How to Build the Next SpaceX or Tesla

1. 0:00 – 0:49

   Intro

   1. EPErin Price-Wright0:00

      You don't have a defense industrial base without an industrial base. It's been a real wake-up call that we need to get building again.

   2. CLConnor Love0:06

      AI will be a phenomenal tool that can be used in the physical world. The reality is AI cannot turn a wrench yet.

   3. EPErin Price-Wright0:12

      The top 10 most valuable companies in the world, like the majority of them are hardware companies.

   4. EBElena Burger0:16

      What's it like to visit one of these sites?

   5. EPErin Price-Wright0:18

      You're building a physical thing. You're not sitting at a desk on your computer. You're out in the world. It sounds kind of sexy and romantic, but when you're actually doing it, it's rough.

   6. CLConnor Love0:27

      When you show up at Mariana, when you show up at Hadrian, when you show up at Castillian, you literally get people who are so passionate about what they're doing, that produces really good results.

   7. EBElena Burger0:36

      There's that very famous chart of like US power production versus China new energy production. What would it take to close that gap?

   8. EPErin Price-Wright0:45

      I don't think that that is a technology problem. I think that that's a...

2. 0:49 – 5:09

   No Defense Base Without an Industrial Base

   1. EBElena Burger0:51

      Connor and Erin, thank you so much for joining the podcast today. We're here to talk about AD50 and this year's list, and let's just get straight into things. Um, I know a big theme of this year was the American industrial base. Can you talk about what we've learned this year and why that's such a big, important theme right now?

   2. EPErin Price-Wright1:14

      We've been saying for a while, you don't have a defense industrial base without an industrial base, and I think this year really put that into perspective, um, you know, with c- conflicts going on in the world and, and realizing that, um, you know, the hollowing out of our industrial base that's happened over the last several decades actually has real consequences on the battlefield for soldiers, um, both, you know, A- American soldiers and our allies. And I think it's been a real wake-up call in the United States, um, that, uh, we need to get building again.

   3. CLConnor Love1:44

      Yeah, I mean, I think it's also something that is not just one factor, but it's multiple factors that are all kind of happening at the same time. And when you take a step back and you say, okay, world conflict, you have kind of a continued evolution of the capital markets, which I'm sure we'll talk about a bit later, about capital flowing into this ecosystem. But I think one of the bigger things is you actually have an entrepreneurial base right now who is effectively raising their hand and saying, "I'm gonna build in this ecosystem that's incredibly important, not just for our nation, but also you can build really valuable companies in." So I think it's just this conglomeration of a, of geopolitical factors, of capital markets, and then entrepreneurs that are kind of all just coming together and, you know, I, I think it's a really interesting time to be building, and it's a good time for us to be investing. When we looked at AD50 this year, we thought about, uh, you know, kind of where we're at in the history of American dynamism. And we're still early, but I think one theme that has evolved is like you really need to start looking at American dynamism companies as a totality from end to end, from the input that comes out of the ground to the factory that makes the thing to the end system. And so that's how we've set up AD50 this year, to think through those three lenses. Each one of those pillars is uniquely important to, you know, the end product or the end system. But in the end, like I, I, I don't think people think that way, and a lot of the companies that are addressing, you know, uh, uh, things in our portfolio have thought, you know, from an input's perspective, from a factory's perspective, and now from a systems perspective.

   4. EBElena Burger3:06

      So one theory that a person could develop after looking at the list is, okay, we built out this industrial base for, you know, defense, like building missiles and drones, um, but it's actually a tailwind now that's helping a lot of different-

   5. CLConnor Love3:22

      Yeah

   6. EBElena Burger3:22

      ... industries in America. So there's energy, there's robotics, there's AI. Can you kind of talk about how all of these things fit together?

   7. CLConnor Love3:30

      Yeah, I mean, I, I, it's funny because if you look back in history, I mean, even, you know, 70, 80, al- almost 100 years ago, if you look at how we've developed technology in America, a lot of times it's very much been from the government. If you look at how we, you know, went to space for the first time, if you look at how we developed the internet, um, how we developed nuclear energy, it was the government saying, "We are gonna do this for the purpose of the government," and then the long tail of that technology was super valuable for, you know, you name it, the internet being created, you know, energy being proliferated, you know, across the world. Um, what's different now to some extent is now private industry as well as private capital is saying, you know, we're actually gonna be the impetus that, that develops something. And so to your point, um, you know, the, many of these markets is to serve the federal government, to serve the Department of War in some way. But the beauty about these things is when you build, you know, an industrial base, either, you know, down the supply chain or end systems itself, those inherently have many use cases. I mean, the, the, the term dual-use is talked about a lot in, in investing and, you know, to some extent, like, uh, I, I think it's a little bit of a folly, like focusing on too many things at once is not good for a startup, but it is 100% true of what's happening with any factory that's being built today, any neo-factory being built, uh, any, any, uh, energy production, anything we t- we, we touch in kind of minerals or materials from the ground, it's not just going into a defense system. It's gonna go into my uncle's car. It's gonna go into [laughs] like my kid's future, you know, toy that they have in some way, shape, or form. So I, I, I do think it is a, uh, you know, uh, m- maybe the tip of the spear is focused on the government, but I think in the long run, to your point, like what's happening is these systems will be used, you know, in the Waymo that we took today or, or anything

3. 5:09 – 8:38

   How DJI Went From Drones to Robots

   1. CLConnor Love5:09

      else.

   2. EPErin Price-Wright5:09

      I think a good, a good example of this to, to look at is actually DJI in China-

   3. CLConnor Love5:13

      Yeah

   4. EPErin Price-Wright5:14

      ... um, which start, which has gone through, you know, multiple arcs of, of, of its lifetime and its journey. You know, started out building consumer drones and recognized over the late 2010s that there was a large market for drones in, um, both public safety and national defense, and so built out, you know, a real high-scale drone production business for defense. And now the company behind DJ- or the, the, the, the folks behind DJI are now the largest producers of robots in the world-

   5. EBElena Burger5:45

      Mm

   6. EPErin Price-Wright5:45

      ... because what is very similar to a drone motor is a robot actuator, which is the hardest part of building a robot. So you have this company that over the course of growing a large defense business that itself spun out of a consumer business is now, you know, the world's leading expert on how to build and produce hardware for kind of the next wave of physical AI, both consumer and, uh, industrial. Um, and so I think, you know, this technology transfer and process knowledge transfer between military use cases and non-military use cases is really important and has always been how it works. Um, and it's great to have the federal government be sort of a, a, a subsidizer for-

   7. CLConnor Love6:22

      Yeah

   8. EPErin Price-Wright6:22

      ... figuring out this process knowledge and figuring out the new technology and then, you know, I think I, uh, uh, like our world's greatest gift in the United States is the discernment of the American consumer. Like we are gonna push things to be more capable and cheaper than the government ever will, so that symbiotic relationship, um, in the industrial base is actually really important, and we're certainly seeing that on the energy side.

   9. CLConnor Love6:44

      Yeah.

   10. EPErin Price-Wright6:45

       We're seeing that on the electronic side. Uh, we're seeing that-

   11. CLConnor Love6:48

       Yeah

   12. EPErin Price-Wright6:48

       ... you know, a- a- across the entire sort of industrial stack.

   13. CLConnor Love6:51

       And, and, and to some extent, I, I, I, I don't think this is a super complex, you know, topic, but it's important to kind of restate, which is when you build the first of a kind of anything, it's quite expensive.

   14. EPErin Price-Wright7:02

       Mm-hmm.

