Lior Susan - Leave the World Better than You Found It - [Invest Like the Best, EP.353]

28:57So do I have that right, that that effectively is how you have been spending your time. As an Israeli who has lived through this, how are you going to be spending your time in the next months and beyond? So you're absolutely right. I spend a thousand percent of my time building companies in the intersection between technology and the physical world. And I think the impact of these companies just got way more important. If I can build Teslas and SpaceX and Vulcan forms and bright machines and waves in this world, I know that the west part of the world and my camp are going to have a much more control mode.

29:40So the other side will not try to play games. I actually think that industrial powerhouse have much more weight in today's world than nuclear bombs. we lost in the last 30-40 years the industrial powerhouse of the United States in the name of globalization. It was easy. We thought we are doing this fair deal. We will give our manufacturing to China. In returns, they will buy American bonds. And we're all becoming really good friends. Globalization works well when everyone's playing fair. And I think the other sides took a disadvantage of our willingness to trying to build a world that there is a much more global community than these regional camps and essentially deglobalization.

30:34I think if we want to have freedom of speech, I think if we want to have freedom of religion, I think if we want to be able to live the place better than we find it, we must, must, must rebuild those physical industries and have the Western, and especially America, controlling those industries. I didn't know that that was my mission in life. I thought it was because I was passionate about those companies. And I thought that those markets are huge, and I will be able to generate strong returns to my limited partners. I thought that that's my mission. Actually, my mission is much bigger. My mission is to protect the principles I believe in and leave this place better than I find it for my kids and the current kids and all of us.

31:23And it's true building those companies. So not only I'm going to continue to do the same, I'm going to double down on that. And I'm going to speak with whoever I can to make sure that everyone understands that we need to unite it right now behind it. Can you say a bit about your impression of existing leadership in the areas that matter, that can drive the best possible outcome, hopefully of peace and of mutual respect and working together in some of the ways that you've described. What do you think about the state of leadership and what leadership means to you as we face all this down? I have a lot to say.

32:02Just to be clear, me being Israeli entrepreneur ex-special forces not mean that I don't have a lot of feedback and frustration with the Israeli leaders. I do not think we did a good job in Israel as a leadership in the last couple of years to unite the country and find a way to live with our neighbors by helping them build and develop their economy so they are pushing out those terror organizations out of their society. I think we did a bad job. I also think that in this country, in America, we did not do a good job as well. I see too much hate between the two parties. I see bureaucracy and cheap politics are coming on the way of approving budgets or the Speaker of the House, for God's sake, in order to be able to operate and deal with these very large conflicts that are coming in our backyard.

32:55It's not by coincidence that we have two wars now against our side and what we believe, one in Ukraine and one in Israel, that is being attacked in about the same time. It's not a coincidence that China making all of that statements on Taiwan. It's not a coincidence that Iran is getting more and more aggressive with their nuclear plants. It's all in a vacuum of a leadership on the Western side. I'm not a politician, but I want to believe that I'm a leader in this country and in the Western side. And my job is to not build any more only companies. My job is to carry that message and find other leaders to make an impact and influence on our leaders to united behind what we want and what we sign up for.

33:42This may be a totally impossible question, but in the face of history, is it even conceivable that we reach a state where a category of people that want to kill other people based on their beliefs are gone? and is there modern or historical precedent for it being possible to do the thing that I would say that you've said you want here, which is to remove the worst people capable and willing and eager to do these things and then build partnerships and hopefully friendship and interdependency with those who want the opposite? Do you think that that's possible? I think we have no other way around.

34:25Otherwise, we will not leave a better place for our kids. and their kids. I'm a believer. The German Nazis killed 6 million Jews. The German government today is one of the biggest supporters of Israel and what is right and what is wrong. I traveled across the UAE this year. I traveled to Morocco. I traveled to Jordan. I saw the people that want to move on. Unrelated if I'm a Jew and Israeli and you are an Arab. We want to, At the end of the day, the people want the same things. They want to have food on their table. They want their kids to have a good education and a healthcare system. That's about it.

35:05It's the mass hierarchy. I want to believe that if we do our job of strengthening the economy of this country, building the industrial backbone, showing the world that we are powerful than ever, that we are united than ever, the other sides will put their arms down and join us again. on the name of not religion, not God, not nothing, in the name of having life. Do you know that Hamas, one of the principles, is they say that they start the life after death. They believe in death. I believe in life. And if we are not going to unite against those terror organizations and show the other sides that after we will destroy those terror organizations, we will give them their hand back immediately to go and build the bridges, this place is going to be very dark.

