The Exchanges

Q What did you do that you wish you hadn't done?

A Oh man. Um, there's a few things I would say here. Um, First thing is, uh, we made a, I made a conscious decision, um, about a little over a year ago, year and a half ago, uh, to attempt to non-linearly scale our GNA support functions. So things like our business systems team that does our internal tooling, our, uh, HR team, our people business partners, kind of, you know, support their, their managers and their organization, uh, our IT operations team, our, Facilities team. Um, and what we were trying to achieve is we were trying to achieve a, uh, a non-linear kind of return on those types of, types of heads. Like, can we build in automation? Can we utilize AI? Can we take a different kind of approach than a traditional type of company, uh, that ultimately will get to a, like a stronger kind of cost margin profile if we can kind of condense that G&A segment of the spend. Um, and, and that was just, that was just a shit decision.

AI assessment note: “attempt to non-linearly scale our GNA support functions”

Q And they'll always be pretty scattered. Mm-hmm. And so does that go against the idea of winner-take-all, and is this market good as a result?

A So, yeah, a couple of questions, uh, kind of baked into one there. Um, first, uh, I don't think there will ever be a kind of venture style dynamic of a winner take all. I don't think this is a situation of like Google versus Yahoo where, where one is the obvious dominant winner by 10 X and then there's the other rands. I don't think that's going to be anywhere close to the case in, uh, overall defense spending. So it kind of goes against that thesis. Sure. The, the inverse of that is that it is a gigantic market and it is a long enduring market. And for me personally, an incredibly impactful and incredibly important market to bring innovation to. To wit, I have a couple of stats here to throw at you. In 2024 alone, US is spending about eight hundred and eighty billion on defense. The UK spending about seventy three billion more. The EU member countries are spending almost three hundred billion on top of that. Australia spending forty five billion on top of that. And that's before we start talking about other partner nations like Japan or like Taiwan or Middle Eastern allies or any of that. That's purely just looking at like this year's spending. It's like over a trillion, almost a trillion five in spending. It's a big number. So clearly I'm not saying like, oh man, the total addressable market for Andalus, a trillion five years. It's not like a lot of that goes into salaries. A…

AI assessment note: “I don't think there will ever be a kind of venture style dynamic of a winner take all”

Q I'm sorry, I'm really naive. So thinking about this, it's like. Why, why is that when they have a shitty structure of cost plus that doesn't really incentivize them to be that innovative? I'm struggling to understand those premiums. Yeah.

A I'm, I'm, I'm, I'm enjoying, I'm enjoying the, the light bulb going off. So what's, what's happening is that the incentive structure within the Pentagon, within the procurement office, has said like, well, this is how we prefer to do business, because we don't want to have our companies make too much money. So this firm fixed margin is something like eight percent, nine percent, 10%, thereabouts, depending on the particular contract. Uh, so that's how they've structured many of their large procurements, including the F-thirty-five, including large submarine programs. Have all been designed under this kind of cost plus type structure. So what the defense primes have gotten very good at is they've gotten very good at figuring out ways to take their overhead kind of corporate costs, including their buildings, including their HR departments, their finance departments, their legal departments, kind of all of these, their IT infrastructure, all of that, bundling that into that cost number on the beginning part of the equation, then taking that firm fixed kind of price margin markup on top of that. Such that that free cash flow that comes off of that, that contract, it's like actually pretty, pretty free. So then the companies perform financially very well, uh, including some wild stats about stock buybacks and dividends. Like last year alone, Lockheed Martin, the twenty-twenty-three …

AI assessment note: “bundling that into that cost number... taking that firm fixed kind of price margin markup”

Q Is that not a financial crime? You are like misrepresenting to induce purchase.

A A hundred percent it is. A hundred percent it is. And when we've, when we've seen it, we've, we've called folks out and said, hey, that's just not true. Uh, the, the, the most classic of which is where someone says, oh, we have direct access to Andrel primary shares of their last round. There was something going around recently of somebody who was like, we have access to the second close of Andrel series F-rays. And it's like, what the hell are you talking about? There is no second close. The round has been closed for four months. Like this is done. So if what you're saying is like you're buying shares from somebody who did invest, okay, then say that, but that's not what they're saying. What they're making it sound like is just a totally fundamentally different position.

AI assessment note: “A hundred percent it is. A hundred percent it is.”

