Transcription
Anton and I bonded early on for so many reasons. One of the core areas of alignment is this mutual focus, uh, that we have in identifying, uh, and backing mission-driven entrepreneurs. You know, at DBL, we made it part of our firm name, calling ourselves Double Bottom Line, uh, and you've had this long history of backing Tesla, SpaceX, Zipline, Andrew, and you've really built the firm on this idea of service to your companies. Um, tell everyone what's led you to believe that mission alignment is so critical to selecting great companies, uh, great founders, and how do you actually determine the authenticity of whether a company and entrepreneur are truly mission-driven?
It's a great question, man. So, you know, I started my career, um, doing buyouts of industrial companies. Why I knew how to help this factory, you know, uh, and just decided at one point with my partners, we just didn't want to do this anymore. We had this technology business running at the same time. We invested in Tesla and phone one and phone two and found that definition, initial experience to be inspiring. And the first reason was we just wanted to do it. We we we wanted to spend our life's energy making the world better. Feel like we lived a life of service, and we were in the investment business. So, how do you, how do you make the investments business work for you in this way? This emotional connection to to making humanity better while you simply invest in companies you believe make the world better, as you do and we do. And I think when we started doing it in the, you know, 2000s, it was not a like a thing. It became a thing, and now it's like back to not being a thing, but it's our thing. So, you know, it's, uh, yeah, it, it, I think you're just a lot happier, um, if you live a life of service, however you want to express that. And we were in the investment business, we expressed the investment business. And I come from a family, as you know, of healthcare healthcare professionals, and, um, yeah, that I think that's just kind of ingrained. And then, you know, what we also learned is, hey, mission orientation attracts the very best people. Yes. So, as an economic matter, as an emotional matter, and as a, as a, as a matter of like, what your drive and what your, what your intrinsic drive to to to work, it was great for the firm. As an economic matter, we learned that when we found companies that were truly mission-driven and entrepreneurs are mission-driven, they then attracted the best people to that mission. And so, if you want to win in any game, anything you're doing, the step number one is get the best people on your side. And look, the the company we worked on, Tesla, um, you know, in the early days, it was harder, but the reason wonderful people, amazing human beings showed up to work at that company when it was dire straits, we were going bankrupt multiple times, is because they believed in the mission. They believed in the mission of sustainable future. They believed in mission to cars. They believed in Elon. And they, it's a little bit believed in us, and we could actually figure it out, um, but they believed. And that belief is so motivational in the darkest moments. You know, if you're there for money, dark times, people just, you can't find them like screwing under the chairs and they're running up the hills. In great times, as you said, man, the best people, they they find a new gear. Yeah. They find new gear. And we saw Tesla over and over again. And so, we've seen this in many companies now. And how we, the way you find it is we actually write a small check, a bigger check, a bigger check. And we, our strategy, like yours, we scale our positions over time. And you'll know in about six, 12 months if someone is real. I think you'll see it if they're really motivated by the by by the economics and the exits and whatever else. Are they motivated by a firm belief and mission that they are doing the right thing to change the world?
Yeah, well said. You know, uh, we both share this, uh, coming from entrepreneurial roots. As Antonio knows, uh, my grandparents immigrated to the US with no money. They started eight companies. It wasn't because the first seven were very successful. Uh, they kept at it. The eighth turned out to be a success over time, but it was that that grit and tenacity, uh, that defined them. And you too, entrepreneurship was central to your upbringing. Uh, I know you've talked a lot about your mom, uh, running the lingerie store and and inspiring really your early work in business. And I, I love the story. Um, Tony's mom helped him buy $300 of Apple stock in middle school.
You still own that today?
Still today.
Still own it today.
Um, I, I know my grandparents helped shape my worldview on on companies and and building and working with entrepreneurs. Talk about your mom's example and these formative years and the example it set, and how it actually translates into who and how you invest today.
