a16z's First Employee on the History of a16z, Venture Capital & Fixing the Government | Scott Kupor

1. 0:00 – 1:37

   Quitting HP mid-financial crisis to join a16z

   1. DSDavid Senra0:02

      Tell me what it was like starting a16z with Ben and Marc.

   2. SKScott Kupor0:06

      It was interesting. So let me give you the backstory if I can. So we don't, we had sold our last company to, uh, Hewlett-Packard, right? So we sold in two thousand and seven, and a bunch of us had basically indentured servitude to HP for-

   3. DSDavid Senra0:17

      [chuckles]

   4. SKScott Kupor0:18

      ... you know, twelve to eighteen months.

   5. DSDavid Senra0:20

      [chuckles]

   6. SKScott Kupor0:20

      And then the summer of '08, and mind you, right, you know your history, right? So in March of '08, basically Bear Stearns disappears, right? So it's summer of '08, and Marc and Ben are like, "Yeah, we're gonna do this." We've been... They've been doing angel investing for a long time with their own money, and they said, "Look, it's, it'd be a lot more fun if we institutionalize this and go out and raise money." We were literally having this conversation summer of '08, and then September of '08, of course, Lehman goes bankrupt like overnight, and so the world seems to be coming to an end. So I go home one day to my wife, I'm like, "Good news, I'm gonna quit my job at HP," which is probably the most stable job you have, "and join these two guys." And we were actually living in North Carolina at that time 'cause, uh, we had acquired our business out there, and Ben and Marc had asked me to go move out to run it, so I was already... I was, you know, not in California even anymore. So it took me a long time. I hemmed and hawed on it, and these guys joke to this day, which I don't know if it's true or they just like to razz me, is had I agreed to actually join them sooner, then I would've been, you know, it would've been Andreessen-Cooper Horowitz instead of Andreessen Horowitz.

   7. DSDavid Senra1:17

      [chuckles]

   8. SKScott Kupor1:17

      Now, I don't know if that's true or not, but, um, so I, my official title was first employee, not actually co-founder of the firm. Uh, but they started, so I finally kind of Christmas, um, I, I, I still have these emails. I look back at them. Marc and Ben were like, "Look, you gotta get off the dime. You gotta figure out what you're doing." And I finally said, "Okay," like, "I'm gonna go do this." But it took me a long time to figure it out.

2. 1:37 – 4:00

   His first day

   1. DSDavid Senra1:37

      What was the job description? What'd they say?

   2. SKScott Kupor1:38

      There was no job description. This was part of the problem was that, so yeah, it's like my wife's like, "What are you doing?" I was like, "I have no idea." So this was basically, so remember, it was just the two of them, and the job description was actually Marc and Ben said, "Look, we're gonna invest, and you need to figure out everything else we need to do to build a firm." And I didn't know what that was. So in the early days, it was literally like going to Costco to get, buy furniture and make sure we had food in the office and then, you know, doing things like opening bank accounts. And then we closed the first fund, and, uh, the way the funds work is, or you may know this, but for your listeners, is people, the investors sign up for what's called a commitment. They say, "Great," like, "I'm gonna commit ten million dollars of a lighter fund," and then we call the capital as we go. So it's literally called a capital call. It's what you do when you decide to invest in a company, and you actually need the money so you can make the investment. So my very first, uh, like day on the job, they're like, "Great, we made an investment in this company. Can you please call capital from our LPs to, uh, get the money?" So I didn't even have an email yet, so I used my personal Gmail. Um, so I send out this notice to like fifty different LPs. I'm like, "Great news," like, "Wire me a million dollars basically 'cause we need money for this thing." And I immediately get an email back from one of our LPs who I won't name, who's like, "Who the fuck are you? Why are you sending me this email?" And then he s- he calls Marc and Ben. He's like, "Somebody's impersonating you guys."

   3. DSDavid Senra2:52

      [chuckles]

   4. SKScott Kupor2:52

      "Like somebody's literally trying to shake me down for money." So you know, I finally realized I probably should actually get an a16z domain and set that up, so that was kind of the, that was the, you know, impetus I needed to actually get an a16z domain to do stuff. But that's what it was. It was just like we were figuring it out as we went, and these guys obviously, look, they knew what they were doing 'cause they were investing, and they knew what their primary job was. For me, it was, you know, the whole goal was like how do we actually create a firm? And so most of my initial days were hiring people basically. So you know, basic stuff like we had to hire finance people, for example, so that, like, I wasn't doing stupid things like capital calls for people from my Gmail account. Uh, but then we always had this theory, right, which has panned out, which was how do we build a services component to the business, right? So how do we basically create a system where we can take everything that, like, an entrepreneur might need and develop kind of concepts of, like, networks and relationships around that, so talent networks, you know, um, business development networks. And so a lot of the early days was hiring people who were domain experts in those areas so that we could actually start to build this team. And you know, we went from three of us to probably close to a hundred in the first year, and today I think we have like seven hundred people or something at the firm. So it's been a, it's evolved over time for sure.

3. 4:00 – 10:18

   How a16z copied Michael Ovitz's CAA playbook

   1. DSDavid Senra4:00

      Was Michael Ovitz around, uh, a16z at this time?

   2. SKScott Kupor4:03

      He was, yeah. So, uh, Michael had been on our board actually at Loudcloud and Opsware, so that's how obviously Marc and Ben knew him, but that's also how I got to know him. And, uh, yes, he was very, very influential, as you probably know, and I'm sure Marc's told the tor- story just about, like, the founding of the firm. And so he was very helpful, so I would call on him a lot and be like, "Look, you know, this is what we're thinking about doing," and he would kind of recount to me how they did things at CAA. But you know, essentially what they did, which is what kind of, you know, a lot of what a16z was built on, was kind of disaggregate the job of what back then was the agent, right? And then we basically did the same thing for what was the general partner job, right? So in the old days, and we actually pitched this in our first LP meeting, we were basically trying to institutionalize John Doerr. Uh, and so for your listeners who may not remember John Doerr, he was, you know, one of the very, very famous founders of Kleiner Perkins. And you'd go to John, and he knew every salesperson, he knew every CFO, he knew every political stuff. So John was like this ultimate uber connector for entrepreneurs. And our basic idea was, look, could we basically institutionalize that and not have every GP have to learn all those things? But could we basically, uh, effectively disaggregate that from the GP job and hire professionals who could do talent networks, who could do political networks, who could do sales and marketing, all the other things that ultimately, like, came to be the platform for a16z.

   3. DSDavid Senra5:16

      Was this around Michael, uh, O- Ovitz's idea of this phalanx, where it's like if you... Before that, it's like you were his... You might, like his, he's your agent, but really it's like, no, you have all of CAA-

   4. SKScott Kupor5:27

      Yes. Yeah

   5. DSDavid Senra5:27

      ... and you essentially tap into every single resource.

   6. SKScott Kupor5:29

      Yeah. So his, his theory, uh, and he'll... I know, I know you're friends with him. You've had him on many times.

   7. DSDavid Senra5:33

      I'm having dinner with him tonight.

   8. SKScott Kupor5:34

      Okay.

   9. DSDavid Senra5:35

      As a matter of fact.

   10. SKScott Kupor5:35

       Tell, tell Michael I said hello.

   11. DSDavid Senra5:36

       Yeah. [chuckles]

   12. SKScott Kupor5:36

       I haven't seen him in a while. But, but look, he'll tell the story much better, but my recollection of the story is, look, they, they start CAA in, I think nineteen seventy-five, and the whole industry was, was, which was very similar to how the venture capital industry was, you had an agent, right? So you're Robert Redford, right, and you have an agent, and that agent comes to you and says, "Great, I'm gonna help you do this," right? "I'm gonna help you get movie deals. I'm gonna help you get book deals, radio," whatever the, whatever the stuff is, uh, which was great. But the model was basically a one-to-one model, which was your agent To actor. What Michael did in, in CAA was they said, "Look, we're gonna basically maintain the relationship context between agent and, uh, actor." But when you would go, like, show up for a pitch at CAA in, like, 1990, where I think they had, like, 90% market share, they would sit around a table, and Michael would introduce you as Robert Redford and say, "Look, meet my colleague who does nothing other than radio deals. Here's my expert in radio deals. Here's my expert in international. Here's my expert in books." So you had this whole idea that you were surrounded, yeah, phalanx maybe is the right way to think about it. You have this whole firm as opposed to an individual who's responsible for your career. And we basically took the same model to the VC world, right? The VC world was a lot like that, was you had a one-to-one relationship with John Doerr, who was fantastic at what he did. The problem with that inherently was, number one, it just wasn't scalable. Uh, you know, at some point, John has so many board seats that you time out from a GP perspective 'cause you can only take so many board seats on. And then two was you had to get everybody to invest in all that same amount of relationship development work across all these domains, and that might have worked in the day John Doerr did it when basically we invested in enterprise software companies. That was essentially the domain of VC. But if you believe, you know, which I do, you know, Marc's software, you know, ate the world or is eating the world. As the domains grew, like, the expertise needed just continued to grow. So the fundamental theory that Marc and Ben had was let's hire GPs who are functional domain experts in the particular areas of investing they want, and then let's surround them with this phalanx of somebody who all they do all day long is manage CFO relationships or CEO relationships or VPs of engineering, somebody who all they do does government relations or business development or other stuff like that. So again, like, our pitch to an entrepreneur when they came in, we used to do this thing, we called it the reverse pitch, actually, where an entrepreneur would pitch us, and then we would bring the team in, and we would do the reverse pitch to them to say, "Hey look, if you work with Andreessen Horowitz, not only do you get me, Ben Horowitz, as your board member, but you get this entire table of people whose job it is day in and day out to figure out how do we institutionalize a set of relationships and networks that'll make you successful." So that was, like, the key application of, like, what Ovitz did to, you know, how Marc and Ben adopted it to the VC world.