Q What is that? I'm so sorry. I'm really naive. I'm a venture investor, so it's my, it's my job. But like tier two, tier three, tier four, what is that?

A Yeah, ok. So like, uh, if, when, when, when you buy a phone, inside the phone is a circuit board, or, and then on that circuit board are some chips, and then inside those chips are individual minerals, individual materials that go into making those chips, right? So like, as you go further down in the supply chain, you get this kind of broader out pyramid. And then in the business, you refer to that as your tier one suppliers, or tier two suppliers, tier three suppliers, kind of going down into like, How far down into the, like, actual raw metal coming out of the ground do you want to trace back your supply chain? And too much of that down in the pyramid of the supply chain depends on Chinese processing and Chinese mining, especially around rare earth minerals and rare earth elements like magnets, which means motors, a lot of the underlying components that go into silicon chips, a lot of that is still going through China. So if you think about a Kind of a cold war, which to me, I think it's pretty obvious that we're in, uh, escalating into a hot war. And then you think about like, okay, well, every drone needs electric motors. Every, uh, missile needs semiconductors to help kind of control the, the, the flight dynamics and the, the aiming and the, uh, avionics and all of that, uh, far enough down that supply chain, you start looking at like, oh man, those individual resistors, t…

AI assessment note: “you refer to that as your tier one suppliers, or tier two suppliers”

Q What did you do that you wish you hadn't done?

A Oh man. Um, there's a few things I would say here. Um, First thing is, uh, we made a, I made a conscious decision, um, about a little over a year ago, year and a half ago, uh, to attempt to non-linearly scale our GNA support functions. So things like our business systems team that does our internal tooling, our, uh, HR team, our people business partners, kind of, you know, support their, their managers and their organization, uh, our IT operations team, our, Facilities team. Um, and what we were trying to achieve is we were trying to achieve a, uh, a non-linear kind of return on those types of, types of heads. Like, can we build in automation? Can we utilize AI? Can we take a different kind of approach than a traditional type of company, uh, that ultimately will get to a, like a stronger kind of cost margin profile if we can kind of condense that G&A segment of the spend. Um, and, and that was just, that was just a shit decision.

AI assessment note: “and that was just, that was just a shit decision.”

Q I'm sorry, I'm really naive. So thinking about this, it's like. Why, why is that when they have a shitty structure of cost plus that doesn't really incentivize them to be that innovative? I'm struggling to understand those premiums. Yeah.

A I'm, I'm, I'm, I'm enjoying, I'm enjoying the, the light bulb going off. So what's, what's happening is that the incentive structure within the Pentagon, within the procurement office, has said like, well, this is how we prefer to do business, because we don't want to have our companies make too much money. So this firm fixed margin is something like eight percent, nine percent, 10%, thereabouts, depending on the particular contract. Uh, so that's how they've structured many of their large procurements, including the F-thirty-five, including large submarine programs. Have all been designed under this kind of cost plus type structure. So what the defense primes have gotten very good at is they've gotten very good at figuring out ways to take their overhead kind of corporate costs, including their buildings, including their HR departments, their finance departments, their legal departments, kind of all of these, their IT infrastructure, all of that, bundling that into that cost number on the beginning part of the equation, then taking that firm fixed kind of price margin markup on top of that. Such that that free cash flow that comes off of that, that contract, it's like actually pretty, pretty free. So then the companies perform financially very well, uh, including some wild stats about stock buybacks and dividends. Like last year alone, Lockheed Martin, the twenty-twenty-three …

AI assessment note: “figuring out ways to take their overhead kind of corporate costs... bundling that into that cost”

Q And they'll always be pretty scattered. Mm-hmm. And so does that go against the idea of winner-take-all, and is this market good as a result?