36:06Bior, have you had conversations with members of the Muslim community who, whether they're Palestinian or live in the area, and very clearly do not want Israeli children and women and citizens to be killed and murdered? Have you had conversations with people of that background who, of course, nonetheless are terrified of their own women and children being collateral damage, being thoughtfully avoided, but inevitably sucked into this conflict? How do you have a conversation with somebody like that that's out there and have you? I have in the last three weeks, I did about 25 calls like that. people that live right now in Gaza, civilians that I know, Israeli Arabs, people don't know.

36:59They called Israel an upright country and genocides and all of that. There is a one and a half million Arabs, Israelis, that their rights and my rights are the same. They have the same passport, same IDs, same rights, exactly the same as I am as a Jew. Actually, a lot of them are working with my dad in this construction company and I had multiple of conversations with them. I have a really good friend that he is a doctor in the South that is an Israeli Arab, that unfortunately his nephew is one of those kids that got slaughtered in the South. These are Arabs, by the way. And they told them when they attacked, we are Arabs as well.

37:42And they say, you are worse than the Jews because you live amongst them and killed the whole family. All of them have one thing in common, Patrick. and is they don't believe that these people are serving their interest. They don't believe that these people should be part of the Islam. Their shame of this behavior is like where in the Islam it's said that you can burn babies and cut the head of women. Where in the Islam it can say that you can rape. They don't view their behavior as the one that's representing them. And they all want one thing and one thing in common. they want to go to focus on the things that they care about and is raising kids in a safe manner having them have a great education so they can have a good job and can have a good health care system the very basic stuff they came and asked me sorry and i'm like you don't need to ask me sorry we need to ask sorry for both of us because the people i know in gaza your house is now getting bombed and I'm sorry for that.

38:46And to my friends that is an Arab doctor in the South of Israel, that now, do you know that Israel took care in the Israel hospital system, the Hamas terrorist that we captured next to the bed, to the people that they killed? Because we don't view the same way that they view life. We believe in life, not we don't believe in death. And even to the worst enemy of us, We will take care of them because that's what we believe in. So this is maybe why in some way I see this small, shiny light in the far, in this old big dark is because I had those conversations with those people. And I know that all of them want the same things that I want and is believing in life and innovation and technology and freedom.

39:36They don't want what we are seeing today. Because it is certainly your incredible deep area of expertise, I'd love to talk a little bit about the role of widespread technological advancement in all of this. Maybe expand the conversation a little bit beyond what's happened recently and Hamas specifically. you mentioned China earlier. Again, I don't want to wade into territories where I'm not qualified to say anything, but I certainly have been exposed to no one in China that wants to kill babies and old women. Nonetheless, I think there's plenty of tension. There's plenty of a race, perhaps, an arms race, if you will.

40:17You mentioned that we're probably right now losing one arms race, which is control of information, narrative, messaging, et cetera, using modern platforms to disseminate those ideas. Teach me a little bit about the roles that technology you think will play in the future that you hope for, that you are going to work for, as you described, in the West. I've had two answers for that before I talk about the West is in any country that technology play a big role, you see growth, prosperity, and freedom. Because technology making you get out of the propaganda that you get in the mosque or in whatever they enforce you to learn.

41:01And that's why in those dark countries, they will shut down the internet and they will control what you can do in social media or not. Because they know if you will be exposed to technology, you will challenge those radicals mindset. Our job, your job, my job is to push technology as far as we can into this globe. And every time that you will have a society touching technology at scale, you will see good things happening. So before I'm talking about the West, go back to the West now and where I'm focusing most of my time. In order to United States and the Western countries to continue the amazing leadership that we were seeing essentially post-World War II, that on the back of it, we could live in a fairly safe matter with not a lot of huge wars, because the U.S.

41:56was a country and a nation that nobody will mess with. We need to bring back this, what I call, digital transformation industrial backbone. And manufacturing capabilities, in a lot of cases, it's more powerful than a weapon. And we saw the cracks of it a little bit during COVID. We suddenly are like, oh my God, we cannot manufacturing so many of our essential products. We cannot ship them. There is lack of resiliency. We heard about this lack of resiliency constantly during COVID. That cracks are not small cracks. They're huge cracks in the backbone of our economy and our society. The ability to use automation and software and hardware and semiconductor to own those capabilities in this country from building rockets that we can go to space through batteries, like Inovix, not too far from where I sit, that building batteries in Silicon Valley to manufacturing automations, company right now I'm sitting in, Bright Machines.

