The Twenty Minute VCMike Schroepfer: Former Meta CTO on "Why The Best Leaders are Like Music Conductors" | E1158
EVERY SPOKEN WORD
150 min read · 30,013 words- 0:00 – 0:55
Intro
- MSMike Schroepfer
Building a company, it feels like it's big moments, but it's more a game of inches. I describe a good leader as sort of like a conductor of an orchestra. It's like, I can have the best players in the world, but if they're all playing from a different song sheet, it's gonna sound terrible. As I learned more about climate, I'm like, "This is a $10 trillion problem." Availability of cheap, clean energy is probably the biggest rate limiter to human progress right now.
- HSHarry Stebbings
Ready to go? (upbeat music) Schrap, I am so excited for this. As I just said, I spoke to JC, Julien Courdina, I just spoke to Dan Rose. They said wonderful things, so thank you so much for joining me.
- MSMike Schroepfer
I've been so excited. I've gotten a lot of feedback from people who can't wait for me to be on this, so I'm, I'm very excited too.
- HSHarry Stebbings
They said, "Oh my God, poor you. You've gotta spend an hour and a half with Harry? Christ."
- MSMike Schroepfer
(laughs)
- HSHarry Stebbings
Um, listen,
- 0:55 – 1:35
Background
- HSHarry Stebbings
I wanna start with a question. I think so much goes back to childhood, honestly. If you were to think about how your parents or your teachers would have described a 10-year-old Schrap, what would they have said and how would they have described you?
- MSMike Schroepfer
I mean, I don't know if nerd was in their lexicon, but probably. I was like, I was thinking about this and I was remembering my dad took me on this one weekend trip to Disney World, and like, they had one of those, like, you know, cartoonish sketch artists or whatever. And I wish I still had it, because like, what they did was like, me at the computer with a little bubble that says, "Oh no, bugs in my software." You know? And this, I was probably 10 or 12 or something like that, 'cause they're like, like, "What are your hobbies and stuff?" And I was like, "I like computers." You know, I was a, I was a kind of nerdy, smart, nice,
- 1:35 – 4:41
Memorable Yes & No Moments
- MSMike Schroepfer
nice kid. So that's probably what they'd say.
- HSHarry Stebbings
(laughs) I love that. Um, poor you. I mean, what, what a, what a rude cartoonist. Um, listen, I think, I think along the journey, you get many yeses and nos, and they really shape a lot of how you are and how you think. If I ask, what was your most memorable yes, and what was your most memorable no, and how did each shape how you think, what's the first that comes to mind?
- MSMike Schroepfer
It's probably (laughs) gonna be my wife going out with me and then eventually marrying me. So, 'cause I think that that is, like, having a partner in life who's smarter than you and supportive and, and you can work with, um, and build a life together, I think is, is a phenomenal gift. So that's, that's an easy one. That's the yes. I think the nos, you know, it's not one no, it's a rapid sequence of nos in succession, which is when I was trying to raise money for my startup. (laughs)
- HSHarry Stebbings
(laughs)
- MSMike Schroepfer
You know, I don't know if anyone's raised money before, but like, going to pitch after pitch after pitch, and like, people saying, "Nah, we're not gonna give you money," or, "We don't like your market," or this or that. Um, and the hilarious thing was, this is 2000, th- this is Q4 2000. Dot-com crash happened in April, so it was like about, a t- tough time to raise money, I get it. But I was remembering back, the first like six slides of our presentation, I was trying to convince people that there was gonna be a lot more servers in the world. (laughs)
- HSHarry Stebbings
(laughs)
- MSMike Schroepfer
It was like, "I think we nailed that one." But like, people do, like, "Nah, there really gonna be a lot..." 'Cause like we're selling software to help people manage large data centers. And people were like, "Mm, are there really gonna be that many more servers? Mm, I don't know." And so it's like, "I think we got the market right." (laughs)
- HSHarry Stebbings
How did that shape you, then, getting repeatedly told no?
- MSMike Schroepfer
It reinforced the like, the intrinsic motivation, sort of the core of like, "Well, why are we doing this?" If everyone else is saying, "Nah, this is dumb," like, why do I think it's not dumb? And to me, that's like boiling it down to first principles. And I had firsthand experience, and I was like, "This is stupid. Like, this is what software's for." So like, I started writing software to help, like, configure, manage, deploy software, uh, to, to increasing the large complex data centers. And I was like, "Well, this is certainly, like, this problem needs to get solved. Um, and I'm, you know, as experienced as anyone to go solve it, 'cause I've been doing this for a while." So whenever anyone said no, I was like, "Well, what do they know that I don't know?" And I was like, "Well, I have this firsthand experience." So it's like first principles, like, what do I believe? Is that, is, has this new data invalidated that belief, like, that it's concrete, that it's core, or not? Or they just have a different opinion? And if not, then I'm gonna keep going. And so that's, that's why I kept going. I mean, we kept going and going, got a lot of no, and we had someone fall asleep in one of our pitches. Um, you know, had it all happen, and then Sequoia Capital said yes.
- HSHarry Stebbings
Take me to that meeting. I'm, uh, I love the story, Schrap. Uh, Dan and JC will tell you, but like, you go to Sequoia after a load of nos, someone fell asleep. I, I thought we agreed that you'd keep that private. I didn't mean to fall asleep, by the way, Schrap. Uh. (laughs)
- MSMike Schroepfer
(laughs) .
- HSHarry Stebbings
You talked about servers. What can I say? (laughs)
- MSMike Schroepfer
It's taken 24 years, but it's payback time, Harry. (laughs)
- HSHarry Stebbings
Do you know what? I was three then.
- MSMike Schroepfer
(laughs)
- HSHarry Stebbings
You know? (laughs) Sorry, Schrap. I'm, I'm innocent on this one.
- MSMike Schroepfer
Yep.
- HSHarry Stebbings
Um, but you go to Sequoia.
- 4:41 – 7:49
Meeting with Sequoia Capital
- HSHarry Stebbings
Who do you meet? How did it go? Like, just, I'm intrigued.
- MSMike Schroepfer
The first thing, to just set the stage, for anyone who's been in a VC, this is on Sand Hill Road, you know, it's a room full of glassed-in conference rooms. And in Q4 of 2000, because the dot... everyone basically lost their shirt in, in, in companies. It's, the best I can describe it is like a zombie apocalypse movie, where you're like walking through the mall and nobody's there. Like, that's what it was like. I was like, "Where is everyone? Why are we the only ones here?" Where like, all the conference rooms are empty but us, basically. So, and then, um, the, Mike Moritz was the partner who did the investment. Legendary investor at Sequoia, you know, originally a journalist. Um, and he was just, I just remember sitting across from him, and he wanted to like, do a one-on-one with me and just probing que- you know, his like, deep investigative journalistic questions about my childhood, this and that. "Why do I think this is gonna work?" And you know, he wasn't a technologist, but he was just trying to get the root at like, who we were and what problem we were trying to solve. Um, and that, you know, there was a series of meetings after that, but eventually, we had, you know, we had prototypes we had built, we had customers that we had, you know, to give to them, to, to explain the problem to them. So I think what we had was really solid. But I think they, you know, believed that we could go off and build this.
- HSHarry Stebbings
(laughs) I loved that with Mike. He asked me the same. I came out of like an hour's meeting and it felt like an incredible therapy session, and I'm not sure if I passed or failed. (laughs)
- MSMike Schroepfer
Yeah. No, no, no. You didn't know. I had known, I was like, "Ugh, that went terribly." I was like, "Sorry, team." Like, 'cause I really screwed that one up.