A So, yeah, a couple of questions, uh, kind of baked into one there. Um, first, uh, I don't think there will ever be a kind of venture style dynamic of a winner take all. I don't think this is a situation of like Google versus Yahoo where, where one is the obvious dominant winner by 10 X and then there's the other rands. I don't think that's going to be anywhere close to the case in, uh, overall defense spending. So it kind of goes against that thesis. Sure. The, the inverse of that is that it is a gigantic market and it is a long enduring market. And for me personally, an incredibly impactful and incredibly important market to bring innovation to. To wit, I have a couple of stats here to throw at you. In 2024 alone, US is spending about eight hundred and eighty billion on defense. The UK spending about seventy three billion more. The EU member countries are spending almost three hundred billion on top of that. Australia spending forty five billion on top of that. And that's before we start talking about other partner nations like Japan or like Taiwan or Middle Eastern allies or any of that. That's purely just looking at like this year's spending. It's like over a trillion, almost a trillion five in spending. It's a big number. So clearly I'm not saying like, oh man, the total addressable market for Andalus, a trillion five years. It's not like a lot of that goes into salaries. A…

AI assessment note: “I don't think there will ever be a kind of venture style dynamic of a winner take all.”

Q Okay, so four to five billion. Who runs the fundraise process?

A Uh, it's changed over the years. Uh, so in the early days, and this is because our investor profile has changed over the years too, and surely you have the, the notes of who's led each round and who's participated in each round. Um, in the early days, it was, uh, exclusively Trey who'd run our fundraising processes, and he would put, uh, Palmer or me or Brian or some of our key engineers in front of investors at the right time to, um, kind of, you know, Get to whatever questions they had or whatever their concerns were, but really it was like orchestrated by, by, by Trey. Um, I was always running, managing kind of the back, back office process of it, kind of the collecting of signatures, getting the legal docs done, getting kind of all of the, like, kind of mechanics of it, but really the, the framing of it, the pricing, the structure is all, all, all trade-driven. Um, in the later years, that's, um, the more recent years that shifted to, uh, our CFO, Uh, who's incredible. Um, and he's, he's just coming out of his public shell a little bit. He did a round table at ramp that was really good, but in the latest, um, latest couple of rounds, including our debt round, that was, uh, entirely driven by Bobak.

AI assessment note: “latest couple of rounds, including our debt round, that was, uh, entirely driven by Bobak.”

Q Is that not a financial crime? You are like misrepresenting to induce purchase.

A A hundred percent it is. A hundred percent it is. And when we've, when we've seen it, we've, we've called folks out and said, hey, that's just not true. Uh, the, the, the most classic of which is where someone says, oh, we have direct access to Andrel primary shares of their last round. There was something going around recently of somebody who was like, we have access to the second close of Andrel series F-rays. And it's like, what the hell are you talking about? There is no second close. The round has been closed for four months. Like this is done. So if what you're saying is like you're buying shares from somebody who did invest, okay, then say that, but that's not what they're saying. What they're making it sound like is just a totally fundamentally different position.

AI assessment note: “A hundred percent it is. A hundred percent it is.”

Q I was speaking to a defense entrepreneur the other day, and they said the thing you will consistently overestimate is the intelligence and the intellect of government buying organizations. Yeah. They largely don't know what AI is, Harry, and so it is a uphill battle selling into them. Yeah. Is that a fair picture of government buying knowledge?

A Uh, I mean, in, in, insulting your customer and expecting them to buy from you is usually a kind of a dicey proposition, so like, uh, no, I don't think it's totally fair. I think there's a worldview piece Here that we as Silicon Valley kind of entrepreneurs tend to underestimate where like it is our jobs. Literally, it is your job literally to go meet the most brilliant, adventurous, entrepreneurial, creative, uh, folks on the planet. That's your job. And then pick which ones of them you want to invest in, which ones of them you think have the best opportunity to go make their vision a reality. Of course, that is not the job of a DoD bureaucrat and a procurement officer. That's fundamentally not the job. And you also have to think about a kind of a risk reward kind of incentive system that they're operating under. Uh, and to be clear, I'm not like defending the system. I'm thinking there's a, there's a perception and an understanding problem that has to happen here. So from the perspective of a procurement officer, if they take a flyer, they take a bet like you do on a prospective new company, and then that Company totally implodes for, for you as a venture capitalist, you think like, ah, yeah, well that's like 80% of my companies that are, you know, ultimately probably gonna fail, and I'm hoping for the other 10% to return my money, and I'm hoping for 10% of them to be, uh, yo…

AI assessment note: “no, I don't think it's totally fair. I think there's a worldview piece”

Q Now, we, uh, we're in an interesting time. We've obviously just had the election. I just want to start. How do you feel post-election? Are you happy about it and why?