Yeah, my my my parents were, uh, immigrants, right? So, I was the, my my mother from Spain, my father from Goa. They met in Spain. My parents came here, my mother spoke no English, and I was the only one born here in my family and the first generation of kids. Uh, my mom actually passed away. I was in high school. So, um, you know, she's very near and dear to my heart. She started this lingerie boutique when she, when I was, uh, you know, end of end of lower school, middle school, and she started it because she had a friend who had a mastectomy in Grand Rapids, Michigan, and she could only go to a pharmacy, uh, called White and White. I still remember the name of the place, White and White, to be fitted for a prosthesis. They didn't do reconstructive surgeries those days. My mom was trained as a pharmacy in Spain and didn't practice here in the US. So, she started this lingerie boutique to, it sold all the regular stuff that women would buy, and then it also, they fitted prostheses there, and it was sort of this combination of, you know, passion she had. She loved lingerie, and she wanted to help her community, but even that was service, right? So, as an entrepreneur, she was serving. And I grew up in that store seeing how she treated people. Um, you know, she taught me math on the little books in the back with the big green, the big, you know, the big green spreadsheets, the actual spreadsheets I like wrote the numbers in. I did stock and stuff in the back after school, and I just watched how she went to the world and how she cared about the people that that came in, how she cared about the people they worked for, and she cared about the people. She was in the mall. She cared about like the maintenance people in the mall. And I learned that, you know, being a great entrepreneur, we think about this as sort of like the cult entrepreneur. You see them on TV, you're up on, but what it really means is you're care about the people that work for you and the impact in your communities and the, you know, the way you touch them and the way you motivate them and inspire them. No matter how, how small the business or how big the business, it's the same thing.
Lest you think this is rhetoric, uh, the first firm that Antonio founded was out of out of an homage to his mom, named MG Capital, her initials.
Yeah, for sure. Yeah.
You know, I, I love Antonio for so many reasons, but, you know, he has so many unique worldviews. Um, we spent countless hours talking about just business and life, but one of the things that you've coined is this term pro-entropic, uh, for companies and entrepreneurs that thrive amid increasing chaos, you know, whether it be from tech disruptions or climate volatility or geopolitical shifts. What is this pro-anthropic term and how do you apply it to to how you think about investing?
Yeah, the first thing, it's hard to understand. I mean, you know, my, uh, my partners, I, I, we, I started thinking about this back in like 2010, 2013, when we realized that like the combination of delocalization and technological change is going to really shift all the power structures globally.
And, um, I wouldn't let me say it for like three years, but once I, entropy, you know, in physics, basically entropy is increasing over time, and, you know, it can't be reduced to zero and it continues to grow. I think this is happening now. You're seeing the the this this expressed in the world. And the period post World War II was like an anomaly in that it felt like it came down. That was the anomaly. The reality is the world has been tending toward more, uh, more chaos and more, more volatility as human populations gotten bigger and technologies changed. So, that's how we think about it. We think about, we're looking for businesses that, you know, like SpaceX was invested in businesses that are really good at predicting that future state and figuring out where to go. So, it's not just that they are they're in a market today that works, but they're they are baked into their strategy and in their people is a way of thinking about the world that's probabilistic, that that really takes into account what might happen at the edge cases and actually benefits from them.
Yeah.
That's the way I think about it.
You know, when I think back, uh, and reflect on the years that we served on this Tesla board, one of the things we both learned is that conviction is never built in calm waters. It's built on chaos. And there's so many stories around just, you know, surmounting what seemingly was impossible odds and, uh, and the operational challenges that ultimately strengthen the resolve. You touched on it, but talk a bit about one about the idea of building conviction over time. I think it's really one of the things that defines you and the Valor strategy, and how that early, uh, experience of of overcoming those odds has led to that conviction building, uh, in the years since.
Yes. So, I mean, the the name of the firm, Valor, means courage with honor in Spanish. Follow, right? So, it has a double entendre in English and Spanish. And, um, you know, going back to my mother, that was the last thing my mother said to me before she died was, "Sigue adelante, be be courageous." And this idea of building conviction is very important. We have this poster in our, one of our offices in Austin in Chicago that actually is a single tree standing in the lake, kind of after a storm, bruising, battering, but it's still there. And that's how I think about it. It requires courage. You know, we're going into a period of time, into a period now in the economy where we're, if you really want to build a better world, you're going to have to have moral courage and courage of your convictions to do the right thing despite what might seem to be, um, unbelievable odds. That's the reality. And whenever you are standing alone, you know, you're either very right or very wrong.
And it requires courage. Um, it requires courage of you and the people around you. My partners, I'm so, you together, we did this together. And hopefully, when you, when you have to have that courage, you have a few people around you like Ira, you can hold hands and you can do it together. U, you know, if you're all by yourself, it's super lonely. But I hope for all of you, exactly. I hope for all of you, you're able to hold hands with a few good people that you trust and and go for it because the world needs more people to show courage, do the right thing, hold hands, and go for it. And I, I hope if you leave any, leave this room with anything, any message, it's that, um, feel, cultivate that courage. It isn't, it isn't easy, and it doesn't come out of the box that way. You know, people mostly, the human brain tends toward more fear than courage, but cultivate that courage. You know, it's easy to say in retrospect, but when you think back of of the names that that one was called for actually having that courage and conviction at the time when it was contrarian.
Yeah.
Very, very different than.
