Investing in Outliers | Shaun Maguire, Partner at Sequoia | Ep. 1

1. 0:00 – 13:38

   Speaking his mind in public

   1. JAJack Altman0:00

      [upbeat music] All right, Shaun, thanks for doing this. I'm really excited to talk to you today.

   2. SMShaun Maguire0:03

      Thrilled to be here, Jack. What's going on, man?

   3. JAJack Altman0:05

      All right, so I wanna go right into it. So the first thing I wanna talk about is sort of like the current state of the media and social media. I'm not sure if I have-

   4. SMShaun Maguire0:12

      I have no opinions on the subject.

   5. JAJack Altman0:13

      You got nothing. We can move on. [chuckles]

   6. SMShaun Maguire0:14

      I'm just kidding.

   7. JAJack Altman0:15

      I don't know if I have the timing exactly right, but the way I experienced sort of you on Twitter was October 7th happened, and you got super vocal, and you started sharing a lot of opinions on X that were, that were kind of controversial, that were strongly rooted. They were ones that I agreed with, but, you know, ones that many people were sort of afraid to say in those ways. I wanted to start there, of just, like, what happened in that moment, and did I read that right, that there was some change in you or the way you thought about how you were gonna show up around that moment?

   8. SMShaun Maguire0:44

      For sure. Um, you nailed it. There's a pretty long backstory [chuckles] on this, so I'll try to keep it brief, but I... Child of the internet, born in 1985. First time using the internet was fourth grade at my friend Nick Palchakoff's house, AOL. We went in AOL chat rooms. We realized that we could impersonate being a professional baseball player, uh, Mike Piazza. If you're listening, Mike, I've never met you, but I, I did a great job pretending I was you in fourth grade. You know this, too, but there was just really something about the internet in those points, where it was very new and the social elements of it were brand new. And this is a, a weird tangent, but, like, in physics, when you study some system, you start with very simple toy systems that you can actually understand. You study a single ball on a spring or a single ball on a string, you know, or y- you study with some simple system, and then you try to build up from there. When you understand a simple system deeply, it makes it much easier to understand the complex systems. I feel like I got lucky with when I was born, where I was on the internet in the very beginning of the social element, and so I think I was able to understand, as a participant, like, how manipulation works, how, how misinformation works, how it spreads. Y- I, and I'll give you an example on Mike Piazza, and I've talked about this maybe twice before, but, you know, my friend and I, we would A/B test. Like, can we convince people as fourth graders that we're a professional baseball player? And we basically learned a tactic accidentally that worked almost every time, call it eighty percent of the time. You know, if you just come out in a forum and say, "I'm Mike Piazza," no one's gonna believe you. But if you join some chat room, and you're talking to people, and you seem normal, and oftentimes AOL at the time would then go into a sidebar, you'd be talking to someone one-on-one. You know, after talking to someone for a little bit about random stuff, you know, the weather, whatever their hobbies are, you know, they'd ask: "What do you do?" And if you're not the one that starts, you know, with that, and they ask you, "What do you do?" And you'd be like: "Oh, I play baseball. " And they'd be like: "What do you mean you play baseball?" You're like: "You know, like, I get paid to play baseball." And they're like: "So you're a professional baseball player?" S- It's like: "I guess so." It's like: "Who do you play for?" "I play for the Dodgers." They're like: "You're lying."

   9. JAJack Altman2:55

      Uh-huh.

   10. SMShaun Maguire2:55

       Like: "What's your name?" Like, "My name is Mike Piazza." They'd be like: "Shut up, you're lying," you know, and they'd ask some question about you, and you'd be like, you know, you have to know all the trivia on the person, and so then you answer some basic questions. And then y- I'd basically lead with, "Look, I know it's hard to believe, but it's really hard for me to meet people in the real world. I like to come on AOL and just talk to people, you know, like no one's judging me," all this, and that would click with people, at least in 1995.

   11. JAJack Altman3:22

       Yep.

   12. SMShaun Maguire3:22

       Or sorry, call it 1998, something like that. It was actually shocking where if you kind of did it that way, at least in that time... Today, that wouldn't work, but back then, it worked. So anyways, I, I really grew up in the early days of the internet. I started building websites. I'd build a lot of prank websites and just gained intuition for how information spreads, what would go viral, all of this, and I basically followed information warfare from an early age, and then I actually worked in the US government doing some of that work. Um, but I was basically quiet online.

   13. JAJack Altman3:56

       That's what I was gonna say. So you figured this out when you were, like, twelve or thirteen-

   14. SMShaun Maguire3:59

       Yeah

   15. JAJack Altman4:00

       ... and then, you know, twenty years go by, while you just know this, and you're probably learning more. Then you started exercising it.

   16. SMShaun Maguire4:04

       And I-- Well, I did some things anonymously-

   17. JAJack Altman4:07

       Mm

   18. SMShaun Maguire4:07

       ... that some very high impact-

   19. JAJack Altman4:09

       You're one of the anon accounts?

   20. SMShaun Maguire4:10

       I was [chuckles] running some anon accounts.

   21. JAJack Altman4:12

       I've had some.

   22. SMShaun Maguire4:12

       And I did some very high-impact stuff, and so I, I, I was still practitioning a little. It was, it was just something like, that I understood but was not taking that seriously.