43:00All of these industrial capabilities and the technology and the innovation are not only helping the United States thrive the GDP and the growth of the GDP, because this is the industries that are moving the economy. More importantly, it's strengthening our force, even more important than our air carriers and nuclear capabilities and our F-35s. And we underinvested and underestimate the importance in that in the last 30 years because we were in the name of globalization. We should just outsource as many things as we can. What's the bridge to success here? Because one of the problems for sure is you get dependent on low-cost manufacturing.

43:49It's very hard for some businesses to work when you take their cost of goods from one thing to something much higher than that thing. how do we affect a thoughtful transition to restrengthen that base? And is there any argument to the contrary? Is there any argument that, no, what we should be fighting for is increased globalization, is increased specialization around the world so that we can concentrate on, you look at the S &P 500, the top 10 are US technology companies, they're not manufacturing companies, should that be what we're doing? So I'm just trying to get as much perspective on this problem as possible and how you think we can thoughtfully rebuild this base and making sure that it's worth it to do so?

44:28I think globalization can happen only when everyone plays fair. I do not think people play fair with us in the last 30 years. They have a very different, is there is a freedom of speech in China? Is there is a freedom of religion there? No. Is there is a freedom of speech in Iran? No. Is there is a really, truly a leader in Russia that we can actually negotiate and do things in a common sense? No. So I can't focusing on specialization when the other side is taking advantage of me. And I think that's what happened. If you are looking on actually the S &P 500 and you're looking on the largest companies in the S &P 500, what you will find is a company like NVIDIA that's building chips.

45:06So that's actually a hardware manufacturing company. You will find a company like Amazon that's doing logistics. You will find a company like Apple that's building hardware. You will find, not in the top 10, but you will find a company like Tesla that's building cars. I think what we're seeing in the commonality in logistics, semiconductors, automotive, hardware, is those industries are huge. And we're used to focusing on the design of those products and the end market. And I think what we are seeing now that vertically integrating by building these industrial capabilities domestically can actually give us a lot of other benefits that are not purely the focusing of low cost.

45:50and it can be how fast we can move. It can be the idea that I can control everything in the car and I can push software from remote and I can do things that I couldn't do before. I call it, it's a technology company that's building a car. It's not a car company that's using tech. And NVIDIA, it's a technology company that's building chip. It's not a chip company that's using tech. And that's what we do in Eclipse and looking for other companies that looks like that. The other thing that is happening that I think it's worth to give a little window and talk about Tech transformation is happening in those industries in China as well.

46:25China have the same issues that we actually had 40 years ago. They are running out of people that wants to do those bad jobs. I ran factories in China. Trust me, it's not a fun job on an SMT line to spend 15 hours a day. So they don't want to do those jobs anymore. They have a declining, massive declining of their industrial workforce, meaning they need to use the same automation and software that we are using here. If you will see where Qi is spending all of his time, so they totally shift the way for investing in internet. They all want to invest in semiconductors, robotics, quantum computing, and the things that are in the core of what we do here.

47:01So in some way, the competitive of our industries and their industries is first time in the last 30, 40 years in part, knowing that we actually have the innovation and engine and the design and the powerhouse that we always had, but now the manufacturing scale and the tools that we are going to use from an industrial point of view is in the same as they have. And I think there is a big opportunity to grow the domestic economy around that here. This seems to be an area of hopefully tremendous common ground, certainly speaking to a very specific audience and pretty much everyone listening will agree.

47:39But the notion that we can build new businesses, a Tesla, a SpaceX, whatever, lots of great modern examples in Amazon that operate between the hard world and the software world very seamlessly. This seems like as close to a universal good as we can agree on for human flourishing. You've looked at more of these companies than probably just about anybody. So this question is both for investors with capital to deploy on this thing that I think hopefully most of us can agree on that you're devoted to and to founders who have or may start companies like this. Maybe teach us a little bit about what you've learned leads to success, can lead to success, attributes that matter to you, the sorts of things about impact that these technologies may have and how to think through those impacts.

48:31Again, if this is the area that we can all say, okay, yeah, there's lots of places we might disagree, but here we agree that this is a net good for all of us. I would love to learn what you've learned about the founders that do that well and the investors that allocate capital thoughtfully to those people. I will start by giving a three-second macro view. World GDP depends on the day, about$100 trillion, give or take. About$80 trillion is in physical industries. Agriculture, manufacturing, supply chain, logistics, aerospace and defense, etc. Tech penetration in those industries, about single digit.

49:09So regardless of what Leo thinks and regardless of what Elon Musk thinks, basic investment principle, you want to invest in a very large town that have a very small tech penetration, but you see the growth coming up. and when I started Eclipse in 2015 and everyone told me, oh, Venture should do only crypto and only SaaS and only enterprise software and only fintech. No, no. Semiconductor, this is not automotive. No, no, no. This is not a Venture business. And I was like, how it can be? I mean, how many DevOps company the world needs? I see 50 of them doing exact same things all get funded and I see none of the semiconductor get funded and I'm like, If you will want to run all of this machine learning a cloud, you will need a lot of silicon.