I mean, courage, you know, courage is not the, um, it's not the absence of fear. We're not stupid. Okay. We're not dumb. I mean, we're not so smart, but we're not that dumb.
It wasn't that we weren't afraid. We just overcame it.
Yeah.
You know, um.
Back to the mission.
That's back to mission.
Yeah. You know, one of the things in knowing you as long as as we have is the way you think about culture. U, easy in the maybe in the early days with a smaller team, but as we've both built firms, you know, keeping that culture and keeping the values is something that requires everyday intentionality. As you've thought, as you've built Valor now, you've, what, like 50 or so people?
125 people.
125 people. See, I'm, I'm like, I'm a minute and a half.
Dated here. Yeah, exactly, exactly. [laughter]
Um, you know, but you have these core values, values that you've always talked about in terms of building the firm. How do you actually infuse that at the firm level as you scale?
Yes. So the values are humility, integrity, responsibility, and excellence. And we wrote these down back in 2002 when we started. And, you know, we live them. We live them as we, the senior partners have to live it. You have to model your behavior. Just, it's almost like a family. You know, it actually is like a family. You have to model behavior for everyone, everyone in that in the firm. And you have to really, um, I'd say, make sure these these they're here to with great discipline.
That's one. And two, you know, we also, we have an ethos of servant leadership, as you know, right? Um, we, in all our conference rooms around the country, there's this quote which basically says, "A leader is best when the people say we did this ourselves." And that informs all the operations work we do, and it's always about our companies. It's always about entrepreneurs. It's never about us. You know, we, I don't want it to be about us. It's about, it's about the company. It's about the mission. It's about the entrepreneurs. It's about the people, the team.
And I think that is, if you hire right, people want that. Um, but you got to make it about somebody else. Can't be about you.
Yeah. You have so many investment themes that you've been, you've been pursuing, and as you've watched these technology waves crash into real-time opportunities. Uh, we're at this unique moment where AI compute hunger and energy infrastructure and frontier hardware are creating an opportunity. And you've operationalized that with [snorts] uh, massive support at the XAI and now SpaceX scale. How do you think about this convergence, and how do you think about, there's a lot of entrepreneurs out here in the area of climate tech, and hardware, and energy? Um, how do you think about what you're doing, and how it might apply to some lessons and learnings for so many of the entrepreneurs out there?
I mean, you know, it's interesting. I'll draw a lesson from Tesla, okay, which we both know, you know, a lot more than I do these days, but about the the A4 chip in a in a in a Tesla is significant, fewer than an H200 chip, and yet it runs the most advanced artificial intelligence in the world. Yeah.
This is the truth. The most, one of the most complex things a human does is drive a car, and all this inference happening at the edge on the chip in the car, right? So, what does that tell us? That tells us you can build great stuff with with not a lot of compute if you know how to integrate the software and the hardware. So, for all of your entrepreneurs, like, sure, it'd be great if you have access to all the compute in the world. Maybe you don't. Don't be discouraged.
I mean, just think, just remember the Tesla. Go look, go get in a car. Or go to, if you don't have one, go to the store and have them give you a test drive and see how amazing the autopilot is, and you'll say, "Whoa, they're running this thing on at the edge inference, uh, on a on a chip that's worth less than an H200." It's kind of crazy, but there's this, because there's this arms race in capital spending, and, you know, everyone focused on the capital spending. No one focused on the efficiency. What really matters is what is the cost of $1 of intelligence? Like, one token that actually is intelligent. If you use that compute way more efficiently, you're going to be much more efficient producing intelligence per token, then you actually are just massively trying to ram it with huge amounts of money, because of the experiences I think that Elon had at Tesla that he's now porting over. Um, knowing you can build this cheaper, faster, better, better networking, better coherence, integration software to be the most efficient. And it's just like a brain. I mean, if you have a huge brain but you can't talk, you can't communicate, doesn't matter, right?
Yeah. You know, you are known for doing what most VCs and investors don't do, which is you dive deep in your companies. It's not in rhetoric. It's in the human cycles that you and the team put into the companies. And one of the things I've watched you do is you develop insights that you apply not only in helping that company, but in applying it to new investments over time by really getting in the trenches and being at at ground zero, uh, with companies. Just give some examples of that, because I think it's such an an important and differentiated thing that you and Valor do.
And so the ones we did together, right? We did, we did, I mean, three different operational rotations a year, plus at at Tesla, launching the Roadster, launching the Model S, then launching Model 3, which was sleeping the factory. Tim and I, and with my partner Tim Watkins, by the way, who's, I mean, amazing and genius. I, I might not have mentioned him.
Um, and then, you know, we did sales a couple of times too, same thing, right? At sales structure. And then that, we've ported those into several companies. So now we now think about our scale group, which is our operations team. These are not productized. Yeah.