   23. JAJack Altman4:20

       Why, why didn't you do it? Do you want to and you were held back, or were you just, like, not interested in, in doing it?

   24. SMShaun Maguire4:26

       It's a great question. Um, I-- In some ways, I was being held back, and not by any one employer, not by that, but it's... I, I mean, currently one thing is before you're eighteen and after, the rules are very different. It's ill-advised to take risk with some of these things.

   25. JAJack Altman4:45

       Well, I, I mean, I think we all kind of hold back a little bit. You know, like, speaking for myself, like, you know, I wish I could be a little bit more fearless online than I am. I think a lot of people are, and then I think, you know, people see what you do, and there's a, you know, there's like a sort of a, a jealousy, admiration thing of like, I wish I could kind of do that. And so I think most of us feel, whether it's from our employer or our friends or, you know, we're just afraid of people, I think most people-- I think the default is people feel held back from, from going all the way open.

   26. SMShaun Maguire5:11

       Yeah, look, I, I felt that way for a while. Um, and when October 7th happened, it was a moment in my life where, for a variety of reasons, I felt like I have to speak, and there, there's a lot to that. One of the things is I had followed basically every conflict in Israel in my lifetime, uh, you know, and in the region, and had learned some of the information warfare tactics from prior flare-ups. So that was one thing, is I felt like I understood what tactics were going to be used in the future, and so therefore had something to offer to the conversation. Another was, I was just, t- to be very blunt, like, I was at a point in my life where I had sold a company for a billion dollars, and I didn't obviously make a billion dollars, but I had made enough money to where if I got fired and-... you know, I, I, I wasn't gonna starve to death, and that's a very lucky, privileged-

   27. JAJack Altman6:07

       Yeah

   28. SMShaun Maguire6:07

       - position, but-

   29. JAJack Altman6:07

       But you were unafraid?

   30. SMShaun Maguire6:08

       I was unafraid. Like, I-- you know, it's-- you get to a point where it's okay if you, you know-
2. 13:38 – 24:27

   Trust and the media

   1. JAJack Altman13:38

      As somebody who used to trust the media, like when I was younger, I was just like: Yeah, it's, you know, it's the media. And I, you know, now I trust it very little. I think that's like, you know, common. Is-- it's not that I think everything's wrong, but it's this ninety-five/five thing. It's like, I don't know which thing I don't trust, and then once that happens, it's very hard. But so then we're in this kind of like fog of worry moment where, you know, we don't have these media-

   2. SMShaun Maguire13:58

      Yeah

   3. JAJack Altman13:58

      ... outlets that we fully trust. You've got this, like, citizen journalist thing, which I think is good.

   4. SMShaun Maguire14:04

      Also, it's good, but it's also flawed.

   5. JAJack Altman14:06

      But you-

   6. SMShaun Maguire14:06

      It's very flawed.

   7. JAJack Altman14:06

      Yeah, exactly. You don't exactly know who to trust there, and, you know, people have the same kind of flaws, and somebody who's very trustworthy on one topic might be completely untrustworthy-

   8. SMShaun Maguire14:14

      Yep

   9. JAJack Altman14:14

      ... on another, and all this stuff. And so it does feel to me like we're in a moment in time where truth is hard to come by. I'm hoping at least that this is, like, a transitory moment, and there's some resolution here. Um, but I'm curious your read on the situation, and, like, where does this evolve into? 'Cause it feels in flux or something.

   10. SMShaun Maguire14:31

       I couldn't agree more. I think we're at basically a low point in the truth in our lifetimes, and hopefully, we come out the other side, um, in a stronger place. But I, I think there's, there's, like, at least two really important factors here, if not three. And just, just to contextualize, I think it's important to know what you're dealing with. One is, I think that we basically have had a phase transition in Western media in the West that I think really started in the late nineties. And, and candidly, I think Fox News, like, defected in prisoner's dilemma, and they realized that they can start putting out, you know, highly editorialized-

   11. JAJack Altman15:12

       That's a good way to put it about-

   12. SMShaun Maguire15:13

       ... things

   13. JAJack Altman15:14

       -the prisoner's dilemma.

   14. SMShaun Maguire15:14

       It was, it was literally prisoner's dilemma.

   15. JAJack Altman15:15

       Yeah.

   16. SMShaun Maguire15:15

       I think until, like, through the early nineties, I think both sides were, for the most part-

   17. JAJack Altman15:20

       Yeah

   18. SMShaun Maguire15:20

       ... you know, trying to do their best. But Fox News defected. In my opinion, they were one of the first. Once they defected, CNN defected, and then everyone defected, and that was happening at a similar time that, you know, before social media, but then a decade later, social media came, and then that changed the incentives where-

   19. JAJack Altman15:37

       It's just not worth it.

   20. SMShaun Maguire15:38

       It's-

   21. JAJack Altman15:38

       You should go for the headline.

   22. SMShaun Maguire15:39

       You gotta go for the headline. So that created a second incentive, which, you know, just in this negative feedback loop, we defected in prisoner's dilemma, and then once we were already out in the lower quadrant, we were incentivized to basically put out fake news and, you know, tell stories very quickly, all this. So this is, like, one big trend. The second thing that I think not enough people really understand is just how much nascent-- nation state involvement and, like, intelligence operations are involved in the misinformation on all sides, including the US, like massively.