   13. DSDavid Senra8:09

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4. 10:18 – 13:31

   After-hours bourbon in Marc Andreessen's office

   1. DSDavid Senra10:18

      Before you left a16z to go to government, you were there for how, how many years?

   2. SKScott Kupor10:22

      16 and a half years, so '09 until-

   3. DSDavid Senra10:24

      What are some of your, like, most memorable stories from the very early days, first year or two, three years?

   4. SKScott Kupor10:29

      Well, there were some fun ones, like, uh, we had a little bit of our Mad Men episode, uh, during the f-firm where, uh, at, you know, in the evenings we would go sit around and drink bourbon at the time. This was when Marc actually used to drink. I think he doesn't drink anymore.

   5. DSDavid Senra10:42

      No, he said that, I think he, on, he was on this show earlier.

   6. SKScott Kupor10:45

      Yeah, yeah.

   7. DSDavid Senra10:45

      And I think he said, like, he thought the best day was like, uh, 12 hours of caffeine followed by six hours of alcohol or something. [laughs]

   8. SKScott Kupor10:51

      Exactly. He was great, right? Yeah. Like, Marc would drink a lot of coffee. He always had sushi for lunch. I don't know, uh, you know, you, I don't know how well you know Marc, obviously it sounds like you don't know. But, like, Marc is very, uh, he, Marc gets very deep in things, so, like, if he gets excited about sushi, quite frankly, he'll eat sushi for, like, every meal for, like, a six-month period at a time, right? So he would do that, and then yeah, like, we would sit around his office at the end of the day and drink. And I remember very distinctly because we had to buy a, uh, special ice cube maker that actually made, like, you know, uh, the square ice cubes.

   9. DSDavid Senra11:20

      Yeah.

   10. SKScott Kupor11:20

       And Arsho, who's his assistant, was incredibly generous with us, but, like, she would basically come in at the end of the day and, like, make sure the ice machine was right. So that was fun. And it was just-

   11. DSDavid Senra11:29

       Hold on. You gotta bring me-

   12. SKScott Kupor11:30

       I have no idea what we're doing

   13. DSDavid Senra11:30

       ... so, so let's get over this. Bring me to this. Okay, so Mad Men style, we're working all day. Now we're hanging out in the br-

   14. SKScott Kupor11:36

       We, we didn't drink, we didn't drink during the day.

   15. DSDavid Senra11:37

       No, of course, of course, of course.

   16. SKScott Kupor11:37

       So I would say Mad Men style maybe is overrated 'cause-

   17. DSDavid Senra11:39

       No. So then-

   18. SKScott Kupor11:39

       ... nobody was smoking cigarettes.

   19. DSDavid Senra11:40

       So now it's nighttime.

   20. SKScott Kupor11:42

       Now it's nighttime.

   21. DSDavid Senra11:42

       Nighttime.

   22. SKScott Kupor11:43

       Yes, it's evening time.

   23. DSDavid Senra11:43

       Work day's kind of over.

   24. SKScott Kupor11:44

       Right.

   25. DSDavid Senra11:45

       But we're gonna keep it going and we're gonna drink.

   26. SKScott Kupor11:46

       Exactly.

   27. DSDavid Senra11:46

       What's happening?

   28. SKScott Kupor11:47

       Right, yeah. In our original office, and actually in our new office too, but our org- Marc and Ben, they had these very spacious offices, which was very nice. And, uh, Marc literally had, like, a bar. Like, Marc had one of the most amazing, like, bourbon and whiskey collections that I've ever seen. He probably still has it, although he's been generous with my birthdays over time. He sends things to me now since he's less of a drinker. Uh, I pick up most of his stuff. But yeah, we would sit around and, like, talk, and it wasn't like there was no, it was like the one part of the day where there was no formal agenda, and sometimes we just bullshitted about whatever was going on. Sometimes we were actually talking about an investment or something in the company. But it was fun. It was like, it was a time period where you felt like- I mean, number one, for someone like me, even though I'd been around Ben and Marc already for almost ten years, they're just, like, the kinds of people where if you have time to sit down with them and just shoot the shit, like, outside of work hours, like, you always learn something. And so that was always fun. And it just felt like we just had this sense of camaraderie that we were trying to build something. So there was no agenda. We would sit around, and sometimes it would go for fifteen minutes, and we'd all disappear, and sometimes we'd sit there for an hour. Uh, it never, like, turned, like, raucous. Like, you know, we all had, like, you know, families [chuckles] and kids to go home to, so it wasn't like we were, like, going from there to, like, a bar somewhere else. But it was just kind of a relaxing way to quite frankly end the day and have, like, some, like, fun or, and/or intellectual conversation about stuff we were doing.

   29. DSDavid Senra13:01

       What do you think those versions of you three back then would think about the outcome that played out over the next sixteen, seventeen years?

   30. SKScott Kupor13:08

       When I did the math for myself and I was trying to convince my wife why in the middle of the global financial crisis we should pick our family up from North Carolina, go back to the Bay Area and do this thing, my math was like, "Okay, I'm pretty confident they'll raise the first fund." No idea, quite frankly, what happens after that, but my general calculus was like, worst case, these funds take a long time, you know, we'll kind of weather through the financial crisis, and,

5. 13:31 – 18:37

   The Skype deal that returned half the first fund

   1. SKScott Kupor13:31

      you know, these guys had always been very good to me in terms of taking care of me. And I was like, "Look, you know, I'll find a job. I'll find another job basically if, like, this thing just doesn't pan out." That was kind of my general, general back-of-the-envelope calculus. I never imagined we'd get to where we were, and nor did I... Actually, nor did I imagine we would get there as fast as we did, and I think that was the big thing. So Marc's talked about this, but in literally, like, the first couple months after we closed the first fund, we invested in Skype. And, uh, yeah, if you remember, Skype was part of eBay, right? Skype had been bought by eBay, and it was, like, completely neglected inside of eBay, and yet amazingly it had this incredible network effect. If you look at the numbers, like, the numbers of subscribers just kept growing and growing. So we joined with Silver Lake at the time. Uh, I don't know if you know Egon Dourvan, who runs Silver Lake.

   2. DSDavid Senra14:13

      Mm-hmm. Michael Dell, I just saw him a few da-

   3. SKScott Kupor14:14

      Yeah

   4. DSDavid Senra14:14

      ... a few nights ago. He speaks very highly of him.

   5. SKScott Kupor14:16

      Yeah.

   6. DSDavid Senra14:16

      He actually brought him up the other night.

   7. SKScott Kupor14:17

      Exactly, yeah.

   8. DSDavid Senra14:18

      Yeah.

   9. SKScott Kupor14:18

      And, uh, and, and Michael Dell was, uh, was part of that too. But it's literally like we did essentially a buyout. Like, it was, like, a crazy thing to do. We had, we had just gone on the road and told all of our investors we're doing early stage venture investing.