A Yeah, I think there's, uh, obviously the election just ended. We're getting results in from some of the kind of congressional races and Senate races. Uh, obviously President Trump was reelected to a second term. I think there's a couple interesting things here. Uh, for me personally, I'm a Democrat. I've been a lifelong Democrat. I've supported, uh, Democrats my entire life. I donated to Kamala. I donated to Hillary Clinton, donated to a number of, uh, House Democratic races, Senate Democratic races, recently hosted a fundraiser for now Congressman, uh, sorry, now, uh, Senator Elect Adam Schiff of California. So I've supported a lot of sort of left of center national security Dems through my career. So Of course, on a personal level, like, yeah, I wish the election had gone differently. Uh, that said, I think, like, there's a lot of interesting potential for both Anderil and the defense sector writ large in a new administration, and I think, uh, having a new approach, a new mindset, a new approach to, uh, innovation, a new approach to funding different defense programs, um, could be pretty interesting. So we'll, we'll see how things evolve. We'll see what control of the House and the Senate looks like, and, um, and I think for, for Anderil going forward, like, You know, I think there's a lot of things, a bright future. Um, the other thing I would add here is that internal to An…

AI assessment note: “Of course, on a personal level, like, yeah, I wish the election had gone differently.”

Q What is that? I'm so sorry. I'm really naive. I'm a venture investor, so it's my, it's my job. But like tier two, tier three, tier four, what is that?

A Yeah, ok. So like, uh, if, when, when, when you buy a phone, inside the phone is a circuit board, or, and then on that circuit board are some chips, and then inside those chips are individual minerals, individual materials that go into making those chips, right? So like, as you go further down in the supply chain, you get this kind of broader out pyramid. And then in the business, you refer to that as your tier one suppliers, or tier two suppliers, tier three suppliers, kind of going down into like, How far down into the, like, actual raw metal coming out of the ground do you want to trace back your supply chain? And too much of that down in the pyramid of the supply chain depends on Chinese processing and Chinese mining, especially around rare earth minerals and rare earth elements like magnets, which means motors, a lot of the underlying components that go into silicon chips, a lot of that is still going through China. So if you think about a Kind of a cold war, which to me, I think it's pretty obvious that we're in, uh, escalating into a hot war. And then you think about like, okay, well, every drone needs electric motors. Every, uh, missile needs semiconductors to help kind of control the, the, the flight dynamics and the, the aiming and the, uh, avionics and all of that, uh, far enough down that supply chain, you start looking at like, oh man, those individual resistors, t…

AI assessment note: “refer to that as your tier one suppliers, or tier two suppliers, tier three suppliers”

Q You mentioned Russia, Ukraine. It is a, uh, you know, we're obviously in Europe. It's a very pressing and important topic. How do you foresee that playing out over the next few years?

A Yeah, we'll see. Uh, we'll, we'll see. My guess is that, uh, Uh, and it's a complete conjecture here. I have no insider information whatsoever, but, uh, my, my guess is that we see some sort of detente or some sort of, uh, negotiated settlement take place probably over the next year would be my guess. Uh, and if I had to bet it looks something like, uh, Russia annexing a, a chunk of Eastern Ukraine more or less along the line of conflict where the line has, you know, for better or worse kind of held for the last year or so. Uh, and that, and that then the, War kind of de-escalates and everybody goes back to rebuilding. But again, pure conjecture. I don't really know.

AI assessment note: “we see some sort of detente or some sort of, uh, negotiated settlement”

Q Is a good decision today always better than a perfect decision tomorrow?

A I know this gets thrown around the valley a lot. Um, in the general case, yes. However, I think that point is, is kind of hyperbolic. If the decision is truly genuinely tomorrow, and there's new information that is coming today, Yeah, waiting for tomorrow is better. That's, in practice, it's not actually the point that the question is trying to get at. The point that the question is trying to get at is, like, over analyzing, over data collecting, driving to consensus amongst large committees, uh, over many, many, many, many months, getting to a groupthink decision at the end, yeah, is always net worse than making a quick decision, seeing the impact of it. Learning from it, and then maybe changing course, maybe changing tact completely. Uh, yeah, almost always. Delaying's worse.

AI assessment note: “In the general case, yes. However, I think that point is, is kind of hyperbolic.”

Q For sure. How do you feel about that? How do you think about that internally? Is it something you want to lock down?