   15. CLConnor Love7:02

       Like, when you are building a bespoke, you know, whe- whether it's a military system or a consumer product-

   16. EPErin Price-Wright7:06

       Like zero to 100, it's gonna cost a lot

   17. CLConnor Love7:08

       ... it's gonna cost a lot. And then to some extent, like you, you know, we'll, we'll get into this a bit, a bit later, I bet, but you know, we talked about vertically integrating or using the supply, you know, chain base that you have. Um, the beautiful thing about what's happening right now is we have a federal government and a Department of War is saying, "You know, number one, we're gonna, we're gonna try to actively rebuild some of this, this industrial base." And by doing that, they're actually changing that unit economic decision from the start for these companies.

   18. EPErin Price-Wright7:33

       Mm-hmm.

   19. CLConnor Love7:33

       So, you know, again, it's instead of building 100 things, you can say, "Okay, maybe build 100, but we're willing to pay a cost that the consumer or the commercial market wouldn't pay." And all of a sudden then, you know, that means more machines you can put in your factory, more CapEx that, you know, the government is helping you pay at the start, and then that leads to things that are physic- you know, both like financially viable, but also like, you know, at a scale that actually can touch the consumer. So I just, it's important to, to, to identify that, and that is definitely happening right now.

   20. EPErin Price-Wright8:00

       Yeah, like, like if you're building a new PCB fab in the United States, like that's a pretty expensive operation. Those are pretty expensive machinery, pieces of machinery. Um, and if you have a defense buyer as the first buyer to help you kind of f- pay for, subsidize a lot of that CapEx investment, that's great because you know what else has PCB boards? Robots.

   21. CLConnor Love8:19

       Yeah.

   22. EPErin Price-Wright8:19

       You know what else has PCB boards? Hearing aids. Um, and so the ability to, to, to kind of pass on some of that CapEx to the defense industrial base, I think is, uh, will be really powerful as we, as we, uh, rebuild kind of industrial capacity in the United States.

   23. EBElena Burger8:32

       So what specifically are you seeing startups do to drive down costs and move faster?

4. 8:38 – 10:16

   The Elon Playbook: Vertical Integration

   1. CLConnor Love8:38

      Yeah. Um, I mean, I, I think, [laughs] like many things, we can look to, uh, Elon for a lot of answers here.

   2. EPErin Price-Wright8:44

      Mm.

   3. CLConnor Love8:44

      I mean, it's not a crazy statement to say really the few modern-day companies that have built anything at scale are probably SpaceX and Tesla. Um, and if you look at how Elon and, and his team have built those businesses, it's been, one, very vertically integrated. Uh, and, and look, like I, I take the, the ideology that you shouldn't vertically integrate everything. I mean, again, if you're building a super exquisite system like a missile that is, you know, doing something very unique, you kind of have to because you have to c- you know, control the exquisiteness. You have to control the cost.

   4. EPErin Price-Wright9:13

      Well, well, s- I mean, SpaceX and Tesla were doing first of their kind. Like, there was-

   5. CLConnor Love9:16

      Yeah

   6. EPErin Price-Wright9:16

      ... there didn't exist industrial base in the US to support them, and so they had to build it themselves.

   7. EBElena Burger9:20

      Mm-hmm.

   8. EPErin Price-Wright9:20

      I think where there are high-quality suppliers, like you should use-

   9. CLConnor Love9:24

      For sure

   10. EPErin Price-Wright9:24

       ... suppliers.

   11. CLConnor Love9:25

       Yeah. Yeah, I mean, again, I, I, I think the, the, the learning, though, is, number one, if you don't have an industrial base that you can rely on, you know, quickly, reliably, you know, et cetera, then you have to do it yourself. And inherently, that is a hard journey. Like, that- that's really hard to do, this concept of saying, "Okay, I'm gonna focus on the end system. I'm gonna focus on, you know, building the most, you know, cost-effective, you know, effective system that I can. And oh, by the way, I gotta go figure out the ball bearing. I gotta go figure out the solenoid valve. I got..." Like, that, that's a lot to do. And in the case of, you know, Tesla and SpaceX, I, I would argue the, the auto industry was a little bit different because there was a, but there wasn't, there wasn't a battery supply chain. They had to, you know, Elon had to recreate that in a lot of ways.

   12. EPErin Price-Wright10:05

       Well, the whole, the whole power electronics, the, the whole drivetrain, you know, they had to really build completely from scratch-

   13. CLConnor Love10:11

       Yeah

   14. EPErin Price-Wright10:11

       ... uh, based off papers that were published in the '70s that, you know, had been collecting dust for, for 40 years.

5. 10:16 – 13:32

   Mariana Minerals Bought a Copper Mine

   1. EBElena Burger10:16

      Um, in terms of, uh, companies that we talk about in the 80 portfolio, there's Mariana Minerals, which bought a copper mine and is kind of reinventing things and, and would they be a good example to, to talk about here?

   2. EPErin Price-Wright10:32

      I think that they, they recognize that, um, the, you know, the, the existing players in the mining industry just were not gonna pick, pick up technology fast enough, uh, for it to really make a difference and really move the needle. That, and they also recognized that they wanted to actually own the entire value chain to be able to really put their money where their mouth was, um, and capture-

   3. CLConnor Love10:53

      Yeah

   4. EPErin Price-Wright10:53

      ... the end value of the new technology they were bringing. So yeah, they do everything from, you know, ac- acquiring the asset, developing the asset, mining the asset-

   5. CLConnor Love11:01

      Yeah

   6. EPErin Price-Wright11:01

      ... operating the asset, refi- and refining the material themselves across multiple different, uh, mul- multiple different minerals, and then they sell a final commodity product in the market, um, and have really leaned in. That's an- another trend I'd point to is how much founders and entrepreneurs building in these spaces are leaning into AI and software as a huge, huge-

   7. CLConnor Love11:20

      Yeah

   8. EPErin Price-Wright11:20

      ... component, um, of their build. Um-

   9. CLConnor Love11:22

      Yeah, I mean, I, I, I think when you look at the physical world, applying software and AI will look different than what has happened in, say, legal or customer service or any other category where you see AI taking off in a, in a crazy way today. But, but to Erin's point, like, w- many times what you have to do is you have to own the asset in order really to change that asset. Not every time, but a lot of times, you know, kind of showing is believing in the physical world.

   10. EPErin Price-Wright11:47

       Mm-hmm.

   11. CLConnor Love11:47

       Whereas, you know, when you, when you're purely a digital AI product, you can kind of just see it, and it's very easily transferable and kind of understanding. You know, what Mariana is doing with this copper mine is, is really impressive in a lot of ways. It's not just saying, "Hey, we're gonna be better at extracting copper." It's, it's rethinking everything. It's re-

   12. EPErin Price-Wright12:03

       The entire end-to-end process-

   13. CLConnor Love12:04

       Exactly

   14. EPErin Price-Wright12:04

       ... of how you plan, operate, mine, and refine materials. And, uh, you know, what's cool is once you, o- once you own that process end to end and are using software at every stage of that journey-

   15. CLConnor Love12:16

       Yeah

   16. EPErin Price-Wright12:16

       ... you actually capture that data, and then it feeds back-

   17. CLConnor Love12:19

       Yeah

   18. EPErin Price-Wright12:20

       ... um-

   19. CLConnor Love12:20

       And th- this is, this is an important point

   20. EPErin Price-Wright12:22

       ... into that loop.