   10. DSDavid Senra14:28

       [laughs]

   11. SKScott Kupor14:29

       And we hinted, by the way, this, the Skype thing was going. So, like, we pretty much said it was gonna happen, but we couldn't say it was gonna happen 'cause, you know, it hadn't been done yet. But so it wasn't actually a surprise for LPs, but it was clearly very different than the strategy we had laid out. And so we did this thing, and immediately, of course, everybody attacks us and says, "These guys are crazy. What the hell are they doing doing a buyout? It'll never work." And there was all kinds of stuff at the time. If you go back and read the stuff, you'll see it. There was this big IP dispute, uh, with the original founders like Janus and Nicholas and eBay about who actually owned the fundamental underlying IP. And so a bunch of people looked at buying Skype, but nobody could get comfortable 'cause they're like, "Gee, if we buy it, what if Janus and Nicholas come out of the woodwork and say they own it? And so do you really own the IP?" You know, Egon's genius, uh, was let's actually figure out a way to work with these guys. So we actually, you know, our bids came together and we actually worked collaboratively with, uh, with these guys as a way to mo- moderate this IP question. But anyways, everyone's like, "This is crazy." But the beauty of it, literally eighteen months later, we sold to Microsoft for four times what we paid, like, eighteen months before. And so the news cycles were just unbelievable. And look, part of this business is momentum begets momentum, right? Uh, which is true of so many businesses. And so we were able to actually, like, raise our second fund well ahead of what we had planned doing, in part because the Skype thing just worked out so well. We returned, you know, literally, you know, half of our fund to our LPs within eighteen months, which, you know, these days is obviously completely unheard of and even back then was unheard of, and it just completely changed the narrative. We also had a company called Nicira, which, um, was in the networking space. Martin Casado, if you know Martin, he's one of the partners there today. His company got sold to Cisco early on in the first one. So we had these, like, very quick early wins, which basically, you know, potentially could have gone the other way, but they didn't. They went in our favor, and they basically just dramatically accelerated the progress. And key to our business model, right, to do the Michael Ovitz business model, we had to have enou- enough of a fee stream to be able to hire all these other non-investing people, right?

   12. DSDavid Senra16:22

       Yeah.

   13. SKScott Kupor16:22

       And you know, Marc's talked about this before, but, like, you know, what Marc and Ben did, they were ve- very magnanimous. The two of them didn't take... They took no salary, right, at the beginning of the company because they wanted to basically take, you know, as much of the fees as they could to give it to me to go hire other people, you know, to build this thing out. But, you know, we needed another, you know, in order to kinda continue that build-out. The second fund gave us, you know, a, you know, stacking fee stream that allows us then to say, "Okay, now we can actually double down on this strategy." So it was one of these things where, like, you know, we had early success. It was also two thousand and nine, right? So again, middle of the global financial crisis. You know, you know this, but, like, you know, the Sequoia guys put out this, you know, RIP, uh, presentation. Have you seen this?

   14. DSDavid Senra17:01

       Was RIP Good, Good Times?

   15. SKScott Kupor17:02

       RIP Good Times, right. It's literally like the world's coming to an end. We're all gonna die. Sounds a little bit like today, actually, now that I say it. [laughs]

   16. DSDavid Senra17:09

       [laughs]

   17. SKScott Kupor17:10

       No one will ever raise any money. Like, put all your money under, under your mattress. And so, like, we were this shiny gold, you know, like, object in two thousand and nine when everyone else was hunkered down and worried about their portfolio companies. So we had this enormous advantage, which is we put a shingle out and we say, "Hey, like, we're open for business." And every other venture firm, and, and rightly so, I understand it, like, they had these enormous amount of portfolio companies that they were very worried about whether they would survive or not. So, so much of, like, all that early momentum accrued to our benefit, which enabled us then to go raise the second fund, which gave us the funding to build out the services strategy, and that really kinda compounded in a way that I, I don't think we expected. Now, Marc and Ben may tell the story differently, which is they always knew, they always knew it would be a success. And, and I'm certain... I, I believe that, right? I mean, these guys are entrepreneurs for a reason.

   18. DSDavid Senra17:51

       They pro- Obviously, they're co- entrepreneurs can be self-confident, and they don't wake up, uh, like, thinking they're gonna lose. But they're always surprised. There's no fucking way-

   19. SKScott Kupor17:58

       Yeah

   20. DSDavid Senra17:59

       ... if you build something that... They're confident they're gonna succeed, but they-

   21. SKScott Kupor18:02

       Yeah

   22. DSDavid Senra18:02

       ... can never predict the degree they, uh, uh, to which they do succeed. It's funny that you say that they would tell the, they might tell the story differently, because one thing I love talking about Marc, and it's obvious on the, if you watch the episode him and I did together, is the amount of business history that's in that guy's head.

   23. SKScott Kupor18:15

       It's unbelievable.

   24. DSDavid Senra18:16

       It's like I'm just, like, constantly prompting-

   25. SKScott Kupor18:17

       Yeah

   26. DSDavid Senra18:17

       ... and it's like he... I don't tell people, you know this, like-

   27. SKScott Kupor18:19

       Yeah

   28. DSDavid Senra18:19

       ... we don't know what we're gonna talk about before we talk about it.

   29. SKScott Kupor18:20

       Right.

   30. DSDavid Senra18:20

       There's not a list of questions.
6. 18:37 – 21:48

   Why VCs thought marketing was beneath them

   1. SKScott Kupor18:37

      It's amazing, yeah. And look, as you know, look, the guy is encyclopedic on so many things. But that's the, and that's the other thing, by the way, that he and Ben both were really, really smart about, which was... And, and I know he talked about this on your show, but just to double down on it, this concept of marketing generally in the venture business, right? So it was, it was considered verboten to market in the venture capital business. And I don't know why that was, and it was, I don't know, it was probably just, I think it's mostly historical reason, which was you didn't need to market because there was, in the old days, capital was scarce, right? So the source, the derivation of power for venture capital firms in, like, late seven- you know, late '60s, early '70s until, like, probably, like, close to 2000s was money was scarce. The VCs had the money, and so therefore, if you look at the balance of power, the VCs were up here and the entrepreneurs were down here. And that was sufficient, right? And, and a lot of great firms, and many of which still exist today, were incredible in that era, right? That's, you know, obviously Sequoia, you know, has been and continues to be incredible. But all the existing firms that you see there at the top of the game, like Sequoia, Accel, Greylock, even Benchmark, right, which was a spin-out of Merrill Pickard, all these guys lived in that era, right, where nobody marketed, I believe, just in part because they didn't have to market. Like, you went to them because they had the money, you needed the money. That was what the marketing was. When we came along board, look, we didn't know anything, and we didn't know anybody. And so part of, like, what Marc and Ben rightly said was just, like, we came out of the enterprise software business, and we know, like, in the enterprise software business, just because you have a good product, nobody gives a shit if you don't actually tell them what it is, right? And so they're like, "Look, we gotta go tell people who we are, what we stand for." And so we did. We told the story, which is, "Look, we're gonna do things differently. We're gonna build this whole service as part of our business, and we're gonna market on that basis," because what we didn't have to market on was we didn't have the, like, the long history of a track record in the business, right? So to this day, right, if you go to Sequoia, who's an amazing, you know, player in the space, if you go to their conference rooms, you'll see Cisco in a, you know, a poster of Cisco and Apple and, you know, Google and all these other things. Like, we had none of that, right? We had... Marc and Ben had done their own, you know, angel investing, and of course the two of them had had success as entrepreneurs, but, like, we couldn't compete against that. So what they rightly did was they said, "Look, if we can't compete on what people are competing on today, we have to change the rules of the road and go compete on something else." And so they created this category was, okay, the new venture capital firm is going to be not just capital, but it's gonna be capital plus plus, right? It's gonna be plus this whole network of people whose job it is to help the entrepreneur, you know-

   2. DSDavid Senra20:56

      It's in service of the entrepreneur.

   3. SKScott Kupor20:58

      That's exactly right. And so, and that, so that was a huge, major, major difference, you know, that they did, which also played out really well, and we got a lot of shit from all the other VCs on Sand Hill. They're like, "Look, it's, you know, verboten to market," and all this other stuff. We would... I, I remember 'cause I was talking to our, all of our LPs every day, and they're like, "Oh, uh, so and so, you know, we heard, we heard this from, you know, one of your competitors." And it was always, "Look, these guys talk a big game and they, you know, tell people stuff before they've done it." And we're like, you know, we're doing exactly-

   4. DSDavid Senra21:25

      That sounds like an entrepreneur to me. [laughs]

   5. SKScott Kupor21:27

      Yeah, we're doing exactly what any entrepreneur would do, which is, like, we were trying to create a category. You have to tell the category. You have to actually tell your narrative. And, and look, we had to deliver on it at the end of the day, which we did. It was just such a unique way to approach the business, not just the foundations of the business model, but the idea that we were gonna actually create a marketing strategy around that, that, you know, enabled, you know, the firm to kind of grow at a pace that I don't think any of us ever anticipated.