- HSHarry Stebbings
(laughs)
- MSMike Schroepfer
Like, "Let's keep going." But no, but um, and then he was an incredible board member, and he was incredibly tough on us in the, in the, in the board meetings. I mean, I...I- I'll just tell one other story that I often tell to our founders, which is just sort of like, I was the engineering guy as- as... So I started the company and then found our founder CEO and founder head of product. And, uh, you know, and then word on the board is enterprise software, so we signed a big contract with a customer and say, you know, "Hey, at this point, we're gonna deliver this version of the software with these features." So we spend a bunch of time, you know, designing and testing and all the rest of it. So I came to the board, I'm like, "All right, here's our schedule for delivery. We're gonna deliver." And of course, we don't make money till we ship this thing. So just long presentation about all the things we need to do to get done, and the board kind of sits back and they said, "Have you thought about shipping the product a quarter earlier?" And I was like, "Nah, never, never thought about it." It's like, we're, we're- we basically take Sunday afternoons off, like that is our current schedule. (laughs) It's like, I get a half a day off a week, and we booked a schedule that was six and a half days a week. (laughs) And it was like, if we could ship it a quarter earlier, we definitely would have. But, you know, now as an investor and as a board member, I get it that they're like, it's the right question to ask, which is like, you wanna push. It's like, can we do this faster? Can we do this cheaper? Can we get more customers? 'Cause building a company, it feels like it's big moments, but it's more a game of inches. It, it's, it's every single day, it's every single customer, it's every single, you know, diff. And so I think that that is a good board and a good... In the right way, appropriately. They won't ask you to do things that, you know, that affect the laws of physics, but, but they will push.
- HSHarry Stebbings
What else do you think makes a great board member? Shut up, the joy of this show for me is like, I'm forever learning, I'm early in my career, I'm trying to be the best board member that I can be, but I use it as a learning tool quite frankly.
- 7:49 – 12:52
What Makes a Great Board Member
- HSHarry Stebbings
When you think about being a good board member today from having Mike on your board to seeing many different boards, what do you think makes the best and how would you advise them?
- MSMike Schroepfer
I mean, and I have had the, the, you know, I've been on board, several boards myself, including a public board. You know, I've sat in on Meta board meetings for a decade and a half, and so I've seen, uh, an amazing set of people there. Um, you know, I think the best boards that I've seen, the most high functioning boards are the ones in which the team is actually treating the board as a resource, as a set of external people who are invested in the success of the company, but bring a different set of broad perspectives to the problem. And so you come to the board, not with a report out and everything that's happening, you don't treat the board meeting as a pass-fail test that you like come in and like hope it's over. You come in and say like, "I've got these two big strategic challenges, you know, do we go vertical? Do we go horizontal? Do we go to Europe? Do we do the US? Do we launch early? Do we wait?" Like, and then you try to tee up the question in a way that you get a broad range of feedback from a variety of people who have good sort of horizontal experience. And I think the key of a board member is to give critical advice, but to remember it's not your company, it's the entrepreneur's company, you're not there five days a week. Um, and so you've gotta think, I like, I try to say fewer things but more impactful generally speaking, because it's easy to fill the time with lots of advice and if I give 30 pieces of advice to a founder, they're gonna remember five of them. And so I sort of like, what are the... I'm always running an algorithm in my head is like, what are the most important highest value things this person needs to get right? Maybe it's hiring, maybe it's the first customer, maybe it's this particular role. And like my job is to help elevate that executive and get them focused on the, on the most critical bits, um, at any one, one point in time. And so I, you know, I think that's what a board... And then you need to go to work as a board member when, when, when the, when the inve- you know, entrepreneur is like, "I'm looking for this hire, I need this customer introduction. I need this." Like get to work. Like pull out the Rolodex, call those people, call their recruiter, refer people in, like that is your... At least that's the way I treat it, is like part of why I ended up becoming an investor is like that's what I'm here to do, is to like go to work for these entrepreneurs and, and help them build.
- HSHarry Stebbings
Someone once told me very wisely that when you make the move from operator to investor and board member, you need to move to a role which is best described as nose in, hands out. (laughs) Do you find that difficult? Shut up, you're a builder, you've been a builder for years, suddenly now you can't put your hands in and get, get involved.
- MSMike Schroepfer
Yeah. You know what's funny is, for me at least, I think that was true... I, I think if I'd made this transition 15 years ago, it would've been a huge challenge for me. But when I, you know, 'cause when I was running a smaller organization, by the time I sort of switched over, I was running a 35,000 person organization. We had gone through several acquisitions including, you know, the Oculus VR acquisition, Instagram. So I would describe, you know, I've talked to Julian about running workplace, you know, I was often running four or five lines of business simultaneously at Meta. And so I was describing my job as a very, like a one day a week board member to five companies at Meta rather than sort of operating one verticalized thing. 'Cause I'd be working with the data centers team over here, I'd be working with the VR team over here, now our ads team, now Instagram. Like that's not a role where I could get in and become a critical path on anything because these are each large things and I would have to figure out how to get the right leadership, point them in the right direction, get the right context. So it was a much smaller shift from that to investor than if I was running one of those things to investor, then I could get how it's- it's harder to sort of elevate and sort of step out.
- HSHarry Stebbings
Shut- these are all like multi-billion dollar business units and you run like five of them at the same time and you say it very casually, but literally how does one do that? I know it's a base question, but I'm just racking it.
- MSMike Schroepfer
No, I mean, I, I, I think that you have to have some humility about what it is you can do and realize that actually the most important thing, just like the most important thing the board can do is have a great CEO running the company. And so, you know, when I had a great leader running these areas, then you know, 90% of my job was done. And then my job was to sort of again, have humility about like not trying to sit in and do their job, but answer the question, you know, I'm often asking the question of like, "What are they gonna do naturally that they need to change?" So like maybe there is some inertia in some direction that made sense, but the market conditions have changed or we need to adjust or pivot. Um, and, and then how do I...... you know, nudge, m- and apply pressure sort of in that direction, or apply context for feedback. And there are times when people are fully aligned. Like, you've got a great leader, their strategy makes sense, and like, there's just not a lot for you to do. And like, you have to recognize that too, and like, back away a little bit and be like, "All right, that's going really well." So, usually, you know, what it means is you're kind of scanning for, like, where are the places where sort of we need the most help? Maybe I need a new leader, maybe we need to switch our strategy, maybe that leader's great but they're hiring a team so then I'll go spend all my time out recruiting, trying to find VPs to come join that leader. Like, it's just sort of a constant process of, like, what's the, what's the highest value thing across this org, and how do I, how do
- 12:52 – 18:24
Common Destructive Elements in Teams
- MSMike Schroepfer
I do it?
- HSHarry Stebbings
What did you find was the most common element that teams did naturally that was most destructive of value?
- MSMike Schroepfer
I would say the two hardest things that are sort of common across everything from that, what I see in my climate tech, you know, portfolio companies and others, is sort of, um, you know, m- my joke is, like, inertia is the most underappreciated sort of force in the universe. Which is, you get a people, set of people together, they're running in one direction, especially if they've gotten any success. I got a first customer. And this happens with startups too, it's like, "Great, we've got this customer. They're really excited. They really want us to do all the following things. They really want us to build a full stack, you know, electrolyzer rather than build a platform to sell, so we're gonna go, we're gonna go in that direction." You have to a- ask yourself, it's like, "Wait, wait, wait, wait. Is that where the big market is?" Right? "Is the big market actually selling this technology to a bunch of other people rather than trying to build a big vertically integrated thing?" Um, you're gonna start running in that direction 'cause it's what's in front of you. So, that's inertia pulling you in that direction, where it may not be the right thing for the market. So, I think the biggest thing by far that orgs do, is like high functioning orgs, is they're like, doing the right thing, they're just like operating in a local maximum, using inertia to go in a direction, and you've gotta either provide them with context or sort of nudge them to say like, "Hey, hey, hey, this market size is 10 billion, this market size is 100 billion, so every minute you spend over here, you're like, missing this bigger opportunity. Like, are you sure?" Um, so that, that's sort of one. Or, um, I think the other is the challenge in any org, from zero, from my startup recruiting/hiring, you know, Xero, to Mozilla when I joined it and it was about a dozen people, to Meta, to the startups we, we operate, is people. When the N is greater than one, you've got a, you've got a people problem. (laughs) Right? 'Cause you've gotta get people together, they've gotta work together, everyone wants to play their part. And so, chief people challenges are by far the hardest and the most common across these. And it's, and it, you know, the best organizations, I describe a good leader as sort of like a, like a conductor of an orchestra. It's like, I can have the best players in the world but if they're all playing from a different song sheet, it's gonna sound terrible. Right? So, you've gotta kind of A, get the best players, and everyone focuses on that, and that's great. But I think people way, way undervalue the sort of coordination and optimization. I've seen the difference between a well-organized team and a not-well organized team. And it, I think it often trumps the, like, quality of the individuals. (laughs) So, you've gotta spend a lot of time, like, does everyone know what they're doing? Do you, are you asking the bass player to play the drums, you know, and the percussionist to play the trumpet? Like, that's gonna go real bad. Like, if they really like to play the drums, give them the fricking drums and figure out how you need drums. Like, that is your job as a leader, is like, how do I get everyone sort of in the zone, where they're coming to work every day going like, "God, I am doing the best fucking work of my life." Excuse my language. Like-
- HSHarry Stebbings
(laughs)
- MSMike Schroepfer
... and that, the m- when you get that happening, there's just like, to me it's like, it's kinda why I do what I do. I get this, like, tingle on the back of my neck. It's that, like, the goosebumps feeling, of like, "Holy sh- Holy, this is awesome." Like, and that, that feeling of this, like, team of people just, just, just doing the best work of their lives is really important. So, I think that that, people undervalue that, and they're like, "Great, I hired a bunch of people, I did one all hands, and I'm like, our goal is to get this customer. Then I left the office and I'm good, I've did my job." Like, nope. (laughs) That is not how you do that. (laughs)
- HSHarry Stebbings
Ca- can I, can I just break a couple of elements down? I need a bigger hand for the amount of notes that I'm taking from this. Um, but when I, when I think about what you said, I just wanna start with the inertia element. We always hear that speed is the most important determinant in getting from zero to one, or not product market fit to product market fit. I'm just intrigued how you think about speed and sheer activity being the most important thing, versus strategic thought, picking the right direction, and being much more thoughtful. Which side of the camp do you lean on, activity and speed, or strategic thought and real ...