   23. JAJack Altman16:12

       You're saying, like, the US is influencing, like, the media outlets-

   24. SMShaun Maguire16:15

       Everywhere

   25. JAJack Altman16:16

       ... to tell stories?

   26. SMShaun Maguire16:16

       Everywhere, and but so is China, so is Iran, so is Russia. All nation states are doing this and have been doing this for a long time, but I think it's gotten much more extreme recently. And just a couple of points on this: If you go back to twenty sixteen election, there was, there were all these fake news bot farms on Facebook.

   27. JAJack Altman16:32

       Mm.

   28. SMShaun Maguire16:33

       Attributed to Russia, I think probably Russia. These tactics, like, people don't ever stop doing what they were doing. They just get better at hiding it. They get more sophisticated at it. And they were-- Russia was not sophisticated enough at the fake news in twenty sixteen to where we were actually able to catch them. It was relatively obvious as, like, an American citizen. They-- but they got more and more sophisticated over time, and now it's at the point that you can't even tell what's happening. And it's not just Russia, it's basically everyone. But, I mean, the US has been doing this forever as well. Like, even during the Cold War, you know, we would start Radio Free Europe and start, you know, radio stations to put out pro-democracy, you know, content on, on the airwaves, which my interpreta- interpretation of is, that's great, but everyone does this. Living in America, greatest country in the world, I am a maximum pro-America patriot. But freedom of speech, um, is kind of a root vulnerability for America, in that our adversaries get to use freedom of speech as well, and we don't get to use that. We don't get to go into China or Russia and, you know, say whatever we want. Our, our, news platforms, everything gets shut down there, but they get to use it here. And so we're in this maelstrom right now of the news defected in the nineties and fully deteriorated. Social platforms changed the incentives, you know, to go more for clickbait, have very fast responses. And our nation state adversaries got more sophisticated, and especially in an era of social media and all that, it was easier to-- there's less of a check. Like, New York Times in the sixties, seventies, eighties, they knew that Russia was trying to infiltrate their newsrooms, and so they were actively monitoring for it. So just like all those checks went off the rails, and what we're left with right now is just an extreme-... soup of lies-

   29. JAJack Altman18:24

       Yeah

   30. SMShaun Maguire18:24

       -and fake news and misincentives. And I, I think the best thing that anyone could do is just r-really, like, a-assume that everything you're consuming is, is wrong or a lie. And I do think there's some optimism that we can improve these things over the next few years. Like, I think we're close to rock bottom right now, but people at least have to have this awareness.
3. 24:27 – 29:27

   Tech’s political flip

   1. JAJack Altman24:27

      Let's talk about, um, US politics a little bit and sort of, um,... what sort of, uh, I guess specifically the switch that tech has gone through. Um, and I actually wanna draw a parallel between, you know, from the tech side, uh, like inside companies, you know, uh, what Brian Armstrong at Coinbase did, where he was like, I can't remember exactly what, you know, when he said this, but, you know, at one point he was like-

   2. SMShaun Maguire24:51

      It was, it was roughly May twenty twenty.

   3. JAJack Altman24:55

      Yeah, and he was like, "We're not-

   4. SMShaun Maguire24:55

      And I know 'cause I had been with him like a week or two before.

   5. JAJack Altman24:58

      Okay. Yeah.

   6. SMShaun Maguire24:58

      He's such a legend.

   7. JAJack Altman24:59

      And-

   8. SMShaun Maguire24:59

      I'm proud of him

   9. JAJack Altman25:00

      ... And when he did that, which now, you know, being like, you know, w- our, our- we're focusing on our customers and our products, that is a very bland thing to say today. At the moment, people were pretty up in arms.

   10. SMShaun Maguire25:10

       Yeah.

   11. JAJack Altman25:10

       Um, and like, so, so that transition happened where, you know, he went out on what seemed like a limb, but now it's like, of course, he was right, and, like, everybody remembers that. At the same time, tech sort of politically went through this big transition where Trump in twenty sixteen and twenty was like, you know, it was like a pretty heretical thing, like people were, you know-

   12. SMShaun Maguire25:27

       For sure

   13. JAJack Altman25:28

       ... very quiet about if they were supporting him, and most weren't. Um-

   14. SMShaun Maguire25:31

       I was not, for the record.

   15. JAJack Altman25:33

       Yeah. And, and now it's, you know, it's, it, it is definitely not heretical, and it's also much more mixed in terms of the way people are falling politically. So I guess those two things seem to have something in common, of course.

   16. SMShaun Maguire25:44

       Yeah.

   17. JAJack Altman25:44

       Um, but, like, what is that? What is the underlying thing that's happened so that tech, I think, has, like, swung as sharply as it has in this sort of, like, deeper way than either just, like, how it's voting or how it's behaving at companies?