7. 21:48 – 27:12

   Swallowing his ego as a16z grew

   1. DSDavid Senra21:48

      So it sounds like at the beginning you were much more operational.

   2. SKScott Kupor21:51

      Yes.

   3. DSDavid Senra21:52

      As your tenure continues-

   4. SKScott Kupor21:54

      Yeah

   5. DSDavid Senra21:54

      ... did you switch over to investing or you always were operations? Like, how did you do it?

   6. SKScott Kupor21:57

      Like, I, I did, yeah. So I remember when I first came, um, I was like, "You know, what do you want me to do?" And they're like, "Well, we're gonna invest and you're gonna do everything else." And I have to admit, like, you know, my ego for a little while was kind of hurt. I was like, "Okay, well, why can't I, why can't I also invest," right? What I came to realize, particularly what they were, at the time they were doing early-stage investing, was I'm not a deep technologist like these guys are, and so much of that game, I believe, is your ability to actually understand the technology at a way more granular level. So we sit in pitches all day long, and if you don't understand databases, for example, you can hear 10 pitches about database companies, and unless you have that depth of knowledge, the honest answer is you have no fucking clue, like, which one is the right one to invest in. And so I ultimately assuaged my ego by saying, "Okay, look, like, that's not my strength, basically, and so I need to focus on the stuff that I think I can do." What happened over time was we changed the nature of the firms. This is another thing that, uh, I heard Ben talking about this, uh, on another podcast, uh, not too long ago, which was we started with a centralized firm, right? So everything reported to me. We grew that for about 10 years till about 500 people or something. So all of those, like, operating functions reported to me. Even, like, the investors essentially reported to me. Marc and Ben didn't really have any direct reports. What they realized over time, which was brilliant, was you can't scale a venture firm in that fashion. So there were two reasons. One was they said, "Look, like, we can't have 20 people sitting around when we're doing software eating the world and we've got crypto and healthcare and bio and, you know, American dynamism and all these other things going on. You have to specialize." And so we started a process 10 years into the firm where we basically decentralized the firm, and we said, "Look, like, we're gonna have smaller investing teams that are gonna be domain specific, so we're gonna have a crypto fund that Chris Dixon runs, and we're gonna have an American dynamism fund that David Ulevitch runs, and we're gonna have AI infrastructure that this guy Martine runs, and, and on and on." And then we said, "Look, in order to do that right, the needs of the entrepreneurs are different, so all of these, like, ancillary operating services we built, they all also need to feather in into these different verticals, so that we can do the things that are appropriate for the entrepreneurs." So, like, what a gaming entrepreneur needs in terms of business development support is totally different than what a life sciences entrepreneur needs. And so we went through this process of basically, you know, disaggregating everything into these structures, and we just kept a few things centralized that made sense. Like, so legal and finance, right? Core compliance functions. Look, you don't necessarily want people doing those [laughs] separately on their own. Let's keep those centralized. You know, investor relations, right? From an LP's perspective, their view is, look, like, I want to interact with Andreessen Horowitz as a firm. I don't want to have to, like, build completely independent relationships. So we kept a few things centralized. And so what that did for me, uh, which admittedly I will say, uh, and, you know, Marc and Ben know this, I fought initially 'cause When you go from owning everything, right? You go from owning everything, you're like, "Wait a second, I s- all of a sudden feel like my domain got a lot smaller." In fact, actually, Ben, uh, I, I heard him talk about this on a podcast. He said exactly what I felt, which is true, is like anytime you do a reorg in a company, you know, you always get a lot of hurt feelings, right? Because by definition, somebody in a reorg has fewer things than they used to have, basically, that's just the nature of it. And it took me a while before, again, this was another one where my ego got hurt. I was like, "Wait a second, like I thought I was doing a pretty damn good job like managing these things." And Marc and Ben, to their credit, were like, "Look, we're not saying you're not doing a good job. We're saying like the needs of the business have changed. The needs of the business demand that we do this, and so let's go find other ways in which you can add value to the business." And so that was kind of when I finally got an opportunity to start doing some investing. And what I recognized again was, look, I can't do early-stage tech investing because I'm just not a domain expert. And so we started a, a later-stage fund, we call it Later Stage Venture, for lack of a more creative word.

   7. DSDavid Senra25:23

      [laughs]

   8. SKScott Kupor25:23

      Um, and uh, and we started that in two thousand and nineteen. We brought in a guy named David George from GA, uh, General Atlantic, who'd been doing this, who was great. And so I basically started working with David and kind of carved out more of like doing stuff on the healthcare side. So by the time I left for government, I had about fifteen companies that I had invested in, about ten of which that I was sitting on the board of. Uh, but doing stuff where the evaluation of the company was more about the operational successes and kind of the opportunity for the company from like one to infinity, as opposed to the zero to the one side of investing, which I just didn't feel like I had the right skill set to do.

   9. DSDavid Senra25:56

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8. 27:12 – 30:37

   Why he left a16z to run the government's HR

   1. DSDavid Senra27:12

      years-

   2. SKScott Kupor27:12

      Yeah

   3. DSDavid Senra27:12

      ... and you, you take a hard [laughs] turn-

   4. SKScott Kupor27:15

      You think so? [laughs] I sure as heck so

   5. DSDavid Senra27:17

      ... into government. Why?

   6. SKScott Kupor27:20

      Yeah. My wife asks me that a lot too. Um, [laughs] so look-

   7. DSDavid Senra27:23

      This seems to be a reoccurring theme with your wife questioning your decisions.

   8. SKScott Kupor27:26

      My wife is way, my wife is, my wife is way smarter than I am. And, uh, her job is mostly, yes, to question like, "What, what the hell am I doing?" So the historical reason was I had literally done policy stuff starting in, literally in high school, actually. I worked for a group, uh, back in high school that used to do healthcare policy research. So, um, we were trying to figure out like, 'cause we were doing like breast cancer screening stuff, right? You know, like what do the economics look like? And then when I went to Stanford, I worked for a professor, this guy named Alan Garber, who's actually now the president of Harvard, doing stuff around prostate cancer, right? Which is okay, like, does it make sense to screen large populations of men for prostate cancer? And I won't go into details, but it turns out there's these weird nuances of prostate cancer. The basic answer is most men die with some form of prostate cancer. Very few men die of prostate cancer. And so screening broad populations can be problematic because you will catch a lot of stuff that never would have actually had health outcomes. Anyway, so I'd been doing that, and then when I went, when I, uh, went to Stanford through law school, I actually worked for another guy whose, uh, name is in the news today, a guy named Jay Bhattacharya, who now runs the NIH, if you follow that. Uh, Jay was a researcher at Stanford. I was his grunt. I used to do like modeling for him for this, uh, policy group that worked on. So I always had these, like interests in policy and then whatever, life kind of intervened and, uh, I ended up obviously going in a different path and going to the private sector. But at some point on my bucket list, I always thought I'd do policy stuff. The reason now was really a couple things. One was just from a personal perspective, like it was the right time in my life to do this. So my kids were all out of the house at this point in time. Mark and Ben were incredibly gracious and said, "Hey, look, if this is what you wanna do, like we're happy to support it." You know, you know, they were-- they enabled me to kind of transition my stuff off, uh, and, you know, gave me the freedom to do that. And obviously, I've been very lucky just financially along the way to have the means to be able to kind of take a break from the business. And then the second thing was, look, I really believe that what I learned in venture capital might have some applicability to what I would do in government. So the job I have is this, I run this group called the Office of Personnel Management. Essentially, you could think of us as we are the HR/talent agency for the two million civilian federal employees. So we are responsible for like making sure we have the right people coming into government and then all the policies that govern talent essentially in, in agent-- in the government. And-

   9. DSDavid Senra29:35

      Why did you think those, those skills transferable from your previous job to this one, though?

   10. SKScott Kupor29:39

       Because what I learned, and particularly, you know, through all the stuff I've done with working for Mark and Ben in companies and managing people, is something very simple, which will sound like so obvious, but I think it's really true, which is, look, organizations are pretty simple. It doesn't matter if you're a government organization or a private organization or a not-for-profit, they're all the same, which is all an organization is, is a collection of people who are just aligned around a similar set of objectives. Like, it's no more complicated than that. The question is like, do you have the right set of objectives? Do you have the right people? And then do you have a set of incentives that track to those objectives so that when people do the things you want them to do, they get rewarded and recognized, and you can then kind of do ten more great objectives? Or when they don't do that, do you have a mechanism to either correct that behavior and/or remove them from the organization? And so when I looked at that, I was like, okay, I'm gonna come to government, and it's a totally different set of objectives, which I agree. But the fundamental question is like, do we have the right people, and do we have the right incentive structure to actually enforce the behavior we want? And the short answer, particularly on the latter side, is like the incentive structure is completely screwed up from my perspective.