   21. CLConnor Love12:22

       I mean, this is not just Mariana, but if you look-

   22. EPErin Price-Wright12:24

       Yeah

   23. CLConnor Love12:24

       ... at another business like Hadrian, I mean, this is a perfect example of how, one, you can utilize software, you know, but, but more importantly, um, it's not one silver bullet that all of a sudden makes a factory or a mine perfect. It's actually 15 or 20 different things, and when you look at what Chris has done at Hadrian, you know, yes, it's kind of upfront what it takes to, like, quote and even take an order of a part.

   24. EPErin Price-Wright12:46

       Mm-hmm.

   25. CLConnor Love12:46

       It's, you know, it is the actual physical, you know, making of the part. It's how you, you know, inspect it and transfer it and, and, you know, there's, there's all these different interim steps that exist within a factory. And the beautiful thing when you kind of either start from a, you know, a, a fresh slate like Chris has in building his factories or in Mariana's case when you kind of own the thing and take it over, you can look at every single node from a first principles perfec-

   26. EPErin Price-Wright13:09

       Mm-hmm

   27. CLConnor Love13:09

       ... perspective and say, "Hey, was this process that's been done the last 100 years the right process?" And that's what's happening across every layer of the physical world right now.

   28. EPErin Price-Wright13:18

       Mm.

   29. CLConnor Love13:18

       It's not just mines. It's not just factories. I mean, again, it, it exists in many different permutations. And, and, you know, my personal belief, and we see this in a lot of our portfolio companies, is look, AI will be a phenomenal tool that can be used in the physical world.

6. 13:32 – 17:46

   Why AI Still Can't Turn a Wrench

   1. CLConnor Love13:32

      The reality is AI cannot turn a wrench yet. Uh, it will at some point, but we're, we're, we're far off that. You know, again, we can maybe have a discussion about the, you know, robotic models and autonomy that, that, that we see in the physical world.

   2. EPErin Price-Wright13:43

      We're getting closer.

   3. CLConnor Love13:43

      We're get- we're getting closer. I just think the, the nuance here and, and the portfolio companies, many that are on this list or, or many, many non-portfolio companies on this list, that they understand that, um, look, the, the physical world is not about just putting a silver bullet forward, like I said, that some-

   4. EPErin Price-Wright13:58

      Yeah

   5. CLConnor Love13:58

      ... you know, shiny AI product. It's, it's, it's deep understanding of, of what a process looks like, you know, physically how to, like, you know, manipulate the, the process or how to, you know, you know, change something that's happening in the world. It's just gonna look different based off-

   6. EPErin Price-Wright14:11

      Yeah. Well, well, maybe like a, a specific ex- example or, uh, to talk through is like, um- Like, w- low mix, high volume versus high mix, low volume-

   7. CLConnor Love14:22

      Yeah

   8. EPErin Price-Wright14:22

      ... and how, how AI can kind of change, change the game there. So, you know, historically, like, if you're spending a lot and setting up a line with a lot of automation, you really need to produce- be producing, like, a lot of one single thing.

   9. CLConnor Love14:35

      Mm-hmm.

   10. EPErin Price-Wright14:35

       Um, and that's how you get the cost down, and that's how you justify the cost of invest- i- investing in, you know, a pretty bespoke manufacturing line. Um, in the US we do a lot of low mix, high volume manufacturing, which is very hard to automate 'cause it's very expensive when you have to change the line all the time. Uh, but what we're seeing across our portfolio is that, uh, manufacturing technicians themselves are- have this, have the intuition and now have the software tools to be able to, to, to change the economics of what it looks like to produce low volume, high mix on-

   11. CLConnor Love15:06

       Yeah

   12. EPErin Price-Wright15:06

       ... the line. So you can have, you know, a manufacturing technician. This is not someone with a college degree, this is not someone, m- maybe they are, but, like, th- not necessarily, who's, like, studied software engineering, is now able to use these tools to reprogram and reconfigure their manufacturing lines on the fly using the fact that they understand the manufacturing process and they know how to do what they're doing in the physical world. They now suddenly have all these tools so they can... You know, you can retool a line instead of having to call a system in- system integrator, you know, and it takes three months and hundreds of thousands of dollars to kind of reconfigure a line for a new setup. You can have a manufacturing engineer use Claude-

   13. CLConnor Love15:41

       Yeah

   14. EPErin Price-Wright15:41

       ... and do that in, you know, 20 minutes. Um, and so that's been a real game changer across l- lots of companies that we've seen-

   15. CLConnor Love15:47

       And, and-

   16. EPErin Price-Wright15:48

       ... seen in this space

   17. CLConnor Love15:48

       ... and, and, and why that's important is, you know, when you look back at, at how we've articulated AD50 this year, uh, you know, it's, it's, you know, kind of three categories. And a lot of times what we focus on, at least, you know, I have and, and many people in the, in, in this sector are focused on, is just the systems companies. And look, there's a lot of really interesting systems companies. I mean, Anduril, Sirona, Castelli. I mean, you know, the list goes on and on of who's building really good end systems. But the problem is, is if you can't, you know, uh, iterate on that, uh, on the design and iterate on that prototype, you don't not only not get to an end system that is, like, you know, different, better, but you also just move at a slower pace.

   18. EPErin Price-Wright16:26

       Mm-hmm.

   19. CLConnor Love16:26

       So then what happens is, by the time you finally fix a production-level, you know, missile or plane or kind of whatever, then all of a sudden then you gotta, you know, go back and rejigger and build up all these kind of, you know, subsystems in order to meet the scale. But if you have, you know, a more transferable line, a more adjustable line, number one, you can also build the prototype faster, but then two, you can then s- you know, set up each one of these different components in a way where it actually can get to rate production quicker. And-

   20. EPErin Price-Wright16:50

       Yeah, you're, you're, you're designing for, you're designing for manufacture on the outset.

   21. CLConnor Love16:54

       Exactly. Exactly.

   22. EPErin Price-Wright16:55

       Mm-hmm.

   23. CLConnor Love16:55

       And, and that, that is a... Again, I, I keep going back to learnings from, you know, Tesla and SpaceX. Uh, in a lot of ways they, they, they had to make those choice 'cause they didn't have any other opportunity. But in the end, it's actually just that mantra of design for manufacturing that now exists within all these systems companies. Um, and to some extent, like, we are now in the age of now seeing them produce. I mean, again, like, go look at what Anduril's built in, uh, you know, in, in Ohio and, uh, a- and now on the East Coast in, in, in Baltimore. You know, go look at what, uh, you know, Sirona has built with the shipper. I mean, these are massive-

   24. EPErin Price-Wright17:26

       Yeah

   25. CLConnor Love17:26

       ... huge facilities that are, at some point, you know, in a very s- soon, soon timeline, gonna be producing thousands, tens of thousands, hopefully hundreds of thousands of systems. We haven't done that in America in a long time.

   26. EPErin Price-Wright17:38

       Yeah, this is no longer an on-paper theoretical exercise. Uh, this is happening in, in, in-

   27. CLConnor Love17:43

       Yeah

   28. EPErin Price-Wright17:43

       ... the real world, and, and real stuff is coming off the lines.

7. 17:46 – 22:07

   Building It Before the Government Asks

   1. EPErin Price-Wright17:46

      Something that I think is, uh, like, special about AD founders is they make any problem an Elon-sized problem.

   2. CLConnor Love17:55

      [laughs]

   3. EPErin Price-Wright17:55

      Um, and, and I'd love to, I'd love to hear sort of that applied to the different industries that we're talking about here.