   18. SMShaun Maguire25:55

       I, I just need to say one thing about my own personal journey that then I'll tie it into the broader tech journey. But, you know, I came on, and in the beginning of this, I'm saying how I'm some misinformation expert and information warfare expert, and, and I honestly think I am, and I have a pretty long track record of public and non-public stuff there. But I got fully manipulated, um, in twenty sixteen. To, to be very candid, like, where it came from is I was too trusting of the US intelligence community, and I had worked in and with the US IC, and I think there's many unbelievably great people, some of the greatest heroes in America and the world are in that community. But I was, I was raised, like, a lot of people in my family were in the military, and I, I was just, like, extremely trusting of that community. And my root vulnerability in twenty sixteen and tw- twenty sixteen to twenty twenty was I deeply trusted that community, and so things like, you know, when people in the IC said that Trump has ties to Russia in twenty sixteen, like, that, for me, worst possible scenario would be we'd have a Manchurian candidate president that is owned by Russia and somehow skates through. Um, and then in twenty twenty, I, I wrote about this a bunch, but I still didn't vote for Trump there, even though I had really liked his policies in twenty... his first term. Right, two weeks before the election, fifty-one intel officials, five former CIA directors came out and, you know, w- said that the Hunter Biden laptop was Russian disinformation, and, um, that sowed enough doubt in my mind that, wow, maybe if Russia wants this guy to win, then, like, I want whoever Russia doesn't want to win, to win, and that really worked on me. I think everyone had different vulnerabilities, different things that they, you know, d- data sources that they weighted. But for me, two things coincided, which were, one, I had-- I learned that I had just been deeply manipulated, and that was infuriating to me. And the second thing was Silicon Valley, starting around twenty sixteen or so, the Trump administration, and I think that became such a- so much animosity, and people got more political and more vocal against Trump. It coincided with, like, the DEI movement, James Damore at Google, MeToo movement, cancel culture. I think a lot of people in tech simultaneously got so frustrated by, like, cancel culture in the Valley at the same time where people were realizing that they had been manipulated for a long time, and those two things came together, and it was just like: Fuck it, I'm pissed. Like, you know, I'm gonna start speaking my mind. And once some people started to speak up, it's just like every time one person says something, it gets easier for the next person, the next person, snowballs, and that is something like, from an information theory perspective, you can codify, and that was something that was... I was actually going through my, my mind, was like, that you can trigger an information cascade with, like, small-

   19. JAJack Altman29:05

       Yeah

   20. SMShaun Maguire29:05

       ... small change in bits.

   21. JAJack Altman29:07

       Yeah, it goes back to sort of the, uh, the prisoner's dilemma thing, where once you see other behaviors like that, it just gets much, much safer. I also really like the root vulnerability concept. I think that is like a-- I haven't heard it quite like that, but I think that's something that, like, all positions have that, and understanding your own weakness and where you can get trapped-

   22. SMShaun Maguire29:25

       Yep

   23. JAJack Altman29:25

       ... is probably really essential.

4. 29:27 – 45:27

   Investing in hard tech vs. software

   1. JAJack Altman29:27

      As tech's politics have kind of flipped from the left to the right, what's interesting is I think we, like, historically weren't that deeply embedded in the government, and, and now we actually are, in, like, what looks like a much more obvious way to me. And you see, like, a bunch of players inside of tech having much more influence with the government. The government seems to care about tech in a way that it never did. People get invited to the White House. They're like, you know, it seems like they've got a voice in all of these places.

   2. SMShaun Maguire29:51

      It's ironic that this happened with Republicans, not Democrats, for what it's worth.

   3. JAJack Altman29:55

      It's crazy, and it seems like that was, like, a real fumble from the Democrats, and it seems like they, like, had that at their disposal this whole time, and but, you know, s- h- here we are. And, um, one of the things I'm wondering about is, will, will this drastically change the types of companies that become important? And so I'm thinking about the types of companies that, you know, maybe, maybe this got most, like, accurately mimetically captured by, like, Andreessen's, you know-

   4. SMShaun Maguire30:19

      Mm-hmm

   5. JAJack Altman30:19

      ... American Dynamism Fund. You know, there's all these companies that require the government to do government-scale things, and, you know, you see this with Anduril and SpaceX and OpenAI and, like, many others of w- you know, what are kind of like the, the biggest, most important companies at the moment.... you know, coincidentally have these big government relationships. And so I'm curious, will this-- will this sort of tech government hybrid, will this change companies, or will this just make it a little easier to navigate? Like, what's the impact for tech here?

   6. SMShaun Maguire30:48

      There's a lot of directions to take this. One initial quick thing in some sense, it's challenging and risky to have tech be closer to Washington. You know, like, whenever you take a side, you're more at risk if something goes wrong, the conflicts of interest are more acute. And so I, I hope that, like, I, I think that we should have a deeper relationship between tech and Washington, and Washington should be funding more ambitious tech projects. And I think a lot of times, like, the government investments into tech or loans, whatever, have been, I think, treated unfairly. They're seen as a conflict of interest, whereas oftentimes these programs were, you know, there's a broad agency announcement, and a lot of people bid on it, and a tech company happened to win it, or the loan was given to ten companies, nine were incumbents, one is a tech company, but the media focus is on the tech company. So, so look, I, I think we should be doing a lot more, and I hope we don't jeopardize that. But the even bigger thing to me, and I, I haven't said this too much publicly, I wrote a manifesto for Sequoia a few years ago. I think it was three years ago. It's a hardware manifesto. I've been obsessed with hardware my entire life. You know, I have a PhD in physics. I'm literally was obsessed with semiconductors as a kid. Like, completely obsessed, obsessed with the chemicals industry and, and I was also obsessed with early Silicon Valley. And if you look at Sequoia, Sequoia made almost all of its m- money, the first twenty-five years on hardware investments. You know, one of the first investors in Apple-