9. 30:37 – 33:24

   Why government is afraid to take any risk

   1. DSDavid Senra30:37

      Before you move on-

   2. SKScott Kupor30:38

      Yeah

   3. DSDavid Senra30:38

      ... let's describe this. Why is the incentive structure completely screwed up from your perspective?

   4. SKScott Kupor30:43

      So a, a couple things. Number one is, um, it is an incredibly, like, legal, regulatory, compliance related culture, basically. And so everything that happens basically in government is for fear of doing something wrong, we do the same thing we've been doing the same, uh, you know, all along. So the idea of innovation, any kind of innovation is very much difficult to do because the better thing to do is keep doing what you're doing. Don't take risks. You know, when I first came in, one of my, you know, reports said, "Look, our job is to keep you out of the news, basically." And I was like, "Well, okay, well, tell me more about that." And they said, "Well, we don't want you to get hauled in front of Congress for doing something that they don't want you to do. We don't want you to get a report from the GAO," which is basically like this compliance organization. "We don't want the inspector general, you know, doing stuff." And I was like, "Okay, like-"

   5. DSDavid Senra31:30

      Okay, so then let me just sit here and do nothing.

   6. SKScott Kupor31:31

      That's easy. Yeah. Like I-- that is pretty easy how to solve that, right? Which is okay, like, we will just do nothing, right? And, and it's exactly right, and that's what I said. I was like, "That's not your job." Like, your job is to help us figure out, like, what can we do that's good? And yes, if we have a good reason for doing something and we screw it up, like I'm fine getting hauled in front of some congressional committee and explaining that to them. Obviously, if we're, if we're-- our process was crappy, that sucks. We got to fix that. But what it means is basically it does not allow for any innovation, right? So look, I come from, as you know, we come from this crazy world in venture capital where we take like obscene amounts of risk, which is fine because you've got like upside that potentially is uncapped, right? If you find Coinbase in two thousand and twelve, as Chris Dixon and Mark did, you know, if it works, right, it can, you know, generate three hundred, five hundred times your money, right? And like that's a good thing to happen, and that can cover a lot of mistakes. We don't have that in government, but instead what they've had is basically the answer is like take zero risk. But that also means therefore like no consideration of upside potential for anything. And so part of the incentive structure that I think we have to put in place and we're trying to put in place is, I've been using this term permissioned risk, which is deliberately different from the permissionless risk that I think exists in Silicon Valley, which is we got to have this conversation, and we got to be willing to let people take some risk, and that risk needs to be appropriately sized for the organization. So if you're in Department of War, and the risk is people die, okay, like maybe we ought to have a really like low tolerance for that. But look, what I do and what most people in government do, it's not life or death, right? So yes, like we want to get people their Social Security checks. We want to get people their IRS refunds. Like if it happens, you know, plus or minus a day or two from when we expect it, like, you know, most cases, nobody's going to die. But if we could actually like automate a system and figure out, like how do you make it dead simple for people to get their Social Security checks or their retirement checks or anything like that, that has massive upside potential. But the incentive system has never allowed that. So that's part of number one. Like, that's part of the reason why the system's screwed up is like there is zero, zero opportunity for innovation. As a result, therefore, you have slow and plodding and not great customer service from a lot of these organizations.

10. 33:24 – 36:13

    Why 99.7% of federal employees get a passing grade

    1. DSDavid Senra33:24

       Well, not only that, if there's zero possibility for any kind of innovation, like what kind of talent are you going to attract?

    2. SKScott Kupor33:29

       Yeah. So here's the other side of this, right? Which is, um, then you have a performance management system that's also screwed up. So I'll give you a story. I think you and I may have talked this a long time ago when we first met. Everybody gets ranked generally one through five at the end of the year in terms of their employee rating. Some organizations have a four-point rating, but let's just say one through five. One is the worst, like you definitely, like should not be here. Five is like you're knocking the cover off the ball. And three means, hey, like you know what? Like you're good. You're doing what we asked you to do. That's all fine, and, and every organization, quite frankly, needs a lot of people like that. Historically, in government, ninety-nine point seven percent of people are a three or above, meaning literally zero point three percent fall below expectations. Now, in a population of two million people-

    3. DSDavid Senra34:10

       Is that even possible?

    4. SKScott Kupor34:11

       It's not even mathematically possible.

    5. DSDavid Senra34:12

       Okay.

    6. SKScott Kupor34:12

       It's not. So you have one problem, which is we don't do anything on low-end accountability in the government. Uh, we're, we're-- I'll tell you about how we're going to change this in a minute. But so that's a serious problem to your point, which is, look, how do I attract and retain great people when I'm sitting here, you know, busting my ass and you're like dialing it in and everyone knows you suck, but like, nobody actually wants to do anything about it. Like, that's a terrible place for high-performing people to be. So like-

    7. DSDavid Senra34:33

       To leave.

    8. SKScott Kupor34:34

       Yes, exactly. And on the other end, uh, so four and five, right? Those are the top ratings, mean not just you're doing your stuff, but like you're extraordinary or you're outstanding, you're doing great stuff. In the senior-- Just give you an example. In like the most senior side of the government, which is like seven thousand people that are like senior executives, something like ninety percent of people get ranked a four or a five, meaning like literally everybody's awesome. And again-

    9. DSDavid Senra34:57

       In an organization of seven thousand people.

    10. SKScott Kupor34:58

        Yeah, it's not-- again, it's not possible, right? What it means is like we've gamed the system and as a result, again, if I'm a high performer, like, you know, I want to be a high performer, and there ought to be smaller numbers of people who are high performers. And by the way, I ought to disproportionately get money for that. So when you have a system where ninety percent of the people get ranked at the top of the class, that means the bonuses make no sense, right? I give you a thousand bucks, and it has no incentive value, it has no retentive value. Instead, like we should have a system where, which, which what we're doing, is we've put a rule in place which is no more than forty percent of the population can be at that top ranking, and sixty-plus percent of the compensation pool needs to go to those forty percent of the people. Now, personally, I'd like to do even more extreme than that, but like we've got to crawl before we walk and run on this stuff. But like if you want to attract great people, you have to hold people accountable on the bottom end, and you have to allow for differentiation. And then the third thing you have, by the way, just you're-- you got me on my soapbox, is almost every promotion opportunity in government is gated by tenure. So you have to be in the job for a certain period of time, typically at least a one-year minimum, before I can even consider you for, for a promotion. Now, again, like if I'm going to hire some person who's awesome in software development and they knock the cover off the ball and within six months, like they demonstrate that they, they're, they're better than I thought-

    11. DSDavid Senra36:10

        They're essentially stuck in purgatory for six months.

11. 36:13 – 38:37

    Recruiting 1,000 engineers into government

    1. SKScott Kupor36:13

       They're stuck. Yeah. And then, by the way, if you promote them-

    2. DSDavid Senra36:14

       And then they have to-

    3. SKScott Kupor36:15

       They have to wait another twelve months, right? So we're eliminate, we're, we're eliminating stuff like that. So these are all policy changes we're making, which is we're going to eliminate. It's called time in grade is the, is the name for it. But like what we want is a merit-based culture where you come in, and we level you appropriately for what you can do. So one of the programs we have is called Tech Force, uh, just so you're aware, which is basically we're trying to build this elite corps. You and I talked about this. This is a elite corps of, like, we're trying to bring in a thousand software engineers, AI experts, data scientists to serve two-year terms of government. We're hiring them at what's called the GS-14 level, which is, is pretty high. That's like the second highest individual contributor level in government. And we're hiring that way because we are actually giving them assessments that technically analyze their skill set, right? So they come in, and they have to do like an actual test by a third party that is a code development test. Never before has the government done this, right? Instead, I would give you a questionnaire, and you would self-rate your skills, right? You would say, "I'm a really good-"

    4. DSDavid Senra37:08

       It's one through five? Uh, turns out I'm a five. [laughs]

    5. SKScott Kupor37:10

       You're a five, right? You know this language, you know that language.

    6. DSDavid Senra37:12

       Uh.

    7. SKScott Kupor37:12

       And again, like, it's, it's just, it's crazy, and there's a whole historical reason for it, which is, like, there was this lawsuit about disparate impact on these exams. But, but the point is, like, if we have a merit-based culture, we will bring people in at the right level, we will promote them at the right pace, and then I believe they will want to stay because they will feel like they're actually able to do what they want to do. Right now, until the changes we've made, like, historically we've had a system where, like, it's very hard for you to get, break, break out of the pack, basically, and that's just not amenable to having a high-performance culture.