   4. CLConnor Love18:04

      Yeah, I mean, I, I think when you look at defense specifically, uh, this has actually w- been one of the most historically hard, you know, uh, sectors to just build the thing that you think the government needs. Because unfortunately, and again, you know, I, I, I experienced this in my past, you know, when I served in the Army, you know, the buyer is not the user, and the buy- and the appropriator of the dollars for the buyer is completely removed. So you have all these, like, disjointed decision-makers or groups that matter. And so what happens is, you know, companies, you know, back then we didn't really have neo-primes or AD companies to serve, but what you had is you had primes who would just sit there and listen, like, "Tell me what you want. I'll develop the thing after you give me the money." And, you know, the, the age-old problem is you get a system that's, like, actually not, you know, technology forward. You get a system that was developed for 10 years ago, and then, you know, the end soldier gets something that actually is not super valuable to them. What's different now, back to the like, you know, you can think through an Elon problem now, is you can say, "Okay, w- what does the military actually need?" And, and the beautiful thing is, you know, venture capital and what we do in American dynamism, but also, you know, the, the rest of the capital markets is saying, "We will actually fund that in advance," and you can build in advance of the government saying, "Here's the thing for you to build." And, and, and the outcome of that is the soldier gets a better product-

   5. EPErin Price-Wright19:18

      Mm-hmm

   6. CLConnor Love19:18

      ... gets something that actually fundamentally changes the battlefield and, you know, helps with deterrence or security or safety. Uh, and then more importantly [laughs] , you get a timeframe of a t- of a type of system that is actually built, you know, i, it, you know, aligned with the requirement of the market and what technology can do today. So it just, it, it's, it's a fundamentally different way of, like, instead of sitting and waiting for the government to tell you what they want, you, you, the government signals, and you see it, and you build it in advance by using private capital, and that just has not happened in the history of defense. So you can build, you know, like Castelli and building a, a, a hypersonic missile that does a, you know, a, a, a, a, not a super exquisite thing, but it's really hard to build a missile that goes that fast-

   7. EPErin Price-Wright19:59

      Mm-hmm

   8. CLConnor Love19:59

      ... and is reliable. And, you know, the government, you know, now has given them contracts and kind of, you know, showed up and, and, and bought missiles. But if you go look at the last three years of that business, I mean, it was private venture capital. It was, you know, entrepreneurs, like, taking the risk and building the thing in advance. I think if you see that again and again in defense, you're just gonna get better products, and fundamentally, like, you know, you'll have the neo-primes and the new companies start to take a lot of that market share. But it's not just the defense thing. I mean, Aaron sees it in energy as well. I mean, we're rewriting our entire energy grid right now, and we're, again, like, Aaron would know better than I would, but, like, we are in, on the one-yard line. We-

   9. EPErin Price-Wright20:34

      Yeah

   10. CLConnor Love20:34

       ... we are just starting that-

   11. EPErin Price-Wright20:35

       We're just getting started

   12. CLConnor Love20:36

       ... that, that, that, that process.

   13. EPErin Price-Wright20:37

       I, I think, you know, another part of it is [clears throat] It's a little, a little more intangible, but, like, these are really hard companies to build. These are really, really hard problems to solve. Um, you know, when I talk to Turner, who's the CEO of Mariana Minerals, and, you know, he's flying all... He's flying to the m- middle of nowhere places all over the world to build his company. He's, like, out where there's no cellphone signal, where there's no electricity.

   14. CLConnor Love21:04

       Yeah.

   15. EPErin Price-Wright21:05

       You know, touching dirt, you know, spending, like, w- weeks and months away from his family. Um, like, it has to be worth it. You're building a physical thing. You're not sitting at a desk on your computer. You're out in the world. It sounds kind of sexy and romantic, but when you're actually doing it, like, it's rough. The travel is really hard. The people you're engaging with, you know, you're not talking to... You're calling up your suppliers. These are not like other startups who-

   16. CLConnor Love21:33

       No

   17. EPErin Price-Wright21:34

       ... operate in the same kind of timescale and culture as you. These are, like, really tough people to negotiate with and work with who, you know, have a very different culture, and if you're gonna be putting yourself through that, like, it better be-

   18. CLConnor Love21:47

       Yeah

   19. EPErin Price-Wright21:47

       ... damn worth it. Um, and so I think people, p- people really gravitate towards these problems that feel huge and enormous because they're... You know, th- these are real missionary founders-

   20. CLConnor Love21:59

       Yeah

   21. EPErin Price-Wright21:59

       ... that we see building in this space. E- Even as, even as it's kind of heated up and there's more capital-

   22. CLConnor Love22:03

       Yeah

   23. EPErin Price-Wright22:03

       ... and it's gotten cool, um, it's still brutal.

8. 22:07 – 24:47

   When Hardware Became the Most Valuable Game

   1. CLConnor Love22:07

      I, I, I think the biggest thing that has changed in American dynamism land in the last few years is we always knew that the companies being built in this category were really important to the fabric of America. I mean, again, like when we talk about defense systems, when we talk about energy, I mean, when we talk about building, you know, manufacturing widgets that go into everything and the... Like, that stuff's really important. Like, it affects our safety. It affects how we live our life. But the biggest change is those companies weren't just the most important thing to us. Now they can be the most valuable companies.

   2. EPErin Price-Wright22:37

      Yeah. Mm-hmm.

   3. CLConnor Love22:37

      And that's, like, a big distinction that, that has happened, which is, you know, it's not just like, you know, solving a problem for our safety or security. It's solving a problem for our safety and security, and oh, by the way, those can be some of the largest companies that exist in the world.

   4. EPErin Price-Wright22:50

      Yeah.

   5. CLConnor Love22:50

      And, and that's what technology has changed in these industries. I mean, mining has always been a big, big industry. Defense has always been. Energy-

   6. EPErin Price-Wright22:57

      But it ha- it hasn't been economically worth it-

   7. CLConnor Love22:59

      Exactly

   8. EPErin Price-Wright22:59

      ... for a young, smart person-

   9. CLConnor Love23:00

      Yeah

   10. EPErin Price-Wright23:00

       ... you know, who has a lot of ambition to go after these categories. But I think companies like Palantir, Anduril-

   11. CLConnor Love23:07

       Yeah

   12. EPErin Price-Wright23:07

       ... SpaceX have proved that you can build a really big business o- operating in, in these categories. And if you... I mean, if you look at the, you know, the top 10 most valuable companies in the world like that n- right now, like the majority of them are hardware companies.

   13. CLConnor Love23:19

       Yeah.

   14. EPErin Price-Wright23:19

       They're building a physical product.

   15. CLConnor Love23:21

       Yeah.

   16. EPErin Price-Wright23:21

       Um, you know, we, we've kind of come full circle.

   17. CLConnor Love23:23

       Yeah.

   18. EPErin Price-Wright23:23

       And so you, you, you get the most ambitious founders of our generation who, who, you know, who wanna run towards that hard problem-

   19. CLConnor Love23:29

       Yeah

   20. EPErin Price-Wright23:29

       ... and know it's gonna be worth it for them.

   21. CLConnor Love23:31

       And, and, and the beautiful thing about many of these industries, like mining or, you know, Rio Tinto's been around for a long time. I mean, Boeing's been around for like... I mean, you know, good companies that are building good products. But I think when you take this, you know, first of all, like a first principles technology approach about, like, what the audacious thing that needs to be built is, and then two, you get entrepreneurs, like these, these folks that, that are on this, this AD50 list-

   22. EPErin Price-Wright23:51

       Who are like, "Yeah, I'm gonna rebuild the American energy grid. That sounds-"

   23. CLConnor Love23:54

       Yeah.