   7. JAJack Altman32:28

      Mm-hmm

   8. SMShaun Maguire32:28

      ... and, um, you know, Cisco, and, you know, l- Linear and many, many other companies. Nvidia, first investor in Nvidia. The last twenty-five years, Sequoia has made almost all of its money in software. And kind of a question I asked myself was, like, "Is hardware dead? Long live hardware, or is this kind of a secular-

   9. JAJack Altman32:53

      Mm-hmm

   10. SMShaun Maguire32:54

       ... trend?" Secular, you know, in a finance perspective, especially like Wall Street, oftentimes means like longer trends than just one economic cycle. And so I wrote this manifesto three years ago. Uh, now, like, it's obvious to everyone, but literally in my manifesto, I had, like, two stocks. One was Nvidia, one was Tesla. And I really strongly believe we were just in like a secular period where it was all about software and not about hardware. And some of my realizations, there's, there's a bunch of things, but one that I think is not fully appreciated, almost by definition, to like every software revolution is preceded by a hardware revolution. You can't, you can't have some new software platform if you don't have the hardware to run it. Um, and for example, you can't have Uber and DoorDash if you don't have the iPhone. Uh, well, you, you need to have the App Store, and the App Store needs to have the iPhone, and the iPhone required twenty years of development with Qualcomm, Broadcom, you know, fiber CapEx-

   11. JAJack Altman34:02

       Yeah

   12. SMShaun Maguire34:02

       ... all sorts of the-- Cisco, but there was twenty years of hardware before that. To have, you know, deep learning, you needed to have the GPU, to have the cloud, you needed twenty-plus years of cheap, you know, of CPUs getting really cheap. Like, the, the kind of the whole point of the cloud is that we got to a point where hardware got cheap enough that you can, you know, put a ton of relatively commodity hardware in one place and operate, and you get a, like, a economic advantage to, to do it that way. Anyways, you can name any software revolution in history, and it's preceded by a hardware revolution, something like VR today. Part of why we don't have great VR software is the hardware is not good enough, and it's getting better-

   13. JAJack Altman34:48

       Yeah

   14. SMShaun Maguire34:48

       ... very quickly. And the input to VR hardware-

   15. JAJack Altman34:52

       Yeah

   16. SMShaun Maguire34:52

       ... like, a lot of it, it's byproduct of what's been happening with the iPhone. Like, a lot of the... I think, I think sensors in general are one of the most underrated technologies-

   17. JAJack Altman35:01

       Mm

   18. SMShaun Maguire35:01

       ... in the world. There's, my estimate is about a trillion dollars of market cap of companies that are basically sensor companies or selling sensors. A lot of the market cap of Honeywell or Raytheon are from sensors-

   19. JAJack Altman35:12

       These sensors, yeah

   20. SMShaun Maguire35:12

       ... but there's many other companies. Keyence is a hundred billion dollar market cap company. Anyways, like, is hardware dead or, or, you know, are we missing something? And I really think we've been missing something, and I think that thing is that basically the way Moore's Law happened, you know, hardware matured in a bunch of different areas all around the same time, which led to a bunch of software ecosystems all catching on. And now, as you go to-- and now, a lot of those are, have run out. Like the App Store, there's very few new interesting apps getting created. VR is not quite here because the hardware has to get better. In my opinion, AI is still hardware le- hardware limited. You see it with the AI data center build-outs, but it's not just gonna be Nvidia that benefits. There's gonna be a bunch of other companies on the hardware level that, that benefit. We're seeing the beginning of autonomous vehicles, like, just on and on and on. I think we're at the beginning of a new hardware revolution. Silicon electronics are starting to become silicon photonics. We've just kind of gotten the first commercial applications of silicon photonics that are actually-

   21. JAJack Altman36:14

       Mm

   22. SMShaun Maguire36:14

       ... economically viable. And anyways, I, I think we're entering a new era where the next twenty-five years through robotics and AI and space and, um, you know, and, and then some of the later platforms like VR and then brain computer interfaces and medical technology, all these things, I, I think we're entering like another golden era, uh, and obviously, defense technology to a massive extent. I think we're entering another era where that's gonna be like a very money-making-

   23. JAJack Altman36:42

       Yeah

   24. SMShaun Maguire36:42

       ... opportunity. And like that requires-... government partnership, or at least it's enhanced, and if we wanna compete with China-

   25. JAJack Altman36:49

       Because it's such big dollars or something else?

   26. SMShaun Maguire36:51

       Because it, because it's big dollars-

   27. JAJack Altman36:52

       Regulation.

   28. SMShaun Maguire36:52

       Also because a lot, like, the- look, the biggest driver historically as an early adopter of hardware has been the Defense Department. Like, I, I don't think that's something that-

   29. JAJack Altman37:03

       Yeah

   30. SMShaun Maguire37:03

       ... should be ignored. You know, and I think one of the other biggest trends in the world right now, just literally one of the biggest macro trends is, for twenty-five years, we were outsourcing manufacturing to China, and now we're bringing it back, and that re-onshoring is just an insane driver also of, of like hardware development in, in America.
5. 45:27 – 52:30

   Thinking with a beginner's mind

   1. JAJack Altman45:27

      As you were talking about, um, you know, how a lot of investors operated decades ago and, you know, incubating and Genentech and all these things, there's a part of me that as I reflect on my own sort of journey here, where, you know, I've been building, you know, a company up until a year ago, and now I'm, you know, investing, which I really love doing. If there's an insecurity I have, sometimes I'm like, "I was, I was doing the work, and now I'm supporting the people doing the work." I don't think that that's like a productive mindset necessarily, but like that, you know, if I'm on a, if I'm on a day where I'm, like, insecure about what I'm doing, that's what the insecurity is. And, um, you also-

   2. SMShaun Maguire46:05

      You'll grow out of it.

