embraced challenge and risk and all these things, I just find deeply inspirational. So thank you for doing this with me today. I ask everyone the same traditional closing question. What is the kindest thing that anyone's ever done for you? I don't even know where to start. Honestly, I'm full of gratitude to so many people.

1:33:48Sergeant Berkman saved my life in Iraq, tackled me as like tracers. We're going by my head, said they almost took you out, sir. I'm so grateful for that. Kelly Perdue took me under his wing when I had no idea what I was doing. I wouldn't be an entrepreneur if it wasn't for Kelly. I'll just stick with two for right now. But man, I'm so grateful for all the people who've helped me along this journey. And I'm grateful to you for telling people's stories in a way that we can all learn from. You're just a master interviewer. And I really appreciate the collection of lessons that you put together for everyone else to enjoy because you're doing your life's work as well, Patrick.

1:34:20Thanks for saying so, Blake. This has been such a total pleasure. Thanks for your time. Thanks, buddy. If you enjoyed this episode, check out joincolossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more as well as share the best content we find on the internet every week.