- MSMike Schroepfer
I would say two things. I think generally speaking, when in doubt, I think speed, speed often beats sort of good strategy. I think if you kind of zigzag more quickly, you'll probably get there quicker than they are. So, I think, you know, when in doubt, go for speed, is what I'd say. But it depends a lot on the problem domain. So, and this is, I think, when you talk about what I'm doing with this climate tech. When, you know, when we built data centers, you didn't, like, iterate your way through a data center, right? You design the whole thing, you figure... It's like, I can't go like, "I need 100 acres of land." Like, "Oops, I need 120 acres." Like, that doesn't work. You don't get to pivot 18 months into that project. So, like, I- I distinctly remember, you know, all these conversations about like, they're like, "Okay, so how much capacity do you need in 18 months?" And I'd be like, "I don't know." And they'd be like, "Well, we're kinda, like, ordering steel, and like, you, you can't, like, buy that a day b- you can't go to Home Depot the day before. So like, we kinda need to know." And so we're like, "Oh, crap. We gotta get, like, better at capacity planning." There are problems in the world where you, you, like, if, if you don't get good at planning, it's really gonna hurt you. And I think the biggest mistake people make is they sort of, it's the one hammer problem, which is just like, speed, speed, speed, or planning, planning. And like, the best operators are, it's a much more nuanced. It's like, "Ah, I've got the lay of the land. This is a, this is a problem where planning it correctly is really important, and this is a problem where speed is really important." And so we adjust our, our sort of operating cadence appropriately. So, so it's a sort of, it's a tough answer, 'cause it's like, it's kind of a little bit of both, but like, the bigger answer is, really understand the nature of your problem and optimize your process for that problem. And that, that's what... and then flex.... depending on the problem. Like, those are what the- the, like, the tier one operators do.
- 18:24 – 22:36
Best & Worst Decisions
- MSMike Schroepfer
- HSHarry Stebbings
It makes me think of the Jeff Bezos kind of decision-making framework of one-way versus two-way doors.
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
And thinking very carefully about that.
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
When you re- when you review your best and your worst decision, I hope I'm allowed to ask, uh, what would you say they were and what did you learn from them?
- MSMike Schroepfer
I guess you should say that some of the things that I am most proud of, like, fall into three categories. Um, one is, is, is like betting on people. It's like having an intuition about this person, it's like, "Huh, I think they're, they're gonna be incredible, so, like, let's invest in them." I think it's, um, emergent things from a culture that I didn't actually, like, decide on that thing, and I'll tell a, I can tell a couple of stories in, in, in that regard. Um, and then the third is, is, is sort of, like, roughly calling technology trends. Like, not perfectly, but, but, you know, I think, uh, you know, we, we had, had a pretty good history, you know, we built an AI lab at Meta in 2013 and it was kind of like, "Huh, this AI thing is gonna be pretty big, let's, like, start building the skillset." And that's why you see Meta doing LLaMA now and a bunch of other things 'cause they've, we had all the people, we had all the skills, we were doing that, um, and the companies who hadn't had to pivot quickly and, and do sort of crazy things to, to sort of catch up to, to the current state-of-the-art. So, but I think it fits in those three categories.
- HSHarry Stebbings
If I'm pushing you, Schrep, sorry.
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
Sometimes I have to be more journalistic.
- MSMike Schroepfer
Go for it.
- HSHarry Stebbings
Wha- what's the best?
- MSMike Schroepfer
What's the best what?
- HSHarry Stebbings
Decision. So, like, the best decision I ever made specifically was buying the domain name for 20 VC for, for an amount that I could not afford because it meant that there was no humanly possible way I could not do it (laughs) and I just had to-
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
... commit everything I had.
- MSMike Schroepfer
I would say there's, there's people we hired at Meta that were really transformational and I think that that, uh, you know, at, in the Meta context is, is probably one of the best things we did, um, is get those people in the organization and the things they built. Um, you know, I think that the, the culture of open source at Meta has done a lot for the world and done a lot for Meta, so, you know, everything from React to PyTorch to now LLaMA, you know, is, is out in the world. I'm very, very proud of that work.
- HSHarry Stebbings
Can I ask, also, I actually spoke to Yann LeCun before this, uh-
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
... love, love Yann, amazing dude, uh, why did you do it in 2013? Like, now it seems very obvious and, you know-
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
... you have, why that moment did it seem like the right strategic decision?
- MSMike Schroepfer
You know, this is 2012, 2013, so a couple of things had happened. One is, from a company perspective, we'd spent the last, you know, first five years I was there, like, fighting for dear life. It was sort of, you know, how do we build a business on top of social network? Which when I joined was, you know, this is the other thing is everyone thinks these big successes are obvious at the time. I've, my experience is exactly the opposite. When I joined in 2008, I had a lot of people convince me to not join, um, because they were like, "Social networks are big, nobody makes any money. Look at email, look at, uh, AOL Instant Messenger. Everyone uses them, nobody makes any m-" MySpace was bleeding cash and was actually bigger than Meta at the time, or Facebook. It all looks obvious now. At the time, it was absolutely not obvious. (laughs) Um, but, so we spent a lot of time building a business and then the whole shift to mobile happened where it's like we built this whole business on the web, we had to move it to mobile. Like, so, and then we kind of, not like everything was perfect, but there wasn't, you know, such an eminent crisis all the time and, and Mark and I had a lot of time to talk about, like, "All right, what are the, what are the things we wanna proactively build in the future?" And that's when you saw, you know, move into, first move into VR shortly thereafter and then move into AI. And it was kind of a, like, where do we think computing platforms are going? Do, do we think that, like, the little, you know, rectangle in my pocket is the, like, summation of computing, uh, in the future? And, and our analysis was, no, it's gonna both be more, uh, integrated into my real world, gla- you know, smart glasses and immersive in VR, and it's gonna be smarter, it's gonna be AI. So we, AR, VR and AI became the big, like, bets the company made, um, you know, at the time, and, and so we did work on VR and then we, like, decided to build. And I remember 'cause we were like, "Should we build a general purpose research lab?" And Mark over here was like, "No, like, we should focus on AI." And so then when we decided to focus on AI, met all the leads of AI and met Yann and, like, that, that's how we
- 22:36 – 31:12
Lessons from Misprediction
- MSMike Schroepfer
built it.
- HSHarry Stebbings
Can I ask you what technology shifts did you mispredict or get wrong? And are there any lessons from that misprediction?
- MSMike Schroepfer
Well, I think the timing is, is, is often challenging on these things. So, like, how soon something is gonna become big is, is, uh, is often a challenge.
- HSHarry Stebbings
Can I push back on you there? In companies it's a challenge, i- i- like, startups it's a challenge 'cause you don't have budget and if you are too early, it's the equivalent of being wrong. But when you're Meta, actually, you have enough cash to sustain obviously f- you know, i- indefinitely. And so being early on VR just means you get more lessons, you get more reps, no?