    8. DSDavid Senra37:39

       In, in the most simplest description that you can muster-

    9. SKScott Kupor37:43

       [laughs]

    10. DSDavid Senra37:43

        ... explain why you felt it was d- like, what is the main problem as you see it that you felt the need to, again, change your entire life, move again across the country-

    11. SKScott Kupor37:55

        Yeah

    12. DSDavid Senra37:55

        ... and dedicate two, three, four years of your life to doing this?

    13. SKScott Kupor37:58

        Yeah.

    14. DSDavid Senra37:58

        Is it the demographic problem? Is it we just don't... Like, you c- it doesn't matter, it's not a political thing.

    15. SKScott Kupor38:03

        No, no.

    16. DSDavid Senra38:03

        But if you care deeply about America-

    17. SKScott Kupor38:05

        Yeah

    18. DSDavid Senra38:05

        ... you want the most talented people-

    19. SKScott Kupor38:07

        Yes

    20. DSDavid Senra38:07

        ... in the government.

    21. SKScott Kupor38:09

        Yeah. So three things that motivated me, which we're trying to do. One is, do we have the right talent? Do we have the right people in the right seats? This is where, again, um, again-

    22. DSDavid Senra38:17

        And the answer's clearly no.

    23. SKScott Kupor38:20

        So-

    24. DSDavid Senra38:20

        You can't say this, but-

    25. SKScott Kupor38:21

        Yeah, look, I- I- uh, let me say this 'cause I, I wanna be fair. There's a lot of ver- there are a lot of very good people in the federal government, so, like, I, I think, and I'm gonna come back to this, I think a lot of this is a systems incentive problem versus necessarily a talent problem. Now, there is a talent problem which, which you and I talked about a little bit, which is we suck at getting early career people into government.

12. 38:37 – 40:31

    Only 7% of the federal workforce is under 30

    1. DSDavid Senra38:37

       E- explain the demographics of who's-

    2. SKScott Kupor38:38

       Okay

    3. DSDavid Senra38:38

       ... working in the government right now, 'cause this is a wild stat.

    4. SKScott Kupor38:40

       Yeah. So today 7%, that's seven, of the federal workforce is under the age of 30, okay? So just so your listeners have a comparison, if you look at the total US workforce, 23% of the total US workforce is under the age of 30. Okay? So by a factor of three to one or more, the federal government is way under-indexed on early career people, okay? If you go to the other side, 44% of our population is over the age of 50.

    5. DSDavid Senra39:05

       In the work- government workforce.

    6. SKScott Kupor39:07

       In government, sorry.

    7. DSDavid Senra39:07

       Yeah.

    8. SKScott Kupor39:07

       So 44% in government is over the age of 50.

    9. DSDavid Senra39:09

       Yeah.

    10. SKScott Kupor39:09

        That compares with about 33% in the total US workforce. So we are three to one under-indexed, and then we are 11 percentage points over-indexed in the over 50 category in federal government. So, you know, we've talked about this, but look, I'm a small government guy. I, I, I won't presuppose your, your ideological views, but, like-

    11. DSDavid Senra39:25

        I'm the son of, son of a Cuban immigrant. [laughs]

    12. SKScott Kupor39:27

        Okay, so you're, you're more, more small government than big government.

    13. DSDavid Senra39:30

        Yeah.

    14. SKScott Kupor39:30

        Okay, so that explains a lot. Like, if we did nothing else, half of our workforce will retire over the next five or 10 years, and we are stuck with nobody to actually do the work, right? So, like, we need something more than zero people to actually work in the federal government. So thing number one that motivated me is like, can we solve that problem? And I think you solve that problem in two ways. One is we actually have to go tell a story about why it's interesting to go to government. So we've been talking about this, but one of the things I'm doing after I go here is we're starting on a college tour, which we have never done at OPM. We've never gone out to colleges or where, where the actual young people are and said, "Let's go find you. Let's tell you what's compelling. Let's actually create programs around this." And so we're, we're gonna do that. And you know, you know, you may not have seen this, but I do these stupid social media things on, you know, Instagram and WhatsApp and stuff like that because, like, I've hired younger people who actually understand [laughs] how do we get a message to people who a- who are looking at this stuff, right?

    15. DSDavid Senra40:24

        And your message is what? We need young-

    16. SKScott Kupor40:26

        Here's my message

    17. DSDavid Senra40:27

        ... technically talented people to just-

    18. SKScott Kupor40:28

        Not just technically talented

    19. DSDavid Senra40:29

        ... do a, do a two-year stint.

    20. SKScott Kupor40:30

        Yeah.

13. 40:31 – 43:09

    Why "a job for life" is the wrong pitch

    1. DSDavid Senra40:31

       Do you not?

    2. SKScott Kupor40:31

       Exactly.

    3. DSDavid Senra40:31

       'Cause I, I think, uh, somebody was saying, like, when you first came in, "Oh," you're like, "you're kind of screwing things up because our pitch here is like, 'You have a job for life.'"

    4. SKScott Kupor40:38

       Yeah.

    5. DSDavid Senra40:38

       And you're like, "Yeah, but young people don't think that way."

    6. SKScott Kupor40:40

       Yeah. Yeah. So I had a manager who, like, told me that. They're like, "You guys suck because our whole pitch to people is come here and you have lifetime employment." And, and I told her this. I'm like, "Look, that is the worst pitch I've ever heard." Like, there's not a single person under the age of 30 today who is thinking about lifetime employment, and if they are, by the way, you know, I hate to say this, but, like, that's not the kind of person we want because that's not the kind of, like, self-motivated, driven person that we want in the government. So my pitch to people is, "Look, come here. If do something, you know, not just that's good for your country, uh, that's fine, but like do something that's actually good for yourself, which is come spend two or three years to work on, like, some of the most complex, hardest problems there are out there," right? If you're interested in space, like go work at NASA. What, like, Jared Isaacman at NASA is doing is fucking awesome, and, like, you should be part of that. Or if you want energy stuff, go to Department of Energy. There's all kinds of cool, like, supercomputer stuff and all kinds of things. Work on these hard problems. And then after that, quite frankly, if you want to go to the private sector, that's amazing. Like, let's help you go to the private sector. So this Tech Force program I mentioned, in addition to these two-year stints, we've partnered with 40 private companies, right? So all the names you would know, right? You know, Alphabet and Meta and Databricks and all these guys. And what they're doing during the two years is they're gonna do training and career development for these folks in this program. And at the end of the two years, we're gonna do like a massive job fair, and if we've done our job right in the government, we have trained these folks so well that I want, you know, every private company to be fawning over these people. It's a little bit like, you know, you and I were mentioning, right, in Israel and the IDF, right, they have this cyber core where it's the best and the brightest kids coming out of high school who go to the cyber corps, and when they come out, every, like, venture capital firm is falling all over themselves to fund these guys. Every, like, cyber company wants to hire them. Like, that's the kind of thing like we want for the federal government. And if people love being in government, great. God bless them. They can stay in government. But, like, we don't need to ask people to make, like, 30, 40-year commitments.

    7. DSDavid Senra42:23

       I think you're appealing to interest is way smarter than saying, "Hey, here's the government. You're a citizen. Come try to do something-

    8. SKScott Kupor42:30

       Yeah

    9. DSDavid Senra42:30

       ... good for the government." That will get a, some percentage of people, but it's like you're gonna get a lot more if it's like, "No, this is actually good for you-

    10. SKScott Kupor42:36

        Yes

    11. DSDavid Senra42:37

        ... and your country at the same time."

    12. SKScott Kupor42:38

        That's exactly right.

    13. DSDavid Senra42:38

        It's aligning the incentives. And look what could happen. Like, this is where your starting point is when you, you come in. This is what we can do. This is what you'll learn during this, and this is what happens after that.

    14. SKScott Kupor42:45

        That's exactly right. And then while you're here, which comes to the second point, is, look, I have to create a high-performance culture for people like that to succeed, right? So if I can convince- Young, aggressive, like career-minded people to come to government, they can't come to the environment that I walked into, which is, "You have to sit in a job for a year before I consider you a promotion," or, "I can't hire you at a GS-14 level because you have no experience." I'll tell you the story, um,

14. 43:09 – 46:39

    Why the government would never have hired Big Balls

    1. SKScott Kupor43:09

       uh, which is, uh, somebody was reminding me of today. So if you follow the DOGE stuff, right, um, there's a guy named Big Balls. Have you ever heard of Big Balls?

    2. DSDavid Senra43:15

       [laughs] I've heard of Big Balls.

    3. SKScott Kupor43:17

       Okay.