A I think there's... Two sides of it that kind of, they're kind of conflicting. One side of it is that I am a very big believer in providing employees with the opportunity and the freedom to make a choice about whether being full pot committed, hundred percent in, or take a little bit off the table, uh, is best for them and their family. Um, you know, I'm a, I'm a father of three kids and Like, we live in Southern California, and life is expensive, and Andrel shares don't pay the daycare bills, so like, I totally, a hundred percent appreciate someone who's in a position where they're saying like, hey, if I sell 20% of my position off, or I sell 10% of my position off, that'll fundamentally change kind of my quality of life, and it'll lead to, you know, a marked improvement in my home life, which, you know, ultimately will, will, will make me more kind of committed and happy here, and it'll be less tempting to go leave for a higher cash kind of compensation somewhere else. Like, Totally get that. And I believe in the rights and the kind of ability of individuals to make that decision. So on the one side, I'm like, yeah, secondaries are a good thing. Like you want these folks to be able to have that, to have that freedom. And, um, it's worth noting that every time we've done one of these structured tenders, uh, we've had, uh, a relatively low participation rate in them. Um, somewhe…

AI assessment note: “I am a very big believer in providing employees with the opportunity and the freedom”

Q Yeah, in the morning I got sanctioned by China, and then, do you want to let me tell you about the future of ERP? Yeah. Christ, Can I go back to the other college guy? Yeah, yeah, exactly. Um, can, biggest lesson from working with Peter Thiel? You were a miss role before.

A Biggest lesson from Peter is that, uh, there's no alpha in consensus. Uh, and, like, Peter is, like, famously a, you know, contrarian, et cetera, and, and the point is not, um, I think this gets, like, misunderstood or misreported, like, the point is not to just be, like, cantankerous or not to be disagreeable. That's not at all the point. The point is that, like, If everyone agrees, if the consensus is x, then there's no alpha in x, because like, by definition, you were just going to perform exactly as well as literally everybody else is. Uh, so the alpha, the actual interesting signal, the investable signal, the differentiated signal, uh, is, is, is in being contrarian. And it's very easy to say that, it's very easy to read that, it's very easy to be like, oh, yeah, yeah, totally get it. Incredibly hard to implement in practice.

AI assessment note: “Biggest lesson from Peter is that, uh, there's no alpha in consensus.”

Q I was speaking to a defense entrepreneur the other day, and they said the thing you will consistently overestimate is the intelligence and the intellect of government buying organizations. Yeah. They largely don't know what AI is, Harry, and so it is a uphill battle selling into them. Yeah. Is that a fair picture of government buying knowledge?

A Uh, I mean, in, in, insulting your customer and expecting them to buy from you is usually a kind of a dicey proposition, so like, uh, no, I don't think it's totally fair. I think there's a worldview piece Here that we as Silicon Valley kind of entrepreneurs tend to underestimate where like it is our jobs. Literally, it is your job literally to go meet the most brilliant, adventurous, entrepreneurial, creative, uh, folks on the planet. That's your job. And then pick which ones of them you want to invest in, which ones of them you think have the best opportunity to go make their vision a reality. Of course, that is not the job of a DoD bureaucrat and a procurement officer. That's fundamentally not the job. And you also have to think about a kind of a risk reward kind of incentive system that they're operating under. Uh, and to be clear, I'm not like defending the system. I'm thinking there's a, there's a perception and an understanding problem that has to happen here. So from the perspective of a procurement officer, if they take a flyer, they take a bet like you do on a prospective new company, and then that Company totally implodes for, for you as a venture capitalist, you think like, ah, yeah, well that's like 80% of my companies that are, you know, ultimately probably gonna fail, and I'm hoping for the other 10% to return my money, and I'm hoping for 10% of them to be, uh, yo…

AI assessment note: “no, I don't think it's totally fair. I think there's a worldview piece”

Q What would lead to a Cold War becoming a hot war?