- MSMike Schroepfer
Maybe. I still think it's important to be right because, like, you are, you are effectively distracting resources from other things, right? You, you could be putting those resources towards other things and you could miss... Uh, if you, if you pick this trend over that one and this one's the right one and you're investing over here, you can be in, in sort of deep doo-doo. I think you're right that, like, startups don't get as much luxury of time and I think timing is, well this is as a climate investor, a lot of the questions I ask is I have to, like, as like, I can see what the future's gonna look like in 10 or 20 years. But in the time horizon of this company, which is five or 10 years, uh, sort of, you know, to, to full self-sufficiency, will that market be there, right? And will it be able to be there? And I think that's a really, really key question we try to answer for a lot of these things is, "I love this technology, I love this team. This is definitely gonna happen. Mm, not sure about, mm, not, maybe too early, maybe too late." And I think timing really, really, really does matter. You know, when I was at Mozilla in, in 2006 to 2008, I get pitched of startups wanting to start browser companies, right? And I was like Firefox 1.0 when it came out, its, like, big innovations were, like, tab browsing, pop-up blocking and plug-ins. And, like, once you did that, like, what's the new f- and then Chrome came out. So it's like you have Chrome, you have Firefox, IE was like... As a startup, how do I differentiate there, right?... and so, um, and you see this in electric cars, right? Tesla was the first out, and electric cars built a lot of thing. Rivian shows up, they're like, "All right. We're gonna make high-end pickup trucks." Right? What does the next electric car startup go do? Like, what's the market entry that they can do? It, it's a crowded market. It's hard. It's a, it's a bad time to start a new electric car company. So, so, so I think you need to, like, figure out when the markets- And I think this is what's exciting, uh, for, uh, and I'll, and I know you wanna jump in, is it's like, I see a lot of disruption happening in, in the, in the power markets. And so I'm really excited about this, because disruption means there's a shakeup and there's opportunities for, like, market changes and entrants. And like, that's what you need to have a viable company. If the market's really static, it's very hard to start a company.
- HSHarry Stebbings
So with respect, you know, you speak of the timing there, and you know, if companies need longer, they need more cash. Respectfully, you fund some non-conventional companies. In other words, companies that are not B2B procurement payments businesses that venture investors on Sand Hill love. Do you worry and think a lot about financing pathways and who's gonna fund it next round, and how that pathway's gonna look?
- MSMike Schroepfer
Yes. And I think the, the, the key thing that I, that I apply here and learn i- is, you know, how much capital do you need to spend to prove the core technical risk? And I think there's a huge variance in some of these. You know, some projects it's like, I need to go spend $2 billion before I know whether this thing even works. And others it's like, oh, this is actually a cell we're gonna build. You know, it's about the size of a refrigerator. That is the core technology. We can build that with $10 million. And then a large-scale commercial facility that costs $100 million is 20 of those. And so when you go to finance that, you're like, "Oh, like, we have already built this thing. We know how to build it. You can see it, it works. We're just gonna build a lot of them." You're not trying to scale it up or do something different. So, so I think sort of efficient use of capital is really important. Time to revenue is really important. And I think the, the hardest thing that you didn't ask, Harry, is I think in climate tech, it's like I have a very, like I spend a lot of time doing philanthropy, and I, and I spend time investing. When I invest, I'm like, "I'm a, I'm a capitalist." I'm like, your pitch to your customers is, "We are cheaper or we are better." And then you're like, "Oh, by the way, we're good for the environment," is like the little asterisks at the end. 'Cause my thesis is, like, most people are busy. Most enterprises are busy. You can't lead with a, like, "We're better for the environment, but we're more expensive," or this or that. So if you look at all of our companies, their core pitch is like, "You want our product 'cause it's a cheaper form of ethylene, because we produce 24/7 green energy and capture carbon, because you don't have to take out your trash as much as a consumer and it doesn't stink." And that's awesome. Like, this is the pitch. And then, oh, by the way, there's massive climate impact on the backend. So, and that's what gets me excited, is these technological and market disruptions mean that, like, you have the opportunity to enter with a better product, you know, that then has all these co-benefits. It's sort of, you know, again, back to Tesla. The reason they got successful in the early is like, the car's fricking fast. You're like, "Check out my car. It's faster than yours," right? Like, oh by the way, it's electric, right? So that, that sort of entry point works, um, and that's what we look for.
- HSHarry Stebbings
Can you just talk to me about how you think about time to revenue when investing today? Because I worry always with bounty investing in this space that a lot of things remain science projects. Talk to me about how you think about time to revenue and how that impacts your investing decision-making.
- MSMike Schroepfer
To me it's a question of how quickly... I mean, and at each funding gate you need to basically be retiring risks, right? We've got a core technical risk, we've got a core market risk, we've got a team-building risk, whatever, whatever it is.
- HSHarry Stebbings
Do you set those with teams ahead of time? Do you, like, identify them post ra- How does that work?
- MSMike Schroepfer
I mean, that's part of the funding process. It's like, all right, you're raising this money, what are you gonna get to before you need the next funding round? And then what are you gonna do with that? Because you kind of need to pencil it out and say like, "Will that next round of investors invest, you know, based on if you succeed," right? Um, there's an old joke that, like, the worst way to fail is to, is to like, have the, have the wrong plan that, you know... The, the, the best way to fail or the worst way to fail is like, achieve your plan and fail. So like, you need to set the right milestones, so, um, and, and, and get it done. But, um, and then again, it, it's... I think there are some businesses where you can get to revenue quickly. Like, Mill is sold out their first run of 10,000 units. They sold them for a thousand bucks-ish each, um, you know, and they're now on rev two that's cheaper to make and better in a whole lot of ways. Um, you know, Dioxycle, who's got an ethylene plant, they're negotiating off-take agreements right now. Like, they have producers who are like, "We want to buy this so that we can use it to make our products." And so by the time they build their plant, like they're... as soon as they flip it on, they're making money, right? So like, these are the sorts of bus- This is years, this is not decades to sort of like do a bunch of crazy stuff and then, and then hope it happens.
- HSHarry Stebbings
What's the hardest thing that climate tech companies face in those early years?
- MSMike Schroepfer
I mean, you're in this too. It's never one hard thing. It's like you gotta build a business. You gotta de-risk the tech. You gotta get customers. I do think that the like... I think the hardest problem is when I'm h- Like, there's this valley of death, which is like, I haven't built this thing and so I don't totally know whether it works. Like, maybe I built a small one on a bench or this or that, but I haven't built exactly what I'm gonna sell and like, who's gonna pay for that risk, right? Because a venture investor says like, "Ooh, that's $30 million to build that thing and if it doesn't work, we lose it." A bank looks at that and says like, "I'd be happy to finance it once you have a customer and three examples of one running," right? And so you run into this like chicken or egg problem. And so this is why I think that a lot of what I look for is like, you can complain about that or you can basically say, "How do we find technologies that are fundamentally sort of smaller, lower capital, easier to get to proof points?" Where you sort of skip all that and say like, "I've got one. It's not lab scale. This is commercial scale. Again, I just need to replicate it." You know, I, I go back and looked at like what happened to data centers. It's like, used to be giant, huge mainframes, and then we went to pizza boxes. Like, why did we go to pizza boxes? Like, we put 48 pizza boxes in a rack. We could just build one giant rack, you know, all on our own. It's because chopping it up into those pizzas made it really easy to, to do it in increments. I only need three pizza boxes. You need 15. This person needs a million. But like, even when we get a million of them, we're buying them one at a time and you just get this awesome sort of de-risking, decoupling of the risks. If you had to build a data center with like, you built one c-... with like, and you spent m- a, a million, like that, instead of a million pizza boxes, on building one machine, like just think of how much risk you're coupling together in all of that, like, "Oh, crap. We like, we misaligned this. We didn't have enough power." Like, and so you just decouple the risks that way. So this sort of like horizontal scale I think works really well for, for hard tech, because it sort of decouples all of these risks and, and then you can, you can just sort of imagine, imagine what happens from there.