   24. EPErin Price-Wright23:54

       "... that sounds fun." [laughs]

   25. CLConnor Love23:56

       And you just... That, that, that didn't exist 50 years ago.

   26. EPErin Price-Wright23:59

       Yeah.

   27. CLConnor Love23:59

       That didn't exist five years ago. I mean, it is something that is fundamentally, you know, our, America's, you know, best and brightest are building towards this category for the first time. And, and then importantly, like Erin said, like the opportunity is there. You see these examples of these companies that have redefined space launch, that have redefined, you know, kind of military systems, that redefined, you know, all, all these, these categories of American dynamism that we care about. Um, and yeah, I, I think it's exciting. I mean, uh, you know, as, as, again, as someone who served in the military, you always think of, you know, like what you do as something greater than yourself. I mean, look, like the capital markets exist to, you know, make money. Like it's... We're, we're not a charity. This is a capitalist society, but in the end, a lot of the companies on this AD50 list are doing something that is both going to be large and valuable, but also gonna be really inherently important to the fabric of America, and that's, uh, that's pretty exciting. [laughs]

9. 24:47 – 28:39

   Steel-Toed Boots and Giant American Flags

   1. EPErin Price-Wright24:47

      What's it, what's it like to, to visit one of these sites, like a manufacturing site or a mining site or-

   2. CLConnor Love24:53

      Yeah

   3. EPErin Price-Wright24:53

      ... you know, drone manufacturers, those kinds of sites, like-

   4. CLConnor Love24:57

      I mean, Connor and I have the best job of all time.

   5. EPErin Price-Wright24:59

      Yeah.

   6. CLConnor Love25:00

      I did have to... I, I did, I do own steel-toed boots now because-

   7. EPErin Price-Wright25:02

      [laughs]

   8. CLConnor Love25:03

      ... the number of, the number of site visits I've been to at portfolio companies-

   9. EPErin Price-Wright25:05

      Yeah

   10. CLConnor Love25:05

       ... where you're, where they're like, "Yeah, you gotta show up in steel-toed boots." [laughs] Um, yeah. [laughs] I mean, uh, uh, it's not all sexy, to be honest.

   11. EPErin Price-Wright25:14

       Yeah.

   12. CLConnor Love25:14

       I mean, again, these are, these are locations that are, you know, a lot of times-

   13. EPErin Price-Wright25:17

       Hard to get to

   14. CLConnor Love25:18

       ... hard to get to, in the middle of nowhere. Uh, and, and in the end, like we're talking about real physical things that require, you know, earth moving. Like I used to have, uh, in my time in the military, I used to have this, this kind of senior officer who would always tell me, like, "The physical world doesn't care about you, so just be careful in the physical world." Like, you know, these are, you know, moving, you know, tons of dirt and, you know, massive, you know, these factories being built out, you know, Hadrian or, or, or what Amca will do. Um, I mean, these things are huge. Um, and, and it's impressive. You know, my, one of my favorite things is, maybe you don't see this at the remote sites, maybe you do, but uh, uh, it's this, uh, [laughs] kind of running, uh, competition between these companies who can have the bigger American flag at their site.

   15. EPErin Price-Wright26:01

       [laughs]

   16. CLConnor Love26:01

       I actually don't know who currently holds that today. Uh, I mean, Hadrian's was pretty big last time I saw it, but-

   17. EPErin Price-Wright26:06

       I think Valor's is pretty big

   18. CLConnor Love26:07

       ... is Valor's big too?

   19. EPErin Price-Wright26:08

       Yeah.

   20. CLConnor Love26:08

       Okay, good. Yeah, yeah, yeah. And like, again, I mean, um- That's, that's awesome. Like, the, the fact that you have that type of, like, one passion for, for something greater than just the, the product or the e- economic opportunity that you're building. I mean, again, it, it, it drives purpose behind a, a lot of these teams. When you show up at, you know, Mariana, when you show up at Hadrian, when you show up at Castillian, like you, you, you literally get people who are so passionate about what they're doing and, and you know, that produces really good results. When you have to do something really hard in the physical world, if you have people that are willing to run through walls, sometimes literally to solve that problem, you're just... You know, you get really audacious, great outcomes.

   21. EPErin Price-Wright26:45

       Well, one of my favorite things to do, it, you know, is, uh, visit the same company sort of multiple times within a 12-month period-

   22. CLConnor Love26:53

       Mm-hmm

   23. EPErin Price-Wright26:53

       ... whether they're in the portfolio or not, because you learn a lot by how fast a factory build-out happens.

   24. CLConnor Love26:59

       Yeah.

   25. EBElena Burger26:59

       Mm.

   26. EPErin Price-Wright26:59

       And so, you know, that, that, that's one thing we do is, like, we... You know, you don't just go once. You go once, and then you go three months later, you go three months later, you go three months later. And, like, I'm not, I'm not a manufacturing expert. I've spent enough time on the factory floor, on a factory floor between my time at Palantir and, and now doing this job. Um, y- you know, I, like, sort of know what some of the machines are and kind of, like, how a line roughly works, but, like, there's just something about seeing stuff accumulate in a factory, and it goes from the process of watching something go from, like, empty warehouse with epoxy floors and the big American flag and maybe, like, a couple of pallets, and the founder's just really excited to show you their forklift that they bought it.

   27. CLConnor Love27:35

       Yeah, yeah.

   28. EBElena Burger27:35

       [laughs]

   29. EPErin Price-Wright27:35

       Um, and they're kind of like, you know, they're, they, they have the basketball hoop set up or, like, the gym set up in the corner to, like, you know, fast-forward six months, and it's just, you know, they're freaking out about how to expand. They're like, "Oh, we need to get, you know, the, the city out to, to give us more power because we have too many machines plugged in." It's, like, kind of chaos. There's technicians and operators everywhere, people building stuff. That's really satisfying and r- and, and, and really fun and, and something I think we're, we're lucky to get to see that journey and, and, and how quickly that can happen.

   30. CLConnor Love28:03

       Yeah.
10. 28:39 – 32:05

    How Defense Unlocks the Robot Wave

    1. EBElena Burger28:39

       and sort of when you're able to compress one timeline, you can compress multiple timelines?

    2. CLConnor Love28:45

       I don't even think it's just timeline. I also think it's cost.

    3. EPErin Price-Wright28:47

       Cost.

    4. EBElena Burger28:47

       Uh-huh.

    5. EPErin Price-Wright28:48

       And quality.

    6. CLConnor Love28:48

       And quality.

    7. EBElena Burger28:49

       Yeah.

    8. CLConnor Love28:49

       I mean, I, I... It's interesting because when we look at defense autonomous systems in particular, like look, Sirona's making a lot of boats, Covenant's making a lot of missiles, Castillian's making a lot of missiles, you know, Anduril's making a lot of things. Like, w- when you build many systems, you also require many subsystems below that. And you know, again, like, there are really interesting military systems being built today. The, the, the corollary, though, back to the comment we had earlier is, like, you know, by building towards defense, you also build for a different industry. W- we actually don't have a lot of humanoids or robotics that exist in the world today. I mean, there are thousands maybe, I don't know the exact number, but when you think about the, the subsystems that go into some of our military systems, it's the exact same subsystems that are gonna go into the future robotic systems. It's the actuators. Like, it's the motors. It's the, you know, s- you know, valves and switches and those type of things. And I think when you can build those to quality and to cost, then all of a sudden you make other markets that maybe weren't viable or real all of a sudden make sense. And again, I think that's gonna happen in the robotics world, which is, you know, you... We're gonna spend all this time onshoring development of all those subcomponents. We're gonna build for a lot of these military systems, which is good. We need it for our security and safety and deterrence. But then all of a sudden you're gonna have this, you know, kind of robotic wave that will come in America. I said it, you know, AI can't turn a wrench yet. They can. They will eventually. Um, and that will be enabled by all that, you know, actuators and switches and subsystems that we built.