A A few things that could happen. I think you could see, um, North Korea get spicier. I think you could see a, uh, invasion of Taiwan that would get very spicy. I think you could see, uh, Russian expansionism vis-a-vis Ukraine kind of keep pushing into Eastern Europe. And I think it's a pretty hot topic in Europe these days that would get pretty spicy and escalate. Uh, and then I also think, um, freedom of movement of ships and commercial traffic through the South China Sea, like a massive amount of our life livelihood depends On ships moving in and out of the Chinese, uh, South China Sea. So I think if you started to see like freedom of navigation get compromised, that could pretty quickly escalate into a, into a hot war. But like vis-a-vis and all, like what, what we see is we see that deterrence of long-term hot war conflict ultimately comes through strength and that there is a, a, a weakness begets hot wars. So from our perspective, we view it as we want to equip Our military, the military is the UK, the West, our allies, Australia, et cetera, uh, with the best possible technology to make the cost of escalating into a hot war, uh, for our enemies, for our opponents, uh, prohibitively expensive. Uh, that's kind of the idea. That's kind of the vision. That's what we started the company to do. And it's what we're, what we're building towards.

AI assessment note: “freedom of navigation get compromised, that could pretty quickly escalate into a, into a hot war”

Q You mentioned Russia, Ukraine. It is a, uh, you know, we're obviously in Europe. It's a very pressing and important topic. How do you foresee that playing out over the next few years?

A Yeah, we'll see. Uh, we'll, we'll see. My guess is that, uh, Uh, and it's a complete conjecture here. I have no insider information whatsoever, but, uh, my, my guess is that we see some sort of detente or some sort of, uh, negotiated settlement take place probably over the next year would be my guess. Uh, and if I had to bet it looks something like, uh, Russia annexing a, a chunk of Eastern Ukraine more or less along the line of conflict where the line has, you know, for better or worse kind of held for the last year or so. Uh, and that, and that then the, War kind of de-escalates and everybody goes back to rebuilding. But again, pure conjecture. I don't really know.

AI assessment note: “negotiated settlement take place probably over the next year”

Q Is it possible to have six to 12 month cycles, or am I totally dreaming in that world?

A Six to 12 months would be very hard. I think that underestimates the kind of logistics fielding, supply chain kind of piece of it, that's like getting technology into the hands of these soldiers forward, and then training all of them, uh, supporting them with maintenance, like, you know, trucks break, planes break, you need to replace things, you know, hard, hard landings, you need to replace landing gear, whatever it is. Uh, there's a whole kind of tale of Like that, that's pretty hard. So six, 12 months is very hard. I think a two, three year cycle is extremely believable, especially if you architect your products to be pretty modular. If you architect your products to be upgrade friendly, if you upgrade your, uh, you design your products around a software kind of, kind of mentality where you can, you know, thinking similarly to how Tesla approaches their, their fleet of cars with their over the air updates pushing pretty frequently. Like if you take a software first approach, To a lot of the products. Yeah, I think you can get a lot shorter than a five, 10, 15, 20 year kind of life cycle, but six, 12 months, I think would be pretty hard.

AI assessment note: “Six to 12 months would be very hard. I think that underestimates”

Q Is a good decision today always better than a perfect decision tomorrow?

A I know this gets thrown around the valley a lot. Um, in the general case, yes. However, I think that point is, is kind of hyperbolic. If the decision is truly genuinely tomorrow, and there's new information that is coming today, Yeah, waiting for tomorrow is better. That's, in practice, it's not actually the point that the question is trying to get at. The point that the question is trying to get at is, like, over analyzing, over data collecting, driving to consensus amongst large committees, uh, over many, many, many, many months, getting to a groupthink decision at the end, yeah, is always net worse than making a quick decision, seeing the impact of it. Learning from it, and then maybe changing course, maybe changing tact completely. Uh, yeah, almost always. Delaying's worse.

AI assessment note: “in the general case, yes. However, I think that point is, is kind of hyperbolic.”

Q For sure. How do you feel about that? How do you think about that internally? Is it something you want to lock down?

A I think there's... Two sides of it that kind of, they're kind of conflicting. One side of it is that I am a very big believer in providing employees with the opportunity and the freedom to make a choice about whether being full pot committed, hundred percent in, or take a little bit off the table, uh, is best for them and their family. Um, you know, I'm a, I'm a father of three kids and Like, we live in Southern California, and life is expensive, and Andrel shares don't pay the daycare bills, so like, I totally, a hundred percent appreciate someone who's in a position where they're saying like, hey, if I sell 20% of my position off, or I sell 10% of my position off, that'll fundamentally change kind of my quality of life, and it'll lead to, you know, a marked improvement in my home life, which, you know, ultimately will, will, will make me more kind of committed and happy here, and it'll be less tempting to go leave for a higher cash kind of compensation somewhere else. Like, Totally get that. And I believe in the rights and the kind of ability of individuals to make that decision. So on the one side, I'm like, yeah, secondaries are a good thing. Like you want these folks to be able to have that, to have that freedom. And, um, it's worth noting that every time we've done one of these structured tenders, uh, we've had, uh, a relatively low participation rate in them. Um, somewhe…

AI assessment note: “So on the one side, I'm like, yeah, secondaries are a good thing.”