- 31:12 – 45:57
Investing in Consumer Hardware & Managing Market Demand
- MSMike Schroepfer
- HSHarry Stebbings
You shipped consumer hardware to millions of people in your time at Meta. How did that experience impact how you invest and identify investments in consumer hardware that you like today?
- MSMike Schroepfer
Well, I'd say that, back to like hard and mistakes, is like I- I- I was most humbled in, in two transitions. So like did software at massive scale, writing huge distributed systems, building, you know, h- hundreds of millions of users. We start building data centers. Building stuff in the real world is different than building software. To, to my point earlier, you have to plan stuff out. Like, you know, if you make a mistake, it's very (laughs) expensive to fix. Like, and so you just need to approach that problem differently. So like we kinda got good at that, and I kinda had an ego. I was like, "Okay. I can build hardware. Consumer hardware, enterprise hardware, eh, it's the same." Oof. When you ship something to a consumer, like A, they have to decide to buy it. B, if they don't like it, they just send it back, and as soon as they send it back, your business is toast. You lose a ton of money on every single return, and if your return rate's above a certain amount, it doesn't matter how good your product is, your, your whole business is toast basically. Retailers are upset. Consumers are upset. Like you're in trouble, and that could, because they didn't like it. Maybe they liked it, but it didn't work. And so anyone who's built consumer hardware, I, you know, uh, I, you don't, you know what a drop test is, but basically I'm building a piece of hardware. So we spend all this time building this exquisite VR headset, and we hand assemble it, and we try it all out. We're like, "Awesome. Now what you gotta do is drop it two meters (laughs) and then pick it back up again and see whether it works," right? Because that's what's gonna happen with the consumer. They're gonna take it out of the box and put it on and go, "Oopsie." And like, it's gonna drop, and you gotta make sure it works nine times out of ten. And so you gotta do that. And then you gotta go to a factory and basically be like, "Okay, I need like a million of these." And they're like, "Oh, we're gonna have to build custom molds and injection and a whole production line, maybe multiple production line. We're gonna build specific tools designed just to build your one thing." And so you're like, "Oof." So like, again, you gotta get good at capacity planning. Like do I need a million? Do I need five million? Like it, do I do two lines or three lines? Do I make those things thicker so it doesn't break when I drop it? Or do I make it thinner 'cause it's lighter? Like it's just a world of, of like micro-trade-offs on all of these things, and so this is a place where experience really, really, really matters. Like, um, the, the difference between people who've shipped consumer hardware and, and haven't, like you get to learn all these lessons for the first time. And again, back to, uh, you know, this is why I talk about wha- when I decided to invest in Mill, it was like sort of later stage than I normally do and a little bit bunch of other things, but this is a team that knows what they're doing. And you can see it in the products they build and, and the way they build it and how they get it done. Um, and so that, you know, that, that's there. And I think this is the last thing I'm gonna say about it. Good thing about hardware is like I think it's a little bit harder. The, the like the mistakes are less forgiving. You have to plan a little bit better. You kinda have to know what you're doing. The good news is once you get there, like you start getting like a moat that's really deep. So if I'm building a product and shipping it, and I'm at a s- I'm at a five million unit scale, and you're at a 500,000 unit scale, like I'm fundamentally cheaper than you are. So, and like that's just gonna compound as I sell more. And so like this is part of why I'm excited about this area is just like, yeah, it's a little harder. You have to be smart about how you're picking, but like once you get there, good luck catching.
- HSHarry Stebbings
How much cash do you think it takes to get to a sustainable moat? I know it's a general, but like...
- MSMike Schroepfer
I mean, it, it depends on the company and what they're doing. But it's, you know, tens to hundreds of millions of dollars. It's not millions of dollars.
- HSHarry Stebbings
Yep. No, I, I totally get... Can I ask, you mentioned kind of the risks one's willing to take. Are there risks that you're very much not willing to take when investing? It could be timing risk. It could be customer adoption risk. It could be regulatory risk. What are the risks you're like, "I don't take them"?
- MSMike Schroepfer
The risks in order that I worry the most about, like, um, market risk is probably the biggest. Like if, if there's just people who aren't willing to buy it or aren't willing to buy it at your price, like it's an extrinsic factor that you have very little control over. I think the very next risk that's very similar is regulatory risk. If your business is premised on some future law being passed, then like, you know, that's a, that's a binary outcome that's completely outside of your control. And unless I have some information that makes me bullish that that's gonna happen, we're probably not gonna do it. Then you get to like technical risk. I feel pretty good about our ability to assess technical risk, so it means that there are some technical risks where I'll decide like, "You can't do it. You're like violating the laws of physics." But like there's others that it's like, "Okay, well maybe you can, maybe you can't," but like we're willing to take that risk. Um, uh, that's probably the order. And then I'd say probably in the top of that mix too is, is team risk, is like, you know, there's old, old joke in investing that there's the three Ts. There's team, tech, and TAM, total addressable market. Like my joke is like we have three Ts too. It's, it's team, team, and team. Like at the end of the day, like the team is the one that's gonna like figure their way out through some of these hard problems. So like we have to really believe that the team has the sort of, you know, run through walls, get those 30 nos and people falling asleep in the pitch meetings, and then still keep going 'cause they're just like, "Damn it, I have to build this." Like those teams do surprising things.
- HSHarry Stebbings
All right. Uh, again, I, I use this show as a great testing mechanism for myself. I'm looking at this pre-seed now. It's the CPO who, uh, scaled the company to $1.5 billion, okay, which in Meta's world is, you know, tiny, but normal world's it's a $1.5 billion company, scaled to millions and millions of users. As they said, hundreds of millions in revenue, and they're starting a new company in the sales productivity space. And you're like, "Ugh, sales productivity is the worst market. It's a sucky pr- like, ugh, horrible." You're just in a sea of shit.... but they're an amazing CPO and they are great, great product leader. I don't see many of them. Do you just write the $1.5 million check? 1.5 at 15, you get 10%.
- MSMike Schroepfer
(laughs)
- HSHarry Stebbings
Do you just write the check even though you hate the market and hate the product?
- MSMike Schroepfer
Are, are, are you, you always doing deal review on, on these podcasts? We gotta, we, this is like, this is our, our, our RRR meeting on Mondays. Um, I, I-
- HSHarry Stebbings
Shrep, Shrep, I've got, I've got you on the line. Why would I not leverage this opportunity? (laughs)
- MSMike Schroepfer
You're gonna hate my answer, man, which is, uh, it really depends. I think that, like, maybe is the answer. And like, I think the first question is, like, you have to have some, I think of, like, my deal memo is like, what do I have to believe for this company to be wildly successful, right? And so it's like, and it's usually like a one, two, three. It's like, I have to believe this, I have to believe that, and I have to believe that if this happens, this is a multi-billion dollar company. And like, that is, that is the key. And so my question to you would be like, great, okay, team, like four out of four, or three out of four, whatever your ranking system, like fantastic, passed with flying colors. Market, you're kinda like, ugh. You're like, but, okay, so what is the, what is their take on why they think they have a unique angle in? So, like, what do you have to believe that maybe you're like, "I don't see it, but, like, I'll trust them," 'cause they think they have a unique product angle, they have a unique market angle. There's something where it's like, and I have to be like, "If you're right and I'm wrong, this is a huge business."
- HSHarry Stebbings
You have to fundamentally believe that customers are fundamentally frustrated with the unbundled infrastructure that we have today, and they wanna go back to a bundled environment. There's too many tools and they want one platform to sell with.
- MSMike Schroepfer
Yeah, maybe, maybe.
- HSHarry Stebbings
That's what you have to believe.
- MSMike Schroepfer
Yeah, yeah. Uh, uh, you're way, I don't, I don't know this market that well, so you're sort of way out of my market-
- HSHarry Stebbings
Do you outcome scenario plan, Shrep?
- MSMike Schroepfer
What's that?
- HSHarry Stebbings
Do you outcome scenario plan?
- MSMike Schroepfer
What do you mean?
- HSHarry Stebbings
Think about what the exit could be, project A, this could be a strategic acquisition for X, this could be an IPO, this could be a, a buy for NVIDIA, you name it.