   3. JAJack Altman46:06

      Yeah, hopefully. Yeah.

   4. SMShaun Maguire46:07

      Yeah.

   5. JAJack Altman46:07

      I'll just forget that I did it ever-

   6. SMShaun Maguire46:08

      Yeah

   7. JAJack Altman46:08

      ... and that'd be great. And, you know, but you, you know, you, you built, you know, you built a company, and-

   8. SMShaun Maguire46:11

      Yep

   9. JAJack Altman46:12

      ... you were very successful, and now you've been, you know, investor for a while. Like, talk me through, you know, will, will I grow out of it? Like, did you have that, and how do you think about this, and is there a, are there ways to do it where you agree with that statement versus not?

   10. SMShaun Maguire46:22

       No, you'll def- you'll definitely grow out of it. You know, that said, you may get the itch at some point to start another company. Like, I think they're different phases of life. I'm gonna use a few weird analogies. I have a lot of weird analogies. One is with mathematicians. So there's this saying, it's not 100% historically accurate, but that a lot of the best... Like, almost all of the best mathematical results are from young mathematicians, call it before the age of 30, roughly. And, like, the Fields Medal, it's for work before the age of... You have to be 40 by the time you get it, so, you know, the work has to be a few years before that. You know, there, there's this saying that mathematics is a young person's game. There are some counter examples, like some incredible mathematical work that people did later in life, but I think for the most part, it's true.

   11. JAJack Altman47:10

       Yeah. Yep.

   12. SMShaun Maguire47:10

       And as I... Like, as I've- as a former kind of mathematical physicist, the reality of life is, like, you- there are different phases of life, and, like, I have two boys, little boys. It's the best thing in the world, but it would be very hard for me to do math the way I used to, like, with all the responsibilities I have now-

   13. JAJack Altman47:34

       To also be the parent you wanna be

   14. SMShaun Maguire47:34

       ... and having a family and being a parent I wanna be.

   15. JAJack Altman47:37

       Yep.

   16. SMShaun Maguire47:37

       And all this, like, it's basically impossible. When Gregory Perelman solved the re... Like, the, the Poincaré conjecture, basically spent years living in Russian forests, you know, just literally just thinking about this one problem in max autist way, [chuckles] which I respect a lot, and he pushed humanity forward in the process. Or when Andrew Wiles solved Fer- Fermat's Last Theorem, like, he... I think it was seven years of work where he was just fully, it's the only thing, waking up, breathing this thing. And I think it's hard to, for those types of problems, I think it's hard to do anything else. You have to put all the concepts into RAM in your head and just keep them there and-

   17. JAJack Altman48:22

       100%

   18. SMShaun Maguire48:23

       ... process. Like, if you shut down the computer and purge the memory, the IO time is very long, and you'll just never make any progress.

   19. JAJack Altman48:32

       I don't wanna interrupt.

   20. SMShaun Maguire48:32

       Yeah.

   21. JAJack Altman48:33

       But I, um, I'm sure you've read the book A Mathematician's Apology, the G.H. Hardy book, and anyway, it, we- it's about, you know, this great mathematician-

   22. SMShaun Maguire48:39

       Of course

   23. JAJack Altman48:40

       ... who reflects back, you know, reflects back on his life.

   24. SMShaun Maguire48:41

       And, and Hardy's the one that-... basically found Ramanujan.

   25. JAJack Altman48:44

       Yeah, yeah, exactly. And, and he's, and he's sort of like, um, reflecting later on, you know, "I did this work when I was at a certain age to do that work."

   26. SMShaun Maguire48:52

       Yeah.

   27. JAJack Altman48:53

       And then, you know, how do you grapple with that over time? And I think different people grapple with that differently.

   28. SMShaun Maguire48:57

       Yeah.

   29. JAJack Altman48:57

       I think for some people, there's like a, I think the unhealthy- the, the grappling I don't wanna have-

   30. SMShaun Maguire49:02

       Yeah
6. 52:30 – 59:33

   Fulfillment in investing

   1. JAJack Altman52:30

      So when you think then about the, you know, give- given sort of this sort of way of doing it in a way that you're, you know, proud of or excited by or, you know, resolves nicely in the sort of fuller context of life, are there types then of investing that are more in line with what you think is... The word honorable just came to mind. That's not the word I mean exactly, but, like, that are more, um, fulfilling and meaningful versus types that are more just like, "Who cares? Even if I'm gonna make money on this, it just doesn't- who cares? What am I doing?"