    9. EBElena Burger30:13

       Mm-hmm.

    10. CLConnor Love30:13

        It's gonna serve a different market and, and it's gonna make it f- you know, financially viable, and we're not gonna have to rely on factories in China. And, and again, I think that is, that is net good because, you know, as you build an industrial base, an industrial base can be used for many things and, you know, down to the component level. You know, I, I just think we don't have enough of it in America, and it, it's a, it's a decision. Like, you talk to a robotics company today that wants to build, you know, some robotic deployment, there's a 99% chance that majority of what they are buying is coming from China in some way, shape, or form.

    11. EPErin Price-Wright30:43

        And, but they, they w- for many reasons, not just geopolitical, want to onshore that purchasing-

    12. CLConnor Love30:49

        Yeah

    13. EPErin Price-Wright30:49

        ... for q- q- quality, cost, speed of iteration, um, yeah, and geopolitical reasons. I think, like, y- one thing it, you know, it's really... Over the last three years even, just it's remarkable how much of a supplier ecosystem-

    14. EBElena Burger31:05

        Mm

    15. EPErin Price-Wright31:05

        ... has developed. Like, one of the companies in our portfolio, um, it's three years ago would order two times the number of PCB boards, PCBs that they needed because they assumed that they would have to throw 50% of the, them away for quality issues. They would get the batch from their supplier, they would do the testing, and 50% of them wouldn't pass a quality test. Um, you know, then startups have emerged in this category and are like, "We're gonna fix this problem. We're gonna use, you know, software and modern technology to, you know, redo the way PCBs are manufactured in the US."

    16. CLConnor Love31:38

        Yeah.

    17. EPErin Price-Wright31:38

        "We're gonna do it faster, we're gonna do it cheaper, and guess what? We're gonna do it better." Uh, and you know, that, now that same company, um, buys, you know, p- PCBs from new suppliers and, you know, they're keeping 70, 80, 90%, uh, passing quality tests.

    18. CLConnor Love31:51

        Yeah.

    19. EPErin Price-Wright31:51

        So it's, y- I think, like, y- we underestimate how much the, you know- Close co-location and co-development of some of this technology with, um, the end customer and their suppliers really matters to, to drive quality higher

11. 32:05 – 37:43

    The Rise of the Manufacturing Middle

    1. CLConnor Love32:05

       So something really interesting is happening, I, I believe, in the industrial base. Uh, like we talked about earlier, you get this top-down demand signal from these new systems companies. Like, we're building new military systems, but oh, by the way, like, you know, Joby and Archer, we're building new planes too. Like, we're building new end systems. That is, that is a fact. Like, cars are, are being built different, planes are being built, military systems are being built different. When you build these new systems, inherently the inputs of those systems need to change as well. And when you look at the industrial base in America today, like historically, if you go look at how Boeing makes a 737, you know, Boeing's a great company, important to the fabric of America, but they just pick up the phone and they call Honeywell, and Honeywell helps them kind of build all the different subcomponents. And it's not Honeywell's fault, but what Honeywell does is they say, "I don't wanna build a new landing gear again. We have this landing gear that meets the spec and does the thing, so let's just keep going and doing that same thing again and again." And again, it's rational.

    2. EPErin Price-Wright32:57

       Mm-hmm.

    3. CLConnor Love32:57

       Like, you know, they're gonna build more 737s. They're gonna get paid the same way if it's a, a 450-year-old landing gear or if it's a new landing gear. The problem, though, is when you keep iterating on these new requirements for end systems, at some point, the 50-year-old subsystem just doesn't work. And maybe it, it, it physically works in, in terms of meets the requirements, but it's been designed and it's been developed in a way that inherently, uh, you know, we haven't i- innovated on it. And, and, and why does that matter? It's because, you know, we've developed new materials. Like, yes, physics hasn't changed, but, but the inputs to the physics and the inputs to that design has changed. So I think what's happening or what ha- what the opportunity for a lot of these manufacturing companies is to do what I call co-engineering. And, you know, we talked about, you know, the long tail of these, like, sub-tier, uh, you know, uh, suppliers. They, they, they've been in receive mode for the last 40 years. Honeywell's picked up the phone and they've said, "Hey, I need another landing gear. Go make that landing gear." And they've executed on the specs with that IP and building it. When you want a new requirement, uh, that middle layer cannot, you know, think on behalf of Honeywell and change the requirement because, again, they're not in the position to do it. But I think what's gonna happen in the future is you're gonna have this middle layer of supply companies that, you know, s- uh, will effectively be co-engineers with the end OEM-

    4. EPErin Price-Wright34:21

       Hmm

    5. CLConnor Love34:21

       ... of rethinking not just what the end system can do by way of speed or kind of, you know, uh, weight or mass, but the individual subcomponents will be rethought, will be re-engineered, and will be rebuilt. And so, you know, the end system will change from a top level. The, the, the, the individual parts and components will change, and, and I think that just hasn't happened in the last 40 or 50 years. So you're gonna see a completely new wave of what I believe, like, w- will be called, like, the manufacturing middle, uh, that will be, you know, co-engineering and pushing, uh, design and development upward in the supply chain as opposed to just being in receive mode and saying, "Okay, I can build the same thing I built 40 years from now."

    6. EPErin Price-Wright35:02

       Hmm.

    7. CLConnor Love35:03

       And I just, I, I think that's an opportunity. I mean, I defined it, you know, previously as, like, we're creating the Amer- American manufacturing asset class right now. I mean, it, you know, private equity has been playing in this ecosystem for a long time, and looking at an asset, and buying it, and improving the cost, and, you know, selling it off again. That's not fundamentally changing the things that we build. Right now, companies will change the, the, the, the different things that we'll build.

    8. EPErin Price-Wright35:26

       A good example of this is kind of the, um, on, on the, on the grid.

    9. CLConnor Love35:30

       Uh-huh.

    10. EPErin Price-Wright35:30

        And when you think about sort of like the electronic stack, um, and we're about to go through a, a huge step change in how we manage and transfer power on the grid, moving from a system of sort of static and mechanical systems that were deployed in large scale across the US in, like, the '70s and '80s to now sort of modern power electronics, battery storage, architectures which are much more software native and flexible. And, you know, that is, is just... When, when you have a, such a complete step change in technology where the technology that's replacing the previous thing is just completely different-

    11. CLConnor Love36:04

        Hmm

    12. EPErin Price-Wright36:04

        ... you have this opportunity to rethink the entire supply chain behind that-

    13. CLConnor Love36:08

        Yeah

    14. EPErin Price-Wright36:08

        ... and the way all of that design and engineering work happens.

    15. CLConnor Love36:11

        And, and in the energy world, it's the same thing that's happening in the defense or the-

    16. EPErin Price-Wright36:14

        Yeah

    17. CLConnor Love36:14

        ... the commercial systems world, which is you have this massive amount of demand for, you know, data centers and, you know, new factories and new build. When you get this top-down level, you have the ability to innovate, like Aaron's talking about, and rethink the entire architecture. And look, like-

    18. EPErin Price-Wright36:27

        Because it's a completely new architecture.

    19. CLConnor Love36:29

        Exactly.

    20. EPErin Price-Wright36:30

        So, you know, you can't rely on these components that worked in the previous world to just reconfigure. Like, you actually have the opportunity to rethink that from the ground up.