Q As a venture investor contemplating investing in the market, what, what should I know that I don't know?

A Well, you should, you should know that the andrel of X is going to be andrel, uh, and that you're Your best bet is probably buying as many andrel shares as you can. Beyond that, uh, I think what you should know is that execution and delivery and actually winning these contracts, winning these long-term programs of record is incredibly complicated and fraught with incredibly complex regulations, uh, compliance, kind of, uh, accreditation. Like there's this whole world of, of, of very messy kind of back office stuff That is admittedly not sexy. It admittedly doesn't make great headlines, but, uh, saying, like, we've got a new missile, and it's gonna be great, like, cool, does not a successful missile program make, and there's a, a huge gap there. So as a, uh, as, as a new investor to the segment, first of all, I would say, uh, you know, you're unlikely to drive venture-style returns by being kind of consensus, but, like, beyond that, uh, I would say, uh, Truly spend the time to appreciate the complexities of the appropriations process, the budget process, the, the, the awarding and winning and supporting and delivering of these, of these.

AI assessment note: “Truly spend the time to appreciate the complexities of the appropriations process”

Q What's the secret to a happy marriage and being incredibly busy?

A Is two things. First is, uh, I mean, both of them are gonna sound, sound pretty cheesy. Um, first is choosing your life partner very, very, very, very carefully. And I think having a, um, it goes to point to Very clear communication about expectations, about responsibilities, about, ah, timelines, about goals, and if, ah, you know, fundamentally relationships fall apart when some of those things don't happen. So if I'm consistently making promises to my wife and she's amazing and great, ah, if I'm consistently making promises about where I'll be or I'll take the kids here or I'll get this thing done or I'll handle this problem and then I'm consistently not, then she will Understandably get frustrated, and the reverse is also true, and I find that, uh, supplies to business as well, without clear communication about, yes, I will, I will take care of that, actually doing it, and doing it to a, a high level, uh, frustration just builds over time, and over time that can turn in from minor frustration into major frustration into this isn't working for me, kind of, uh, kind of breaks.

AI assessment note: “Is two things. First is... choosing your life partner... Very clear communication about expectations”

Q Do you agree never go to sleep angry?

A No, actually. I actually don't. I actually don't. I think also applies to business, but especially for me, and you talked to enough of my friends, you'll, this has surely been, surely been said, like I can have a very, uh, I can take things personally that aren't necessarily intended personally, and I can have an emotional reaction, an overly emotional reaction to things that may, may not deserve such an emotional reaction with the benefit of time, a little bit of benefit of, uh, self-reflection, um, I think it puts you in a position to have a more thoughtful, clearer communication that isn't so fueled by emotion, and I think having an, an, an argument at dinner that turns into a argument after bedtime, that turns into a let's stay up all night and argue about it, I actually think is like not, not actually that healthy. Just getting to a place where you say like, look, we're both frustrated, let's talk through this tomorrow. Actually, I think it's totally fine. Provided you actually do. I think what the point of the saying is, is it's like, don't let it, don't let things fester.

AI assessment note: “No, actually. I actually don't. I actually don't.”

Q Yeah, in the morning I got sanctioned by China, and then, do you want to let me tell you about the future of ERP? Yeah. Christ, Can I go back to the other college guy? Yeah, yeah, exactly. Um, can, biggest lesson from working with Peter Thiel? You were a miss role before.

A Biggest lesson from Peter is that, uh, there's no alpha in consensus. Uh, and, like, Peter is, like, famously a, you know, contrarian, et cetera, and, and the point is not, um, I think this gets, like, misunderstood or misreported, like, the point is not to just be, like, cantankerous or not to be disagreeable. That's not at all the point. The point is that, like, If everyone agrees, if the consensus is x, then there's no alpha in x, because like, by definition, you were just going to perform exactly as well as literally everybody else is. Uh, so the alpha, the actual interesting signal, the investable signal, the differentiated signal, uh, is, is, is in being contrarian. And it's very easy to say that, it's very easy to read that, it's very easy to be like, oh, yeah, yeah, totally get it. Incredibly hard to implement in practice.