   2. SMShaun Maguire52:59

      I shouldn't answer this, but I'm going to. As you [chuckles] as you stated in the beginning, I, I don't hold back. Look, I generally get way more fulfillment from hardware companies. Um, I think that at the end of the day, hardware companies are the ones that really move the ball forward on humanity in general, more than software, and that's not exactly-- it's not always true, but as a general statement, I think that hardware companies are something that, like, if, if one hardware company doesn't happen, the whole category-

   3. JAJack Altman53:25

      Yeah

   4. SMShaun Maguire53:25

      ... might not happen. Like, if Elon didn't push SpaceX, who knows where humanity would be with space today? If he didn't push Tesla, who knows where EVs would be? If Steve Jobs didn't push Apple, like, who knows where personal computing would have been? And, like, it would've happened, but maybe five, ten years more slowly. You know, if, uh-- there's just so many examples of this, where I think that a individual hardware company can really change the timeline in which whole industries happen, more than software. I think software is more inevitable. Once the, once the macro ingredients come into place, like, I think the software companies are almost inevitable. And going back to science, there's this concept in science that, like, ideas are in the air. Calculus was invented simultaneously by Newton and Leibniz and other people. Like, all the raw ingredients are there. I think with hardware, ideas are mu-- there, it requires more of, like, a stroke of genius or the-

   5. JAJack Altman54:23

      Like great man theory type stuff?

   6. SMShaun Maguire54:24

      Yeah, great man theory. It's like Edison and Tesla were like psychos, and if they didn't exist, you know, like, it's hard to know if the Wright brothers... Like, it's hard to know what would have happened with aviation. So I do believe a little bit more in the great man theory with this. And so therefore, the places where I've gotten the most fulfillment have been-... like, seeing something with hardware earlier than others and being the ones to-

   7. JAJack Altman54:50

      Yeah, I mean, the other big difference is, like, science and math, you know, you might say eventually must get discovered.

   8. SMShaun Maguire54:56

      Yeah.

   9. JAJack Altman54:56

      Like, versus, like, if it, if it, if it's true, it eventually someone's gonna find out that it's true. Versus with, like, nobody had to make Apple.

   10. SMShaun Maguire55:02

       Yeah.

   11. JAJack Altman55:02

       Like, Apple didn't have to be like Apple, it could have been anything.

   12. SMShaun Maguire55:04

       For sure.

   13. JAJack Altman55:05

       You know, somebody decided to make it that way.

   14. SMShaun Maguire55:06

       And because Steve did it with such a specific intent, like being, like... I just watched an amazing clip yesterday of him talking about Microsoft.

   15. JAJack Altman55:18

       Mm.

   16. SMShaun Maguire55:19

       And he, he basically says, like, they had no spirit. They had-- you know, and he respects them, they built a great business, but that they had no design sense, no spirit, and that he viewed Apple as, like, a cultural movement, and that it's, you know, it-- that, for example, if, if he didn't bring in type setting, like, it might not have ever happened, and we might have had ugly text forever. You know, it just-- not only does it take someone to-

   17. JAJack Altman55:49

       Yeah

   18. SMShaun Maguire55:49

       ... do it, but the person that does it gets to really set the agenda for how that field happens in the future.

   19. JAJack Altman55:56

       I saw a clip of him the other day talking about how, like, this is, like, a long time ago, decades ago, like '80s or '90s or something. He's talking about how, like, wouldn't it be amazing if you could ask Aristotle questions and how, like, you know-

   20. SMShaun Maguire56:07

       Totally.

   21. JAJack Altman56:08

       And, you know, maybe that's kind of where AI is going now with stuff.

   22. SMShaun Maguire56:11

       Yeah.

   23. JAJack Altman56:11

       And, but, like, to have that kind of vision and narrative-

   24. SMShaun Maguire56:15

       Mm-hmm.

   25. JAJack Altman56:15

       And that's what rallies people to build towards that vision and nar-- I think that's, like, a big part of what's required for these, is somebody has to just, like, hold this North Star for so long to so many people because it's so hard to make this stuff happen. Maybe this, we can end on this question, you know, with that backdrop, you know, when you think about the way that VCs can be operating or should be operating or... It's-- 'cause, you know, what we're talking about right now, like, I'm like, "This has me fired up." Like, now I'm like, I feel good about being a, you know, an investor. Like, this is great. But so much of it is so, um... It can be so, you know, mimetic, and there's so much herd mentality, and there's so much- because you're, you know, because you're abstracted from the building, unless you're, you know, incubating and building companies yourself, it, you know, seems very easy for people to get caught up in the wrong stuff. And so I guess, like, how do you think about, like, what VCs should be practiced like today?

   26. SMShaun Maguire57:06

       Trey Stevens and Markie, I think her last name is Wagner, they wrote this piece a couple of years ago called Choose Good Quests.

   27. JAJack Altman57:16

       Yes, I loved that.

   28. SMShaun Maguire57:17

       It was amazing, and I thought that was a great articulation of it. I'm not gonna knock anyone that wants to create a widget. Go create-- If that's what gives you joy, go create a widget. But in my opinion, like, I get my joy from either choosing good quests myself or trying to help other people on good quests. There's probably twenty, thirty percent of the companies I've backed are not there, like, they're kind of more widget companies. And something just to, just to call out, I also love people, and, like, there are some humans where, like, if, if I deeply love some founder and they are obsessed with some widget, then sometimes I get excited to give them money to go do that. And-

   29. JAJack Altman58:01

       Also, by the way, widgets sometimes surprise everybody.