    21. CLConnor Love36:39

        And another important point here is, like, you know, you can be pessimistic and you can say, "Okay, Connor, all these new military or end systems, like, not all of them are gonna be adopted," so, like, that, that top-down demand, or, or, or, or Aaron, like, "We're not actually gonna f- increase energy by four times. Like, there's not gonna be that much demand." I actually don't think it matters because I think once you start the snowball of the demand cycle moving in one way, even if you deliver half of that, you know, uh, requirement-

    22. EPErin Price-Wright37:06

        You're not going back

    23. CLConnor Love37:06

        ... you're not going back.

    24. EPErin Price-Wright37:07

        Yeah.

    25. CLConnor Love37:07

        And it doesn't make financial sense, and it, and again, it's, it's like when you rethink something first principles and you make the, like, new design, new engineering decision, and a lot of times that comes with better cost, better efficiency, you're just gonna buy that thing now going forward.

    26. EPErin Price-Wright37:20

        Yeah, better serviceability, easier to manufacture.

    27. CLConnor Love37:23

        Yeah.

    28. EPErin Price-Wright37:24

        Yeah. Yeah, you're never going back. I'm curious kind of what you're seeing in terms of founders being second-generation Anduril or second-generation Palantir or something like that, and maybe they, they see some of these learnings and they see the opportunity to be the middle-layer supplier

12. 37:43 – 41:16

    Spinning Out of Anduril and SpaceX

    1. EPErin Price-Wright37:43

       in-

    2. CLConnor Love37:43

       Yeah

    3. EPErin Price-Wright37:43

       ... some- something that has never been touched since, you know, decades ago, and, and kind of like what, what are you seeing in terms of, you know, those opportunities and those kinds of founders? Yeah, for sure. I mean, if you, you g- a, a great way to light a fire under an entrepreneur is for them to be banging their head against the wall on a sort of engineering or supply chain problem where they are, and then they're, you know, they're like, "Well, okay, I really care about this. This is a, a, pain in my ass. I know it's, I know it's bothering other people. I know it's a problem that I don't just have here at Anduril or SpaceX or Tesla. It's a problem more broadly. I'm gonna go solve that more generally." Um, and the kind of l- lineage of founders that have sort of lived and breathed this on the manufacturing floor, and not just founders, but even engineering teams who are like, "I saw this problem. I solved this, you know, within Anduril or Ceronic or whatever, and I'm gonna actually, like, go out and build this as a company, and then I'm gonna, you know, f- I know everyone in the ecosystem, so I'm, I, I, I have, you know, a- automatic access to a customer base that's captive."

    4. CLConnor Love38:42

       Yeah.

    5. EPErin Price-Wright38:42

       Um, you know, w- w- we certainly see that trend happening, and you know, this is how ecosystems get built. Like, people make fun of YC for all YC companies kind of selling to each other, but, like, that's how it works because you have, you know, y- it's, it's your friends. They're tolerant. They're understanding. They're willing to, like, work with you and help you and, and, you know, put up with something breaking because they're working on their own really, really hard problem.

    6. CLConnor Love39:06

       Right.

    7. EPErin Price-Wright39:06

       And if, you know, the thing you're doing is not the most ex- existential thing to them, they're, like, very willing to outsource it to you. That's beautiful. That's how Silicon Valley was built, and what's really, like what makes me really optimistic is the extent to which we're starting to see that in these kind of physical world ecosystems and supply chains.

    8. CLConnor Love39:21

       Yeah. I, I, I think the, the few companies you mentioned, you know, the SpaceXs, the Palantirs, um, well, they weren't overnight successes. Like, those companies took a long time to get to both the product scale and just the, the size and, and success of the company that they're at.

    9. EPErin Price-Wright39:35

       O- overnight successes that took 20 years.

    10. CLConnor Love39:37

        Exactly. And, and, and I think the, the learning point, and you know, we invest in a lot of the entrepreneurs on this list, like come, come from those ecosystems, is you just learn this, like, relentless focus to do the one thing as well as you can, you know, down a path until you've succeeded. And like, you know, I've, I've, I've seen this with, with the Castilian guys, for example, is like they focused for two and a half, three years on the first hypersonic missile that was really hard to build, and, you know, other people showed up and, "Oh, be multi-product. Go build this small drone here." And they're like, "No, we need to do this one thing really well." And I think, you know, that comes from the fabric of SpaceX. Like at SpaceX, the concept of being a responsible engineer and like, "If this thing doesn't work, like it's my ass. I'm gonna make sure, like [chuckles] I'm gonna obsess over this thing and again and again."

    11. EPErin Price-Wright40:20

        Yeah.

    12. CLConnor Love40:20

        Like, that's what it takes to build really hard things. And again, like, you know, there will be different, you know, derivations of, of success. Not everyone will think just like the SpaceX mindset, but if you look at a lot of these businesses like that, you know, in the physical world, you kind of need to do that to build something really hard.

    13. EPErin Price-Wright40:35

        And but what, what you do in doing that is you learn, you know, you learn that process knowledge. You learn how to do it, and so thing two, thing three, thing four-

    14. CLConnor Love40:43

        Yeah

    15. EPErin Price-Wright40:43

        ... are a lot easier. You've developed a supply chain. You have your relationships. You've developed manufacturing for or design for manufacture processes. You know, you've learned how to build a factory to a high quality, high spec. You've learned how to build that trust with customers.

    16. CLConnor Love40:57

        Yeah.

    17. EPErin Price-Wright40:57

        And so if you can do that one thing really well, that sets you up to do other things really well, but it doesn't work unless you deliver on that-

    18. CLConnor Love41:04

        Yeah

    19. EPErin Price-Wright41:05

        ... on that one core thing. Uh, so we talk a lot about competition. China, what does the United States do uniquely when it comes to our capital markets-

    20. CLConnor Love41:14

        Yeah

    21. EPErin Price-Wright41:14

        ... that, that really enables these

13. 41:16 – 44:23

    America's Real Edge: Its Capital Markets

    1. EPErin Price-Wright41:16

       startups?

    2. CLConnor Love41:16

       Well, I, I, I think this may arguably is one of the, I mean, Brian Schimpf was talking about it, the, the founder of Anduril, you know, a couple of days ago, which is this concept that, you know, we have literally trillions of dollars of private capital in our capital markets that-

    3. EPErin Price-Wright41:28

       Mm-hmm

    4. CLConnor Love41:28

       ... inherently follow, you know, success, follow both technology success and, and, you know, to some extent, like production success as well. And I think if you look at the United States, um, number one, like we do not have a top-down directed, you know, uh, industrial policy that says the state will put this amount of money in, in this. And I think to some extent that's a good thing because the money will follow the entrepreneur. The money will follow the success. I think that the, the distinction though, we've kind of always had a good capital markets in the United States. I think the distinction is the capital markets all of a sudden have said, "You know what? The category of AD is really interesting." And, and you know, Aaron and I s- you know, have been living and breathing this for a long time, but if you go look, you know, not just up and down, you know, Silicon Valley and Sand Hill Road, but if you go to, you know, the major banks, I mean, JPMorgan has, has committed, you know, trillions of dollars towards, you know, both investing in the physical world, not just defense, but factories and, and other things in the physical world. And you see that again and again and again across not just our, our venture capital firms, but you know, private equity now is, is, is starting to play in this category in a big way.

    5. EPErin Price-Wright42:30

       Big credit firms.

    6. CLConnor Love42:30

       Big credit firms.

    7. EPErin Price-Wright42:31

       Mm-hmm.