AI assessment note: “Biggest lesson from Peter is that, uh, there's no alpha in consensus.”

Q What specifically has Andrel done to be the breakout success that it is? I asked, um, Trey the same question, and he gave me a great answer. Which I'll reveal to you after.

A Yeah, you can't tell me ahead of time. That would, that would, that would ruin, ruin the, the surprise. Um, my answer would be Twofold. Uh, I think first we have, uh, and they're very related. I think first we have unlocked what was a kind of a latent patriotism within the technology and defense sector. I say latent because if you look at the momentum through the kind of the early 2000 into the, into the 20 teens, The momentum in the tech sector, uh, amongst kind of the zeitgeist, amongst the employee kind of mindset was not one of patriotism. And to your question, you know, a half hour ago, whatever, like, are the best and brightest going to work at Lockheed, et cetera, like, that, like, no, no, there was not an interest in working in the defense sector. And I think, like, Andrel has unlocked that kind of latent talent to wake up and come work on problems that we view. As the most important problems in, in, in facing the world right now. Uh, so we, we've unlocked that. And then the other half of that kind of, kind of card there is also by unlocking a incredible amount of, of funding and investment into the sector that had also been historically, uh, kind of, kind of lacking for this kind of segment. Uh, and to your point about like, well, isn't this a bad customer? Like I'm used to winner take all. Like, yeah, that's a lot of, that's a lot of investors, and that's a lot of kin…

AI assessment note: “my answer would be Twofold. Uh, I think first we have”

Q Meshing two things together, Dalian at Founders Fund and Europe. He said on the show, Europe is a third world country. Uh, and I mean, Keith, your boy's been like, you're what? What is that? Like, just this massive, like, You know, terribly underperforming countries. Yeah. Do you look at Europe honestly today and go, that's a bleak future.

A Yeah, I think there's a lot of interesting and very challenging structural issues facing Europe. And I think fundamentally, again, it's coming from a very, very American perspective. Uh, there's, there's an ambition. There is a, you know, seeking and working towards a better, brighter future that feels to be, you know, almost kind of complacently lacking from, uh, a, a large portion of, of Europe. I know you said it yourself here in the UK as well, and I think there's an, there's an element of, like, if we want a brighter future, we have to build it. And that spirit, that drive, uh, you know, I, I worry that Europe's kind of lost their, lost their spark on that front. I don't view it as bleakly as, as those guys do. Granted, it's like, you know, they're kind of in the business of-

AI assessment note: “I don't view it as bleakly as, as those guys do.”

Q So you, I'm putting you now in charge of the MOD, the DOD, you name your Department of Defense style. What would you do to create a structure of incentives that creates risk-taking mindsets for the people buying?

A Yeah, a few things, man. Um, first of all, uh, Would appreciate the urgency of the problem, and I think that over the last, call it decade, I think, ah, the, the, the governments of the West have largely gotten complacent to what we view as the, kind of, the major geopolitical strategic problems facing, ah, facing the West, especially vis-a-vis China and to a slightly lesser extent Russia. So appreciating the urgency, I think, is point, point number one. Point number two, I would say, Is bringing capitalism back to the defense sector? Uh, my, my former boss and now friend and mentor, Sham, who you've had, Sham Sankar at Palantir, who you've had on the show, uh, he's been on a tear lately talking about this, and he had this, uh, this tweet that I think perfectly encapsulates it, where he said that, uh, everyone, including Russia and China, uh, have given up on communism, except Cuba and the DoD. And it's like, that's kind of the mentality, right? It's like a mentality of a, of a cost Plus style contracting. We'll get to that in a second. Where, uh, like, ultimately, a competitive win, a better technology, a better approach, doesn't always necessarily win out. And, like, oftentimes there are different incentives at play, uh, that, that, that lead to a little bit more of a kind of communistic or socialistic approach to, to the defense sector that I think is fundamentally bad and i…

AI assessment note: “Way, way, way less cost plus contracting. Moving many more things to firm fixed price”