- MSMike Schroepfer
Again, I like to think everything we do can be a multi-billion dollar business, otherwise the math just doesn't work. And, um, and I like to think they can be independent businesses. So my, my first plan is, is like, you're gonna make a lot of money, and if you're making cash flow and money, there's a lot of options for you in, in the market. Um, so I don't do anything where I think the most likely exit is a acquisition. 'Cause I just like, I think that's just like not where I, not where I play. Now, we do have to say, like, again, can you make money? Where is this market? Where is it going? Is it, you know. I think we've, we've, I've passed on things that, like, I think your technology's really cool, you're fundamentally attacking a relatively small market, so if you take 50% of that market, you're still a pretty small business. So like, from a market sizing standpoint, like that, I will do that.
- HSHarry Stebbings
Can I be blunt? You said about kind of being a capitalist very much in terms of how you think about investing today, and it being different from philanthropy. Did you take in a certain amount of assets and put them in a fund structure? Like, how did you structure that kind of capital allocation question?
- MSMike Schroepfer
Uh, yeah, two things, yes. I have put, you know, we were putting a bunch of money to work philanthropically, and I am putting much money to work, you know, in, in, in the fund. Um, but I think more philosophically for climate specifically, um, very much like outcome derives the tool and approach rather than the other way around. So it's sort of like this path through where, you know, I, I started this in, during COVID in 2020, which is like, climate crisis, got, I gotta, I gotta do more, I gotta do something here that like, it's too big, it's too hard, isn't the right answer to, like, why am I not doing anything? Which was kind of my answer to that date. Um, and so I was like, all right, let's just like, I'm gonna start directing a bunch of our philanthropic efforts towards the climate crisis, 'cause I can do that on nights and weekends while I do my, my day job, you know, at Meta. Um, and so that's where I started, and we started deploying a bunch of philanthropic capital. And we're still doing that, and we're funding a lot of early stage science and policy work, and I think it's a really good tool for, like, high-risk early stage stuff that's just, like, not commercially viable. But along the way, I, I sort of, as I learned more about climate, I'm like, "This is a $10 trillion problem. This is not a $100 billion problem." Like, a $10 trillion problem, philanthropy and governments can't solve. You need markets. Markets can solve this.
- HSHarry Stebbings
Why can't they?
- MSMike Schroepfer
It's just like, the US federal government budget is $2 trillion a year, ish. If you took the entire US budget and you put it on the climate crisis for five years, you, you could do it, but like, you're just not gonna do that. So, but what, what does work is we spend trillions of dollars a year on, on lots of things, um, and, like, if you have c- capitalist markets going and people making money, and, and clean energy being cheaper than dirty energy, then you just sort of start aligning the forces of the market in, in that direction. You're starting to see this with solar, where in many places around the world, like, solar is the cheapest form of power generation by a large margin. And so, like, people are deploying record amounts of solar not because anyone's telling them to, it's because it's like the economically rational thing to do. So, like, what we need to do is move more things into that category, which is like, "Oh, this thing's, like, cheaper, so we're gonna do that." And then it's just gonna pile on investment. So that's why I sort of moved into the, like, huh, we just like, you know, combined with as I met entrepreneurs, it was like, it's just on a selfish level, a lot of fun for me. It's like, I've started, started a company, I've worked at three or four startups, I've grown companies from like zero to 35,000, and so, like, the entrepreneurs wanna talk to me about, "How do I hire an executive? How do I run a board meeting? How do I site our first plant?" Like, that's fun for me. Like, that's, my Sundays are taking calls from our entrepreneurs, you know, and I'm, like, excited to talk to them at 8:00 AM on a Sunday. So, like, that, that, that part's fun.
- HSHarry Stebbings
I think when you look at kind of the excitement around AI, and then you take a step back and you look at the requirements that that needs in terms of data centers, and what they need in terms of energy, and you look at that kind of as a chain of kind of regression back to the kind of source, so to speak, suddenly the focus becomes energy. And then you look at that and go, "Huh, is Sam Altman right?" That like, energy is kind of, I think it was the, uh, is the currency of the future, I think he said, or aligned to that. Or is Mustafa Suleyman right, that we'll see abundant energy free for everyone, right?And I'm looking at it going, "I don't know." And I'm-
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
... wondering what you think, because you're much more intelligent than me. (laughs)
- 45:57 – 48:33
The Importance of Cheap & Abundant Clean Energy
- MSMike Schroepfer
demand.
- HSHarry Stebbings
Okay, so we have kind of this confluence of new technologies combined with onshoring, meaning that actually energy demand spikes again. Are we able to produce it at that level? And going back, is Sam right that it's, like, energy is the, the, uh, currency of the future? Or is Mustafa right that actually very quickly it'll be completely free and abundant?
- MSMike Schroepfer
Sorry, this is a sort of wonky answer, but, like, uh, I think the next couple years are gonna be messy because what you have is a massive spike in demand in a relatively static industry, and the ability to ramp clean energy right now is, is growing, but still limited. And so I don't think in the next few years we will have, like, unlimited clean energy. I think in the next decade we have a really good shot at it. If you look at the growth of solar, if you look at all these charts you kinda see this exponential curve at the very bottom with solar. It's like all sources of power generation. Like, solar is, like, down here, but it is on this definite exponential curve. Um, I mean, China last year installed more solar in 2023 than exists in the United States. So, like, we're just deploying... Like, it is just in front of everyone. If you actually look, Texas on an average there's a, there's ERCOT, which is the Texas power grid. It shows their power mix. Go there on a 12 o'clock today, you know, in half an hour, and you'll see it's about 50% wind and solar, uh, you know, in the middle of the day in Texas. Now, what's missing for renewables, s- wind and solar are super cheap, is storage because, you know, it's cloudy, it's nighttime, you don't get that. Storage prices, battery prices are on this just, like, precipitous decline. And, and what happens with technologies is there's, like, there's always this, like, I call, like, breaking through the surface of the ice moment where it's, like, it's too expensive, too expensive, too expensive, too expensive. Oh shit, it's, like, cheaper than everything else out there. Um, and, like that, we're kind of seeing that very quickly happen with solar plus battery storage is all of a sudden gonna be cheaper than installing a gas turbine power plant, um, and, and sort of generating 24/7 power that's, that's totally clean. So we're in this really messy transition where it's, like, hard to tell exactly how it's gonna go. But if we can continue to deploy solar, continue to get cheaper storage, I think we got a shot that, you know, in a decade, it... That and then we've got this, like, X factor of, like, I like to have lo- lots of shots on goal and, like, the extra couple shots on goal is fusion. So, like, I think we got a couple credible shots on goal on fusion and if, like, that shows up in the 2030s, then all of a sudden you're in a world where it's like, "Hey, do you have 40 acres? 'Cause if so, I can basically make you unlimited clean power."
- 48:33 – 51:13
The Potential of Fusion as a Clean Energy Source
- MSMike Schroepfer
- HSHarry Stebbings
What are the shots on goal on fusion? Sorry.
- MSMike Schroepfer
What do you mean?
- HSHarry Stebbings
Like, w- why, why are you optimistic about fusion as an alternative?
- MSMike Schroepfer
Because we've got 45-plus startups out there going through what is now really well-understood credible science. There's probably a dozen different designs for a fusion machine. Um, several of them are based on fairly well-understood decades of plasma research. Uh, I'll highlight two. You've got Commonwealth Fusion Systems is based in, outside of Boston, Massachusetts. I went and visited their facility where they are building right now-... their first generation fission machine, uh, fusion machine, sorry. Um, and they set the world record for most powerful electromagnets using superconductors. So they have built the world's most powerful magnets. And this is a kind of fusion reactor which is called a Tokamak, which kind of makes a, a donut shaped like magnetic field, which then you basically burn a plasma at hotter than the center of the sun, and that generates energy that you can recoup. Um, and their whole thing is just like, the more powerful the magnet, you kind of squish it with a magnetic field, and if you increase the power of that magnetic field, it increases the efficiency of the fusion reaction. We have built these sort of things. There's a thing called ITER and others that have been scientific consortiums that have built this sort of fusion reactor that, you know, works. We've got really good modeling on it. So, that's a very serious company, 700 people, lots of plasma physicists. Then you've got, for example, if you've heard of the National Ignition Facility, NIF, in the United States, it's a national lab, and they do a different thing which is they drop a little target and they hit it with a whole bunch of power all at once, and it creates so much energy that it fuses the atoms and creates that fusion reaction. We've done that. We know it works. It releases more energy out than we threw at it. So like, that works. We've done this many times actually in the United States in a variety of different ways, and so it's not a question of like, "Hmm, can we make it?" It's a question of can you make it commercially viable? Which means you need to be able to do all of that cheaply enough and get enough power out to, to absolve the power in. So there's a variety of companies looking at that-
- HSHarry Stebbings
What, what do you think is the timeline for commercial viability? I know that's a really hard question to ask.