    4. DSDavid Senra43:17

       I don't know anything else but his name.

    5. SKScott Kupor43:19

       It's very, it's very, it's very hard to say it, uh, on air. But anyways, his, he, as, as I mentioned to somebody I talked to this morning, he actually has a name. His name is Ed, so apologies to his mom that basically Big Balls has become his name. He joined the government, he joined DOGE, he joined Elon's team. I think he was 19 years old. He went to Northwestern, and I think he dropped out as a sophomore, okay? And he's one of, like, the most brilliant software developers around, basically. And he's like, "Look, I got motivated by Elon, and I want to do this stuff." And he's still there by the way. He works for Joe Gebbia now as part of this national design studio, which is like redesigning all of the, like, web, uh, sites for the government. Anyway, so when I, uh, I saw this article come out a few months after he joined. This was in the height of the DOGE stuff, when of course everyone was, you know, thinking the world had come to an end. And there was a quote from a government employee that said, "We would never hire..." He didn't say Big Balls, he said Ed. He said, "We would never hire Ed in government because he didn't have a college degree, and he didn't have five years of work experience." And when I saw that, like, literally, like I wanted to pull my fucking hair out because I was like, this is exactly the problem, right? This guy's awesome. We should hire him because he actually has the skills to help us, and literally every job description in government, almost all of them have like a college degree requirement. Well, in my mind, like that is a proxy for skill that may be indicative of something but may not, right? Like the fact that Ed didn't have a college degree had no bearing on his software engineering skill set, but it would have been used to basically kept him out of a job because he would not have qualified, or we would have hired him at like this low level where we would have paid him like $40,000 a year, which he never would do, of course. He would go to Silicon Valley and get paid like 10 times that, right? So part of this is like if we're gonna get great people, we have to be able to actually have them walk into a culture that actually believes in performance, that believes in accountability, that allows them to progress the organization, that pays them at the level that's appropriate for them. Look, we're never gonna like pay what Silicon Valley does, and that's fine, and, and, and that's okay. But we ought to at least level people appropriately so that, like, Ed should not come in at this GS-5, which is like the most entry level for government. He should come in at a GS-14 or 15, which are the highest levels, because his merit shows that he's capable of performing at that level. But the system as it existed would not have allowed that to happen. So this is what we've been doing from a policy perspective, is to fix all that stuff and say like, "Merit matters. Take a test, take an assessment, and everything else, quite frankly, you know, like we shouldn't worry about."

    6. DSDavid Senra45:31

       So Big Balls kind of gives you the blueprint where he says, "I'm super talented-

    7. SKScott Kupor45:36

       Yes.

    8. DSDavid Senra45:36

       "... drop out, maybe never wouldn't qualify for the set of, uh, um, requirements in federal government, but I heard this person I admire tell a compelling story."

    9. SKScott Kupor45:45

       Exactly, right.

    10. DSDavid Senra45:46

        You came in before, during, after DOGE? Like, what was-

    11. SKScott Kupor45:49

        Yeah, so I came in with, uh, basically I got interviewed and I came in with the, uh, DOGE guys. So it was obviously Elon, but of course there were guys like Steve Davis was kind of the day-to-day person running it. And, uh, I had the opportunity to spend a bunch of time with them pre-inauguration. So kind of, you know, end of-- I got nominated like first week of December or something, and so kind of December and first part of January lead to inauguration. Then what happens is they tell you, "Okay, like, until you get through your nomination process, you basically have to be persona non grata and like stop communicating with folks because otherwise it can, like, foul your nomination process." So we had developed a bunch of plans and ideas for what we would do once, like, the administration turned over. Uh, but I wasn't there day one to be able to actually execute those things.

    12. DSDavid Senra46:30

        But you're observing a lot of what was going on.

    13. SKScott Kupor46:31

        That's exactly right. And they were executing it literally out of my office. So it turns out, like my office was like the, like ground central for, ground zero for,

15. 46:39 – 48:56

    Why DOGE had to be a big bang

    1. SKScott Kupor46:39

       like, everything was happening.

    2. DSDavid Senra46:39

       So regardless of controversy over-

    3. SKScott Kupor46:41

       Yeah

    4. DSDavid Senra46:42

       ... anything that happened there, I'm not even interested in that. I'm interested if there are any ideas that you saw coming out of that, that you thought were good and valuable and should be spread further.

    5. SKScott Kupor46:52

       Yeah. Here's, here's my, here's my view overall on it, um, is part of the issue is... Okay, just to give you a sense of the numbers, right? So there were roughly two point three million federal civilian employees on day one when President Trump took office. Today, we're just about two million. So we've reduced by close to three hundred thousand people the, the size of the federal government, which puts the federal government at the lowest level it's been, uh, as a percentage of the workforce since like 1960. And you literally have to go back to like Clinton, Gore before you have anywhere even close to that. The numbers that president has is, is much higher, but still, like that's the last time you had any serious effort. So part of it is, look, the entire apparatus of government, it travels in one direction only, which is budgets get, get, just get bigger every year. Every time an agency wants to do something new, they go back to Congress and they say, "Great, you want us to do that thing? Give us more headcount to do it." So like, that's been the path of like travel basically for the last, I don't know, fifty years probably or something like that. So the way I think about what Elon did was like Elon had to come in and to cha- to like change the direction of a two point three million person like oil tanker, you can't do gradual incremental stuff. Like, you have to have a big bang approach, right? Now, people can argue and debate about his tactics, and it's, it's fair. I think there's, you know, there's fair arguments to have, to have on both sides. But like the idea that you had to have someone come in with a mission and actually try to like do some serious change, like I don't think there's any argument that you could ever make the change that we did without effectively like a big bang strategy. Look, he got a lot of shit for it. Lots of people got a lot of shit for it. And, you know, look, history will, will, will write the story about that one. What we're trying to do now, like when I came in was I was like, great, all the-- they did all this work. Now we have to institutionalize this. That's kind of how I think about my role, which is, okay, like Elon, Steve Davis, all these guys did an amazing job of like breaking glass basically and saying like, "This is how things are gonna be." Now we have to like do the long-term institutionalization of it, which means we have to now go through and say, "Great, what are you actually working on? Tell me the twenty things you're working on. Like which ones are really important? Which ones should we not be doing?" We never take stuff off the plate in government. We just keep adding. And so-

    6. DSDavid Senra48:51

       This like inertia-

    7. SKScott Kupor48:53

       It is

    8. DSDavid Senra48:53

       ... is insane.

    9. SKScott Kupor48:54

       It's crazy.

    10. DSDavid Senra48:55

        The, um,

16. 48:56 – 55:28

    The underground mine with 400 million pages of paper

    1. DSDavid Senra48:56

       the, the story of you, you oversee retirement-

    2. SKScott Kupor49:00

       Yes

    3. DSDavid Senra49:00

       ... benefits for all, right?

    4. SKScott Kupor49:01

       [laughs]

    5. DSDavid Senra49:02

       And we were on the phone the other day, and you told me a story I just could not believe. So I was like, "Do you understand?" Like you, we were talking about the fact that, hey, uh, you know what? There, America is full of like dynamic, really smart- High agency young people that don't even know this is a path and it's an opportunity, and maybe we should, like, just shine a light on this-

    6. SKScott Kupor49:17

       Yeah

    7. DSDavid Senra49:17

       ... and it'd be beneficial regardless of what you think. Like, you wanna, uh... If you have the choice between a l- better functioning government or not, of course you're gonna choose that, and it-

    8. SKScott Kupor49:25

       Sure

    9. DSDavid Senra49:26

       ... it has to do with the people that are in it, like, and, and the organization. But then you're like, "Do you know about the mine full of 4 million pages of documents?" And like-

    10. SKScott Kupor49:34

        400 million.

    11. DSDavid Senra49:34

        I'm sorry.

    12. SKScott Kupor49:35

        400 million.

    13. DSDavid Senra49:35

        400 million.

    14. SKScott Kupor49:36

        [laughs]

    15. DSDavid Senra49:36

        And I'm like, "Scott, what the hell are you talking about?"

    16. SKScott Kupor49:38

        I know.

    17. DSDavid Senra49:39

        Can you tell this story?