49:56So basic principles, I believe if you want to make money, this is the right place to invest. But this is my two cents. What we are seeing here is the average check that Eclipse is writing is about$8 million in the initial check. Those industries used to be extremely capital intensive a decade ago. And that's why you saw venture investments declining in those industries, because those software companies were very easy to invest, and you didn't need a lot of capital in order to flip a card. So how it can be that I can transform an industry like logistics or manufacturing or industrial with an$8 million is all of the tech tools that is being built in the last 30 years, cloud computing and mobiles and sensors and open source software, now is being used in the physical industries.

50:46And I can build a prototype or I can build some sort of an MVP with a couple of millions of dollars almost regardless of the sectors I'm going after. Now, if I'm successful, naturally, I will need more capital, but that will be true to any venture business. So now I also see that the traditional tech tools that we will all use to build a DevOps company, backend, frontend, open source, cloud infrastructure, I will use exactly the same stack when I'm building a company in the industrial market. And now I'm essentially using the tech. That's why I say it's a tech company building a car, rather a car company using tech.

51:24And it's just tremendous amount of opportunities that we are seeing. And I think the public market seeing it. And that's why we are seeing those multiples of some of the companies I mentioned. And I think now tech founders are seeing and saying, hey, the richest person on earth is actually not a DevOps guy or a traditional software guy. He's a guy that's building cars and rockets. Maybe tell us what the most substantial changes have been that make it possible for a company like this that sounds so daunting and hard to start, to actually start and get an MVP out the door? What are the enabling technologies that have come online in the last 5, 10, 20 years, whatever the period is, that make this possible?

52:06I will give a quick example of a company we're just finishing build because it will be easy to illustrate. It's a company called Peak Energy, and they're focusing on long-duration energy storage. They're going to build these very, very large battery farms to offset the grid using a sodium ion chemicals architecture to do an ESS or long duration energy storage. So I would first start with the people, because actually the people is also a change. So the team there, it's a person that works on Tesla in many years. Then he moved to Northvolt and was the CEO of Northvolt. And then he came to build with us the company.

52:45And his co-founder, it's a person that built with us another battery company called Inovix that we took public. So you have two unbelievable talent that used to not build companies in that space, not only coming to build the companies, they're also coming with the success behind them and understand how scale works, what we want to see in venture. And what they're using there, they're using simulation software. You simulate now, even before you build anything, you're using a ton of simulation. On the simulation, they're using machine learnings to learn the patterns of the chemistry and figuring out when they build the bench test of that chemistry, they know it's going to work because they simulate and then they train the model.

53:25They are using vendors off the shelves. They actually don't build anything on the hardware that is custom in the MVP. It's all available off the shelf. There is a well-defined supply chain that is being worked. They're using cloud infrastructure to collect all of the data. Of course, they don't build anything on-prem, so you can spin an AWS instant in a minute. They're using a lot of, they build a BMS battery management system that is well-defined, that is being built in Tesla, in OldFult, in all of those companies many times, so they can run the battery in a better way. In the BMS, they're using open source software that is being developed in so many areas.

54:05They're using Kafka and they're using the same Datadog that you all use to deal with the software. And here you are going to have a company with a$5 million investment be able to show me a small-ish battery using Cedemion in the most cutting-edge technology to do energy storage. $5 million. dollars. And you're going after the energy space that in this country, it's about two trillion. And if you take the energy storage out of that, it's about a half a trillion dollar. So you're talking about a gigantic industries that don't have 50 companies, have maybe five. We've strayed a little bit from our original conversation, which I want to come back to now.

54:52Now, first of all, I think it's so interesting to hear how not only can technology provide all the things we all say we want for all of our families and our loved ones, et cetera, but that the ability to create those new companies is accelerating because of these enabling technologies. I think that's an incredible story. How do we bring all that back to this awful reality that we're facing now? And you said you're going to double down on your mission, because that's the way you can have a positive impact. What's next? How do we actively take that truth, hopefully it's a truth, and apply it to the present-day conflict, which seems so intractable and so hard to know what the next first step is?

55:37If I'm being successful of building a very large energy storage, I will need to buy less oil from Iran. Without Iran selling oil, they have nothing. Do you know that in the last 10 years, the GDP of Iran has been declined constantly, when oil is actually ripping? Building those companies is giving us the tools of industrial security to actually push our team and our side of the conflict. And this is, of course, just one example on energy. I can give you many other examples on manufacturing and industrials and aerospace and defense and agriculture and food securities is we cannot be depends on only Taiwan TSMC in this country.