- MSMike Schroepfer
Oh, 2030s.
- HSHarry Stebbings
2030s?
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
Okay. So when we look at 20- by the way, um, this takes me back to kind of eleventh grade math class in algebra, when I kind of just thought, "Fuck, I'm out of my depth." Uh, but I'll progress anyway. (laughs) Uh, I got a solid B minus, uh, which was a real win. Don't laugh, Schrep-
- MSMike Schroepfer
Aw.
- HSHarry Stebbings
And I, I know you've managed 35,000 very smart people, but that was a win at the time. Uh ... (laughs)
- MSMike Schroepfer
I think you turned out okay, Harry.
- HSHarry Stebbings
Uh, you know what? It's been fine actually. I still got to manage large amounts of money without being able to count, so it was a win.
- 51:13 – 53:52
Urgency & Rapid Action in Addressing the Climate Crisis
- HSHarry Stebbings
Um, my question to you is, I, I had John Doerr on the show and I actually spoke to him ahead of this show.
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
And my question that he kind of poses, he said, "The sad truth is, although it's important to do, we're too late. The environment, it, it, we're, we're, global warming is happening too fast and we, we cannot stop it fast enough." How do you respond when you, when you hear that?
- MSMike Schroepfer
I would say he's like both right and that's not very helpful.
- HSHarry Stebbings
(laughs)
- MSMike Schroepfer
In the sense of like, yeah, we should've been doing, dealing on this 30 years ago, and we have a bunch of positive feedback loops in the environment that are baked in, unfortunately. For example, glaciers, uh, you know, in the Arctic and Antarctic are, they're moving, um, and like, they're gonna cause sea level rise. And even if we stopped all our emissions today, that's probably still gonna happen. And scientists are debating about how and when and how big, but, you know, there's somewhere between a foot to six feet of sea level rise projected between now and 2100, which is lifetime of, you know, our children. So, six feet of sea level rise is pretty catastrophic, so, and even like a couple of feet's real bad. So, so like, yeah, that's, that's bad. Um, and there's a bunch we don't understand because we just, like, we haven't run this experiment
- NANarrator
Yeah.
- MSMike Schroepfer
... as Earth. So I think there's a question of like, yup, there's like, we should've been doing this three decades ago, but then there's a kind of like, great, what do we do with that? And that's where I agree with John, like his speed and scale thing of just like, we just need to do a lot more really quickly. And I think it's like, and it's a little bit of everything. It's, it's wind, it's solar, it's efficiency work, it's electrification of everything, it's carbon removal, it's sort of adaptation, and we w- we need to do it all. And humans can move very quickly when we need to. Like, and that, that's the thing that gives me optimism. I mean, you know, people kind of just like, "Ah, we don't really know how to build things anymore." It's like, built 10 million square feet of data center in like less than ten years, and they, they're going on trajectories above that. If you like, go back to like, one of my favorite charts is like, ship building production in the United States 1939-1945. It's like 10,000 ships a year to like 100,000 ships a year in like a year or two. Like, that was a war of course, but like, that's an example of like, when we go like, "Man, this is a problem we need to go solve," it turns out you can solve, solve things. So I think getting people oriented towards like, concern because it's definitely some bad stuff happening, but like, great, what do I do with that concern? I vector my energy into trying to make it better. Like, get more clean power, more electrification, more efficiency, more carbon removal. Like, the more we get deployed, the better we have a shot at like, where we're at, which is reducing the harmful effects, not eliminating them. I mean, that's the reality of where we are.
- HSHarry Stebbings
I love the way
- 53:52 – 56:05
The Role of Brazil, India & China in Climate Change
- HSHarry Stebbings
you say about the speed of humans moving. I don't know if you know anyone from Europe, but alas, (laughs) we do not move so fast, Schrep. (laughs) We will, we will have an espresso before we address this climate crisis. Uh ... (laughs) Uh, uh, my question to you, and sorry for the hard questions. A dear friend of mine, Konstantin Kisin, uh, says actually it's almost arrogant of us in the West to expect Brazil, India, China, the largest nations who will control the future of this climate in terms of global warming, to expect them to align to us. They have fought for years to have any form of life out of poverty, and to say, "Well, you know, actually you should forget economic growth and you should prioritize climate," um, is, is almost naive. Do you agree that the future of climate change will be decided by Brazil, India, China, and how do you think about Xi Jinping prioritizing climate over economic growth?
- MSMike Schroepfer
I think the climate crisis is f- fundamentally a humanitarian crisis. I think this is the thing that people get wrong is like, it's not about the planet. The planet will be fine. It's gonna outlive us. It's about how many people are, are, are suffering and are going to suffer because of the climate crisis. And I think the answer is like, prosperity, energy availability for everyone o- on, in, in the planet. And so I, I don't like this either/or scenario, and I, I, like, the thing that I like about technology is it is the one thing I know that shows up and changes the ga- the rules of the game.... you're like, "Do I wanna have this or that at current prices?" And then I show up a decade later and go like, "Actually, turns out these batteries are now a tenth the price they used to be. And these solar cells that were more expensive, they're now cheaper than this other thing." And so I think we shouldn't be asking people who are affected by this to make sacrifices. We should be investing our time, energy, and money into making them not have to make sacrifices because we're gonna deploy technologies at a scale that makes it easy for them to cheaply get access to clean energy, clean water, and, like, a place to live. And that is a future we can have if we continue to deploy solar, batteries, fusion, electrification of everything. It's like, that's- that's the future I believe we should make, and it is, I think, compatible with- with the entire world.
- 56:05 – 1:05:47
Navigating Clean Tech as a Venture Investor
- MSMike Schroepfer
- HSHarry Stebbings
When you think about venture investors, say, like me, I worry that we're gonna see a ve- well, I- I think we might see a ve- load of venture investors lose a lot of money investing in hard tech or spaces that they're not used to. How do you think about advise this wave of venture investors who's now moving into this for the first time who are not used to investing in this category? How do you think about that and advise them?
- MSMike Schroepfer
We need a lot more money in this space. So I'm not a, like, negative person on these things. I'm much more of the optimist. And so as I- we need 1,000X venture investment. We need 1,000X the startups. We need more people switching from other careers into clean tech. Um, we need that to be a job that's good for them from an economic standpoint. (smacks lips) And so I'm excited about more people. So I'm more on the fence of, like, how can I help educate people to make sure that- that we do this well? And I think it just basically boils down to, you know, everyone has something to bring to bear on these problems, uh, Harry. Like- like, some of the best investors, some of the best tech investors weren't techies. You know? We talked about Mike Moritz, he was a journalist. He wasn't a computer scientist. The legendary investor. So I think it boils down to always having a humility. And I actually think this is a place where techies like me can really get ourselves in trouble, which is, like, thinking we're too smart about a problem, about the market, about an entrepreneur. And so, like, I constantly have to remind myself to, like, eat- eat- eat humble pie every single day and be like, "Yep, yep, I don't know this." You know, ask questions, don't talk at people. Um, and so I do think it's a question of just, like, intellectual curiosity, and learning a market and understanding it, and some humility about what you know and you don't know, and just, like, learning from others. The beauty of this is, like, the number of times I've asked people a question they're like, "I don't know what that means," or like, "What's that acronym?" Or like, "I guess I should know that, but I don't." Like, I've got laughed at exactly zero times saying that. So, like, I just try to run that as like, "Hey, plasma physicist," like, "you just said three things I don't understand. Can you walk me through it?" Like, and they're just, like, pumped to tell me. And that's just the best part of my job. It's like I'm getting a private education on, like, how this fusion thing works. Like, so I just think you need to approach it with, like, humility, intellectual honesty, and like figure out what it is you bring to bear. So like okay, maybe you don't have the physics background, but you really understand people or you really understand markets or you really understand the sales motion. All of these companies are companies. They need to sell stuff. They need to hire people. Like, you know, the- the- the hard, nerdy physics is- is usually a- a part of it, but it's not the whole thing.