   30. SMShaun Maguire58:03

       Exactly.
7. 59:33 – 1:13:51

   Investing in outlier people

   1. JAJack Altman59:33

      Do you think that outlier people are the limiting ingredient to us having more outlier companies?

   2. SMShaun Maguire59:39

      I don't think it's the only limiting factor, but I think it's definitely one of them. And if you look kind of in any given year in history, like, at the number of unicorns or decacorns that are formed, like, the-- in terms of realized exits, I'm not talking VC fake marks in capital cycles, I'm talking like actual exited companies, like, it's relatively consistent for a long time, and I think it, that says something around, like, at any given moment, there's not that many real big new market opportunities. So I think it says something about that, and I, I think it also says something-- It either says only purely the number of market opportunities, or it says only something about the number of outlier founders or some combination of the two. But I, I, I think it's, I think it's both. Um, and I do think we're limited by outlier founders, but I also think we're limited by VCs that are willing to give money to... Like, that are able to recognize outlier founders that have a good idea and then give them capital, and, uh, there's other constraints.... as you've sort of, you know, working at a place that's obviously, you know, kind of at the top of the, top of the game, d- have you picked up things there specifically about how to identify what that looks like? Because one of the things I, you know, don't have a good answer to is... I mean, I know, I know somebody who's outlier now. Like, I know, you know, when I see, you know, the Collisons talk-

   3. SMShaun Maguire1:01:09

      Yeah

   4. SMShaun Maguire1:01:09

      ... or you see, you know, these amazing people now, you're like, "Okay, I know good when I see it now," but that's a very different thing than kn- you know, they didn't look the same-

   5. SMShaun Maguire1:01:16

      For sure

   6. SMShaun Maguire1:01:17

      ... when they were 20-

   7. SMShaun Maguire1:01:17

      For sure

   8. SMShaun Maguire1:01:17

      ... and all the rest of it. Like, is that, is that, is that kind of taste in people, is it teachable? Are there things that you learn by watching? Are there... Is, is there things you could learn by reading or thinking? Like, what is that?

   9. SMShaun Maguire1:01:30

      On the first part of the question, I have to say I have learned an unbelievable amount being at Sequoia. Like, like, really, I have learned a lot being at Sequoia. Um, and it- and that's on all dimensions. It's how to think about markets. It's also how to think about founders, how to find outlier founders. We're pretty obsessive around the language we use for how to talk about-

   10. SMShaun Maguire1:01:55

       Mm

   11. SMShaun Maguire1:01:55

       ... founders. And I've also- I've, I've just learned an incredible amount about company building, everything. Like, the, the place... There's 50 years of institutionalized knowledge and an obsessive culture around documenting lessons.

   12. SMShaun Maguire1:02:10

       That-

   13. SMShaun Maguire1:02:10

       That language thing is so hard because, you know, you'll hear so frequently people be like, "Oh, this founder is really spiky."

   14. SMShaun Maguire1:02:15

       Yeah.

   15. SMShaun Maguire1:02:15

       Or, you know, you'll hear this language that to me comes off as, uh-

   16. SMShaun Maguire1:02:18

       It's horrible

   17. SMShaun Maguire1:02:19

       ... inaccurate.

   18. SMShaun Maguire1:02:19

       It's totally inaccurate.

   19. SMShaun Maguire1:02:20

       Yeah.

   20. SMShaun Maguire1:02:20

       And most people are completely uncalibrated.

   21. SMShaun Maguire1:02:22

       It's unhelpful.

   22. SMShaun Maguire1:02:23

       Yeah.

   23. SMShaun Maguire1:02:23

       It doesn't help me be better at assessing next time.

   24. SMShaun Maguire1:02:26

       Genuinely, I have learned an unbelievable amount from Sequoia, and, you know, there's people like Mike Moritz, Roelof, Jim Goetz, Doug Alfred, such like... These people are all unbelievable reads of people, and I've, I've learned a lot. But I also think I've contributed a, a few things, and one of the things that I contributed that I'll share here is one way that I think about outlier founders is I think about the chess rating scale, and I kinda wrote something internally on this. And here's a thought experiment for you. Do you ever- have you ever played chess?

   25. SMShaun Maguire1:03:01

       Yeah. I, I, uh, I didn't get that far up the Elo rating-

   26. SMShaun Maguire1:03:04

       Yeah

   27. SMShaun Maguire1:03:04

       ... but I played chess, yeah.

   28. SMShaun Maguire1:03:05

       So in chess, the highest-rated players, you know, 2,800 plus, like Magnus and others. A- and like a, still like a pretty good player is even 1,000 or whatever. Like, a n- and not, not... But, like, a 1,000-rated player will be someone-

   29. SMShaun Maguire1:03:18

       They're not making stupid mistakes.

   30. SMShaun Maguire1:03:20

       Yeah, they're not making stupid mistakes, and they'll beat someone that doesn't play any chess. If you... Here's a thought experiment: if you ask, like, a 1,000-rated chess player, you have them watch... They, they get to see a game, and they don't know who's playing. They just see the moves of, like, 1,400-rated players, 1,800-rated players, 2,200-rated players, 2,600-rated players. They get to see just the moves of each of those games, and you ask them to place on the rating scale, like, from one game-

Episode duration: 1:13:51