    18. SKScott Kupor49:40

        It's a great, it's a great story. So a- and, and credit to Elon, right? 'Cause Elon made this story a real one. So we, OPM, manage retirement. So roughly 100,000 to 200,000 people retire every year from government, and when you retire, you know, there's a whole process, right? You have to fill out a bunch of paperwork. It has to go to your HR department, who has to confirm it. One of the, like, literally crazy problems, by the way, in government is we do not have the canonical history of your government service until you literally decide to retire. So most people to this day are in government for 30-plus years. They go to different agencies over time. Each of those agencies has different HR systems, has different payroll systems, and so I cannot look at, you know, David's record and say, "Hey, you spent five years here, and you spent this." Literally, part of the retirement process is we have to create that record. Now, we're changing that, by the way. One of the other big projects I'm gonna come back to the mine is we are consolidating the entire HR IT system in government from 120 different systems into a single system, and we're gonna go from spending $2 billion a year to $40 million a year. We're literally gonna save 95% by actually getting to a single system, and we will now have, like, the record of David Senra-

    19. DSDavid Senra50:48

        Mm-hmm

    20. SKScott Kupor50:48

        ... that you can look at every day and see all the stuff. So anyways, you wanna retire. What you did prior to last year was you literally filled out paperwork. You put a fucking stamp on it. You mailed it by mail to your HR department, okay? They did their stuff. They put a stamp on it. They mailed it to a payroll department, which is different, by the way, in the federal government from the HR department. Payroll is a totally separate thing. And then they f- the final piece is they mail it literally to an underground mine in Boyers, Pennsylvania. Now, nobody probably here has ever heard of Boyers, Pennsylvania. It actually happens to be in Butler County, which is where, you know, the president's assassination attempt in July, I guess, of '24 was. It's what you would expect, like, you know, rural middle America looks like. The federal government happens to be actually one of the largest employers out there. So people go to work every day in an underground mine that used to be an actual working limestone mine. Uh, it was since turned into basically a storage facility, but you can't get in there without going through massive security. You can go down in the mine, and there are literally people driving golf carts around in with limestone walls. And so it shows up here, and then literally we have individuals, 800 people in my retirement service organization, who take that paper. They read the paper. They make a bunch of manual calculations, and then they give you a retirement check. That process historically takes anywhere from three months at the low end to 12-plus months to do, partly because we go back and forth, and if you forgot to sign your paper, I literally will snail mail it back to you, ask you to sign it, and that will introduce another one-month delay in the process because, like, literally, like, it's sitting there waiting for you to happen. So Elon identified this, and rightly so. He's like, "This is insane." Uh, he teamed up with a guy named Joe Gebbia. Joe, Joe is a, uh, co-founder of Airbnb who's now running this natural design studio, and they started this project at OPM before I got there, and then I, I picked it up, which is how do we automate this process? Today, we've fully automated the process. So now you never actually send a piece of paper. In fact, we declared the last day of paper in the mine on June 30th. So we will never receive another piece of incoming paper into the mine. Everything's online. We sh- should be in the year 2026, which is this is not rocket science, right?

    21. DSDavid Senra52:48

        Mm-hmm.

    22. SKScott Kupor52:48

        Like, you should be able to fill out an online application for your retirement, and as a result, we can reduce the processing time today just with the first iteration of this by more than 50%. Uh, my goal is, like, we're gonna be able to reduce this, like, by 90%. We're, our commitment is if you give us an application that's electronic that's healthy, within 15 days, like, you should literally have, like, a full retirement check. Like, it should not be any harder than that. So we're doing that. Now, we have 400 existing, million existing pieces of paper from all the people who retired prior to last year, basically, who call us up sometimes and they say, "Hey, my spouse died," or, "My child needs to be added to my insurance," whatever the hell stuff. So literally, if you call our call center today, we send what we call a runner. This is actually a job classification in the mine who goes into the mine, pulls a file out of a electronic file cabinet. Uh, sorry, not electronic file cabinet, actual virtual physical file cabinet-

    23. DSDavid Senra53:39

        [laughs]

    24. SKScott Kupor53:39

        ... some of which date to, like, the 1950s. It's a great... I'll show you some pictures after.

    25. DSDavid Senra53:42

        [laughs]

    26. SKScott Kupor53:43

        And they bring it to the person who adjudicates it, and then when they're done, they literally return the thing back to its thing. Like, we are now, we've just purchased two massive, uh, like, digitization machines. I don't know what you call them. Like-

    27. DSDavid Senra53:54

        Mm-hmm

    28. SKScott Kupor53:54

        ... literally, like, scanners that, like, take up an entire room. It's like a mainframe computer.

    29. DSDavid Senra53:58

        Mm-hmm.

    30. SKScott Kupor53:58

        And, you know, from this day forward now, every single one of those 400 million pieces of paper is going to be digitized, which will allow us, number one, to at some point in time actually literally shut down the storage component of the mine, but also just dramatically change the nature of what we're doing in terms of servicing people. Like, our service is not good for people, in part because, like, we haven't given the people there, they don't have the stuff at their fingertips to be able to resolve problems. They literally have to wait for somebody to deliver a piece of, uh, a file for them from a file cabinet. Like, it's insane. There are problems like this all over the government. They're so obvious we should fix them, but, like, this comes back to what we talked about, about risk. I didn't, like, discover this, and, and Elon, to his credit, didn't discover this. You can go back literally to the 1970s and 1980s. You will see articles written about how fucking ridiculous this mine is. Nobody has ever tried to solve this because God forbid some congressional person is gonna say, "Oh, you screwed it up," or, "You didn't do this, do that." And, and I was like, "Look, this is ridiculous. We have to fix this." But the incentive structure is so aligned against fixing these things. It's way better to have a shitty service for people and not, like, risk rocking the boat than it is to actually try to convert these things into, like, a modern-day experience. Like, this is the fundamental, like, incentive problem that we have to solve.
17. 55:28 – 57:14

    Why government has to accept some failure

    1. SKScott Kupor55:28

       If I'm gonna-- I gotta go tell people a good story to get them here. When they get here, I actually have to have an environment they're excited to do. And if they're excited to do it, then we will actually get modernization because they won't be trapped in the system of not actually trying new things. Like, and look, we have to accept the fact that we're gonna screw some stuff up. Like, again, and, and, you know, Mark always, always, uh, you know, gets excited about some things. Like, you know, there's this whole meme in Silicon Valley, right, that Silicon Valley, like, loves failure, right? And, like, nothing could be farther from the truth. Nobody fucking likes failure. But what Silicon Valley does recognize is, look, if we're gonna innovate, we're not gonna get it right all the time. And again, like, okay, if we're talking about life and death for people, we should be pretty careful we get it right all the time. But if I can, like, make the retirement experience ten times better, and there's some risk that's reasonable that I fuck it up, quite frankly, and it doesn't work, like we got to incent people to take that risk. Like, it's crazy that we're not doing that. But, like, historically, nobody's been willing to do that because, you know, whatever, the person who was in my seat wanted some other political job coming out of this, and therefore, if they got a bad, you know, congressional hearing, that would stop it. Like, uh, I told the president this when he interviewed me in December, uh, after he, like, asked me why he thought I was qualified for the job. And I was like, "Look, I'll tell you the other reason why I think I'm qualified is there's not some other job I'm trying to get out of this. Like, I've been incredibly blessed and incredibly lucky in my private life. I didn't come to this job because, like, I'm, I'm competing for some other either private sector job or public sector job." So it's like, look, I don't really care. Like, I'm gonna do what I think is the right thing, and then if I get in trouble, like, you know, I'm either gonna fight if I screwed up, or if it turns out, like I did something stupid, that's fine. Like, fire me. I'm okay with that. But, like, there's so many people who are in these jobs because it is a stepping stone to something else, that it prevents them from being willing to take that appropriate, like, level of risk to try to get stuff done. And to me, like, that just makes no sense. Like, and this is why we have kind of stasis for, for so long.

18. 57:14 – 58:15

    How young people can join

    1. DSDavid Senra57:14

       All right, so let's say somebody's listening to this right now. They wanna help. They're young. They wanna do a few-year stint. Where do they go? How do they get in touch with you?

    2. SKScott Kupor57:22

       We have a whole website, uh, believe it or not, earlycareers.gov. That's one place they can go. Uh, we're about to be on, like, forty different college campuses. Uh, if they're there, they can show up, uh, and see us. Uh, they can, uh, follow me on X. Uh, I'm just @skooper. Uh, OPM is @usopm. Like, any of those places. But literally, like, send me a DM if you're interested, and, like, I guarantee you, like, we will figure out a way to make something work.

    3. DSDavid Senra57:48

       I love how much you're on this. Thanks for taking the time to talk to me today, Scott.

    4. SKScott Kupor57:51

       Thanks, David. Appreciate it.

    5. DSDavid Senra57:51

       Appreciate it.

    6. SKScott Kupor57:51

       Yep.

    7. DSDavid Senra57:52

       All right. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review, and make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over four hundred biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders. [upbeat music]

Episode duration: 58:15