- HSHarry Stebbings
What do you know now about investing that you wish you'd known when you started GigaScale?
- MSMike Schroepfer
I think it comes back to what I just said. I think the biggest mistakes that I have made is getting too excited about a technology and saying like, "Ooh, this technology is definitely the one that's better," and not thinking enough about the market and the entrepreneurs. It's like, well who's gonna buy it and who's gonna pay for it? 'Cause the world is full of this thing is cheaper, better, faster, but there's a whole bunch of reasons why people don't wanna buy it. Um, and- and like that- that has been the real humbling, is just like not trying to outsmart the market in how great this new technology is, um, and paying a lot of attention to that. I think the other huge mistake, I think that the biggest, like, misses I've made is sort of trying to outsmart the entrepreneur. And that's basically like, "Ooh, I love that entrepreneur. They're so good. But like, I don't really like the market they're in." And then they pivot into a different market that I really like and I was like, "Oh, should've invested." Like, and now they're in the hot market and everyone's trying to throw money into them. So the definitely mistake I've made that I- I try not to repeat is like, oh my god, you're working on climate problems and you're amazing and you're thinking through these problems. Like, I'm gonna go ahead and get behind you. Like, I- I've definitely missed out on- on- on some where I just, I should've gone in and again tried to not outsmart... Both of these basically are me eating a lot of humble pie by trying to either outsmart the market or outsmart the entrepreneur.
- HSHarry Stebbings
Sure. Given it's your money, you don't have the, um, kind of rules or barriers or constraints that a traditional fund manager would do which is like, "Well, I said to my LPs that I'd invest and get 10% ownership. I said that I'd only do C, now I'm doing B." How do you think about the constraints that you have around you? Do you have any? And how do you think about that and when you break them and when you don't?
- MSMike Schroepfer
I think the best part about it and the r- I- I- I spent a lot of time talking to a lot of friends to figure out like, should I just raise out of the gate or should I do it this? And I went here because my life is basically my- like my north star is high frequency learning. It's like high frequency experiments. How quickly can we learn things? And I think the problem with all of those things is you like decide everything up front. We're gonna be this stage, this amount, like and I have all these boxes. And it's like and then a deal comes in and you're like, "Oh I can't do that because it doesn't fit this." And like but I'm like, "But that's an amazing deal." It's like, "Well, but it, you know, blah, blah, blah." I was like, that drives me crazy. It's like fundamentally we're gonna put money to work against great companies that are gonna affect the climate crisis and then we're gonna make a bunch of money from that and cause a bunch of FOMO from everyone else who's gonna be like, "Why the hell didn't you let me into fund two?" Like, that is the game we're playing. And so it allows me to try lots of things. So like we've done super early stage. You know, uh, we've done some really late stage. So we've done unannounced but we've done some Series E, F, you know, companies pretty close to exit. And so it allows us to like look across the whole spectrum of companies and understand it and- and then really understand and dial in where is it that we are uniquely advantaged? Where do we provide the most value? Where do we think the opportunities are in the market? Like I get to run all those experiments rather than just pick a strategy and execute it.
- HSHarry Stebbings
What did you learn from those experiments now you've done that full gambit from very early to, you know, Series E, F?... would have been the takeaways.
- MSMike Schroepfer
Oh, come on. You're gonna let me give away all the secrets to everyone else? Is that what this podcast is about?
- HSHarry Stebbings
That's why the show is so successful, dude. This is why. 'Cause we monetize your wisdom. Come on.
- MSMike Schroepfer
But, uh, uh, okay. Well, uh, I believe in open source. Um, so, uh, (laughs) again, all humility. It's not like I've been doing this for 20 years, so. Um, but, but the, the, um... I think a couple of things. One, you know, I, I guess the first is, this is fundamentally a game of outliers, and like, you have a bunch of rules of thumb to try to, to get you there. But you're, like, you're trying to find the company that's gonna be this huge, huge success. And like I said from early Meta days, my, you know, my experience is even the best companies go through some significant period of time where everyone thinks they're crap, so... And common wisdom is, like, it's a, it's a pile of junk. And so, like, I, I think there's this notion that, like, oh, we'll spot it and we'll know. It's like, hmm, no. And so I think that, like, setting up your opportunity to be lucky, to some degree, is like, how do I have enough investments, enough meetings, enough things that, like, even if I'm wrong, we still, like, have a shot at, at, at being lucky at these things? Like I said earlier, I think the entrepreneur is everything. It's like, who are the best entrepreneurs? Who are running through walls? Like, when in doubt, back the entrepreneur, sort of over, over the market and other things. And I do think, you know, it is difficult. Like, the one thing I agree with is, like, it is difficult to look across many stages at once because you're just comparing unequal objects. And so if you're, like, looking at two PhDs at a lab who, like, literally haven't talked to a customer yet, and a Series F company, you know, with 50 million revenue, like, it's just, like, hard to compare those two in a meeting on a Monday and decide which one to invest in. So I do think that, like, figuring out ways to sort of sub-segment these things is, is really important. The other thing I'd say is, you know, the best part of the experiment that I've been excited about is, like, assembling this little band of operators around us that I really trust, that really know what they're doing in everything from marketing to HR to recruiting, and, like, applying those to our companies has been... You know, it's kind of a question of, like, does it matter? Is it just, like, free services? It's been sort of transformational, because it means that, like, you know, we start referring our, our teams out to the companies. They're like, "Well, we tried three or four other people and they kind of sucked, but yours is great." And, like, it means our launch was really good and we got all this feedback, or we hired this great candidate, or, like, now we did this. And so that's the fun part for me is like, oh, I know how to build companies. Like, that's fundamentally... I can pick people, technologies, and build companies. Like, that, that is, like, my, what's gonna be written on my gravestone. You know, hopefully below, like, was, was a great father and family member and friend. So, um, so, like, that part has been really fun, 'cause that I wasn't sure. It could have just been ni- uh, something everyone does, but I think we're doing that particularly well.
- HSHarry Stebbings
The final thing before we do a quick fire, you mentioned there, kind of, great father. Um, I do just want to ask. I, I think parenting shaped so much of how we think. What would be, if you could call yourself up before you had your first child and say, "You, you should know this," what would you tell yourself?
- MSMike Schroepfer
I th- don't, don't miss a moment. Like, you don't, you don't get to, you don't get it back. So, like, I think every moment, and it's not, it's not the once-a-year family vacation. It's the dr- you know, driving the kids to sports, driving them to school, walking them to school. It's the-
- HSHarry Stebbings
I mean this with a-
- MSMike Schroepfer
I think that's where people-
- HSHarry Stebbings
... respect, I mean this with respect, Shrep. You managed 35,000 people and, you know, kind of, you know, the engineering and infrastructure for one of the largest companies in the world. Did you miss a moment?
- MSMike Schroepfer
I mean, there were always trade-offs. I had to take business trips, you know, but I, I moved, like... I was the coach of the softball team. I, like, volunteered on Fridays at school for lunch duty. Like, I, I had been very fortunate to sort of carve out some time where I'm like, I'm there and just present, and it's something I've decided to, like, really invest into my time. And like, that's why I'm like, hey, eight o'clock on Sunday, I've got older kids now, they're sleeping in, so eight o'clock on Sunday, I can do my calls as an entrepreneur. I ain't missing a thing. They're, they're, my kids are busy. So, but when they, you know, wanna walk to school or, or wanna go get coffee or, or go to a sporting event, like, I'm there, and I'm there 'cause I love it, not 'cause I feel like I'm gonna get, like, an award for it. But, like, it's just, you know, it's your chance to have this tight group of people that you care about and build a relationship with that hopefully spans your lifetime. And so, like, why wouldn't I want to invest in that above everything else?
- HSHarry Stebbings
Uh, someone said to me recently, "You know you've been successful as a parent when your children grow up and they choose to spend time with you." I think it's a very nice one.
- 1:05:47 – 1:05:54
Quick-Fire Round
- HSHarry Stebbings
- MSMike Schroepfer
Yeah.
- HSHarry Stebbings
Um, I love that. Listen, I'm gonna do a quick fire with you. We've had a very, very en- I've loved this. You see why it's, like, the best job in the world for me. Um-
Episode duration: 1:15:53
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