56:21We need to have our own semiconductors capabilities in scales in the most cutting-edge 5-nanometer and 3-nanometer nodes. So nobody, even if they move their ships to the backyards of Taiwan, is not going to risk any of our supply chains. So you know what they will do? They actually will not move their ships. They are doing that because they know how strategic is this technology and country for our economy. So what I'm telling all of us is we should use our power to build those companies because it's going to help us push of living in this place better than we find it. You were on calls and have been on calls with leaders of your companies based in Israel.

57:05And I know on those calls that those people have been very appreciative of your leadership. And I'm curious for you to describe what that means. What have you been telling them? What does small scale leadership, impactful, but a small episode of leadership? How do you think about that and being a strong person and leader in a very difficult situation for a very specific set of people? I will start by saying that I'm not a small leader. I'm a tiny, peeny leader, and I'm doing very basic stuff. And there is a much bigger leader than me. They're doing an amazing work. And this is the CEOs of our companies in Israel.

57:45And to give you a sense, I've sent a call with them multiple times a week to talk about how we can tactically do things, helping them build a budget for 2024, helping them delay payment with SVB, helping them. We, Eclipse team, are going on their behalf to a sales meetings in the U.S. because they cannot travel now outside of Israel because the airport is very hard to fly out and fly in. That sounds surrealistic for me. But to give you a sense in the last meeting, we had a call with them yesterday or the day before, and the sirens went on. So some of them that live in Tel Aviv need to run to the bunkers in parallel to the cold because there is multiple of hundreds of rockets flying on Israel every day from the south and the north, and there's no sirens and you need to run to the bunker.

58:33These people are navigating between having their kids at home because there is no schools, having either they are in reserves or their other family members in reserves and needs to run companies. And my admiration of the resiliency of these Israeli tech founders are overwhelming. And they are so freaking strong of just not giving up and knowing that the real way to win it is not with our military power, it's to show them that they cannot create the chaos in Israel and show them that we will continue to grow our GDP and we will continue to be the third place for venture investments per capita. How you will not want to work with a company that doing insane war like that was able to continue to run the company when your kids at the top and rockets are flying and your or the loved one are in the front line, and you're still running those companies.

59:31Their only ask of me is not for more capital and not necessary to help them navigate some of their business. The only ask for me is carry our message to the world. So we will all united behind this notion of technology is going to be the way that we are solving conflict in this world. and prosperity and innovation. And the only thing they say is it's the people that are going to lead that, not our governments. It's the people. Would you be willing to share with me just the emotion of watching this happen to your community from afar? Hard to describe in words. In the very first day, I wanted to just take a flight to Israel and go immediately to a reserve.

1:00:23but I didn't do reserve for 10 years because I live in America and I'm out of the special forces bench. Then it's turned to anger of what happened because I talked with parents that lost their kids. I have a really good friend that his daughter is being slaughtered in that festival in the South when she just went to dance. The funny thing is this festival name, it's almost Burning Man of Israel. that the festival name is lights and freedom so you had 4 000 people dancing on that border for lights and freedom no weapon no soldier no nothing and 260 of them is being slaughtered cold blood after being raped so the anger went to a pain because i talked with parents that lost their kids then i talked with a father that is three years old being kidnapped so you talk with someone that you're trying to find rational how to even support him and you've promised that you will carry the message and will explain what's going on in Israel so it went to from a pain to a compassion to these people then I talked with a lot of my Israeli Arabs friends and people on the other sides and there was more pain because both sides are going to suffer and then you see what's happening in the U.S.

1:01:48schools and the social medias. I'm asking myself, I'm not going to live a better place for my kids. Not like that. People want to put the Jews in gas chambers. I mean, what? What are we doing here? So I've been through a lot of tough stuff, but the last three weeks has been by far the toughest. If you've listened to me do this before, thanks for sharing that. My final question is the opposite of a lot of this and i look forward to your answer what is the kindest thing that anyone's ever done for you it's actually happened recently and it's a simple thing sorry that i'm emotional my daughter the youngest one she's six and a half and she saw that i'm in a tough spot because i just finished a call with one of those parents.

1:02:41And she came and hugged me. And she said, I see that you're upset about happening in Israel. It's all will be fine. As someone with kids of a similar age, picturing their faces a lot in our conversation today and when we've talked before, thanks for the answer. And thanks for the conversation later. Thanks for having me, Patrick. 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.

1:03:40Thank you.