    8. CLConnor Love42:31

       And, and, and that's so important because, you know, the, the, the reality is many of these companies in, in the AD world, they require a lot of capital [chuckles] . When you build physical systems, when you build a Falcon 9 rocket or when you build a, a CCA and you build a Blackbird missile, um, those are expensive inherently to build up those lines and build that physical system. So I, I think part of this is, you know, the capital markets, you know, speak with, you know, where the success happens, and the reality is, is it's the capital markets are not top-down driven by our government, unlike China's. And, and what that allows is it allows us to be far more flexible, uh, you know, again, to follow success like I said, and then more importantly, um, to fund things in advance of it being obvious.

    9. EPErin Price-Wright43:12

       Mm-hmm. Mm-hmm.

    10. CLConnor Love43:13

        And, and we talked about that earlier, the concept of building in advance of the requirement and the need. You know, w- w- maybe we're a little bit late on the energy side, maybe we're a little bit late on, on some of the defense systems, but look, the capital markets have woken up, and we're, we're putting hundreds of billions of dollars, if not trillions of dollars, you know, you know, towards this category for the next, you know, 10 plus years.

    11. EPErin Price-Wright43:31

        Yeah, I mean, if you look at just the first half of 2026, more, uh, more risk dollars went into the defense ecosystem than all of last year combined-

    12. CLConnor Love43:41

        Yeah

    13. EPErin Price-Wright43:41

        ... which was many times what went into the defense ecosystem in all of the previous year combined. And I think historically there's, you know, in defense specifically, for example, there's been, you know, a narrative around the valley of death and like how you get the government contract to like propel you through this period, um, of needing to build out CapEx. And, and what's really exciting is that almost that, that, that start, that's starting to disappear with the support of, uh, of capital markets and, and of risk and of risk capital, and that's certainly extending even beyond the defense ecosystem to energy and robotics and critical minerals and some of these other sectors that are really important, which is super, super exciting to see, um-

    14. CLConnor Love44:22

        Yeah.

14. 44:23 – 49:02

    The US vs China Power Chart

    1. CLConnor Love44:23

       I had one question. I'm not sure if it's-

    2. EPErin Price-Wright44:25

       Yeah

    3. CLConnor Love44:25

       ... too much of a tangent though. Just, um, there's that very famous chart of, like, US power production versus, like, China new, new power, new energy production. Like, America's-

    4. EPErin Price-Wright44:37

       Yeah

    5. CLConnor Love44:37

       ... line is, like, basically flat, and China's is, you know-

    6. EPErin Price-Wright44:40

       Vertical

    7. CLConnor Love44:40

       ... up and to the right.

    8. EPErin Price-Wright44:41

       [laughs]

    9. CLConnor Love44:41

       Like, like, I, I guess some question, uh, around, like, like, what would it take to close that gap, or how, how fast can we build new power?

    10. EPErin Price-Wright44:51

        Yeah. I, I don't think that is... I don't think that that is a, um, t- technology problem. I think that that's a we need to do some soul searching about our will as an American people. And-

    11. CLConnor Love45:03

        Yeah

    12. EPErin Price-Wright45:03

        ... do we want conforming projects to be built? Do we wanna grow? Um, and if we do, I think the, the, the technology and the capital will follow.

    13. CLConnor Love45:12

        Yeah.

    14. EPErin Price-Wright45:13

        Yeah.

    15. CLConnor Love45:13

        And, uh, it, it's funny because, you know, this is not just an energy problem. It's, you know, it's, it's a-

    16. EPErin Price-Wright45:17

        It's an everything problem

    17. CLConnor Love45:18

        ... it's an everything problem. And, and, and look, I, you know, we're op- we're optimists inherently. Uh, I do think that snowball has started to roll. I think the question is, uh, you know, back to our discussion on capital markets earlier, uh, will, will there be emergent winners in these categories that then fuels more capital to flow into the ecosystem? And, you know, it's this kind of self-fulfilling prophecy that happens. Like, you know, yeah, if you build it, you know, they, you know, they will come. But at some point there needs to be a pot at the end of the rainbow. And if there is for a few companies, I think, you know, one, capital will flow, like I mentioned. But, but I, I think the last thing I'll say just real briefly is, uh, anything in the physical world takes time. Um, you know, we, we, you know, to set up a factory, uh, you know, at a scale where really you either affect our, our, our, our power generation or you affect our military systems or, or you name it, y- you, you can't take a couple of engineers, you know, throw 'em in front of a, a couple servers and computer screens and come up with an answer. I mean, it's, it's moving dirt. It is, uh, physically understanding a supply chain. Like, these things take years. And so, you know, there's a little bit of patience that we need to have in the capital markets side, but again, I, I think I'm optim- optimistic. I think it's happening, and, you know, to some extent, like, it's ours to lose. Like, it's ours as a government and a nation to, to mess up and to get in the way of this, and that's a risk, don't get me wrong, but-

    18. EPErin Price-Wright46:34

        I do think it's, uh, uh, y- I do think it's another, uh, lo- will be another long-term benefit of capital markets, even if it's short-term painful, just in... People need to feel... Y- I mean, you mentioned that these are physical things. They take time. They're also physical things in that they have a physical manifestation to those people and communities that live around them.

    19. CLConnor Love46:52

        Yeah.

    20. EPErin Price-Wright46:52

        And the most important thing is that, you know, s- American society at large feels like they're participating in the economic growth that's coming as a result of this development. Software, you know, was sort of c- like had this ability to be sort of siloed 'cause it really existed in just a few cities. It was kind of this virtual thing. You sort of experienced it in the way that your, your interaction with digital services got better, a lot better over the last 20 years, but it, you know, it w- it was a little bit more, it was a little bit more abstract. Physical world, like someone's building a data center, a power plant, a mine in your backyard, um, and you need a, y- y- you know, y- you, you have a say and you have a stake in that. You, you phys- you physically see it. It affects your life, and if you don't feel like you have participation in that economic upside, it's hard. I do think that this is one thing that the capital markets long term will solve really well because companies will figure out how to bring communities along for the journey and make it-

    21. CLConnor Love47:46

        Yeah

    22. EPErin Price-Wright47:46

        ... financially and economically worth it for them.

    23. CLConnor Love47:48

        And I think there are some good examples of that. A few companies on the AD50 list who, like, you know, build real things in their communities and show up the right way. There are also bad examples that have existed in the last, you know, few years.

    24. EPErin Price-Wright47:58

        Mm-hmm.

    25. CLConnor Love47:58

        I mean, if you look at what Amca does, like, they show up to these, these really small machine shops that exist. They partner with them. You know, they don't, they don't, uh, you know, cut the management and fire people. They say, "How can we build new products and grow the kind of, you know, business that you have today?"

    26. EPErin Price-Wright48:14

        Mm-hmm.

    27. CLConnor Love48:14

        And it's that type of, uh, you know, concept of working with communities as opposed to working against them that I think we still need to, you know, wrestle with a little bit, uh-

    28. EPErin Price-Wright48:22

        Mm-hmm

    29. CLConnor Love48:22

        ... in, in, in the tech world and understand that just 'cause we sit in Silicon Valley, I mean, we, we, we don't understand everything that's happening in the world. And, you know, fundamentally, I think a lot of these 80 companies will build stuff that, that touches middle America. I mean, it will physically exist in middle America, and, you know, I, I, I think that's net good. I think that means more jobs, more prosperity. I think that means more energy and abundance world where, uh, you know, we have a safer America and-

    30. EPErin Price-Wright48:47

        L- less concentration of wealth in these-

Episode duration: 49:17