So lean, lean operations for a factory, it's productized. Sales infrastructure is productized. Um, you know, lean for software deployment, productized. And, you know, we just did one at Zipline. We spent a year at Zipline, um, working on on breaking the bottlenecks there with with a team in, uh, in production manufacturing to create to great effect. The company's scaling like crazy. So, yeah, we have learned to prioritize these things and then move them across companies.
You are a constant learner. I'm, I always learn from you. And I, I think it'd be helpful to just talk about how do you learn?
I, I think there's a couple things going on. One is, I have, I have the privilege of being able to meet with and talk to really smart people. So, if I have an idea and I want to like gather a set of people around this, I, I do that. And I really am not shy about asking questions.
And you do, and you dive deep.
I dive deep. Yeah. So, I, um, you know, we have a staff neuroscience. I have, I have neuroscience. I got interested in analogy between the human brain and and real neural networks in your head and artificial neural networks. And so, you know, we hired a staff neuroscientist at Caltech, and I talk to her every week. We like go deep on writing research papers. Um, it's an example. And then I read a lot, you know, like, I think I hope everyone here just doesn't forget in the age of our intelligence, don't read the summary, read the thing. Um, there's actually a lot of data in that thing. And there's, there's also, at some level, I think if you don't do that, you lose the ability to do it.
Right?
There's something special about the human brain. You know, we've been writing with our hands for a couple thousand years. We, we haven't been doing this for years. We haven't been doing this for like, I don't know, 15 years, right? Um, there's something about writing and reading that is inherent in human learning, and I hope we don't forget that. Yeah.
You know, I think I must have been asked, uh, a couple dozen times in the last 24 hours by by many people here about data centers in space. I know there's some things you can say, some you can't. But give give the audience a sense of, uh, of data centers in space and what's unfolding right now.
Yeah, I mean, I'm asked this question often, like, is it real? Like, can it be done? Like, is it like a science project? Um, well, I've got news for you. Uh, there are data, data centers in space right now, right? Right. So, the Starlink satellite is a data center in space. It has an AMD chip, has a couple more than one, actually, and it has solar. Um, it moves data, processes data, moves along by, you know, laser routing between network, between satellites. And we have them. So, you know, I think it's more of a, a question of engineering scaling. It's not science. It's actually engineering scaling. And then, what is the right unit of size for, like, when you think of data center, people think of, you know, giant buildings that are football field long. Well, the reality is, one Nvidia rack is a data center. Okay. Um, you know, whether it's one rack or five racks or 10 racks, or you've got, you know, 100 megawatts in a hall, and you, you put them together. It just depends on how you want to network the thing. So, and remember networking, just also all public information here. Uh, the, if if you network terrestrially, you ready for fiber? So, fiber is very fast. It's, it's speed of light, but the faster than that is laser in a vacuum.
Yeah.
So, um, you know, the networking between satellites is extremely fast. So, it exists today. The question is just like, how do you scale it up? Not how do, how do you make it work.
Yeah. You know, one of the things I've loved in working together all these years is the number of ways that, uh, we've turned assumptions on their head. And one of the core ways that I, I've seen that unfold is when, you know, 30 years ago, we were taught outsource. We were taught that, you know, you do what you're good at and outsource everything else. And of course, these, this journey that we've had has been all about vertical integration.
Yeah. Talk a little bit about that.
Yeah, I mean, look, we were, um, when we ran the connector company we had in the '90s, we sold it because we want to outsource to, we didn't want to outsource and run outsourcers to Asia. And then when we got back involved in manufacturing, like with Tesla, and the first thing, uh, we did, my part, Tim, is run a supply chain analysis, you probably remember this. And that's right where we actually ran, um, an analysis of how much capital we required to build this Asian supply chain that would hardly put in place by management, um, versus insourcing. And the reality is, we would need like hundreds of millions of dollars, which, by the way, in those days, was, it was, today it's like saying, I need a hundred billion. I, I need, I need $200 million to build a car company in 2007 is like saying today, I need $200 billion. Anything. It's, it was absurd. Um, and we're sitting in this meeting with Ira and we're showing, we're Tim's going through this data, and we're like, "Oh my wow, uh, where do we get the money? There's no money available." And that that decision forced us to move the the battery pack back from Thailand, the motor back, we brought it all back from Asia to the US. And then the unintended consequence, which ended up being hugely powerful for us, is the engineering iteration was so much faster.
Yeah.
Which allowed us to bring the cycle time of innovation. You, the cycle of innovation, audit is like seven years. Ours was like five years. We brought it to like three years. You remember seeing these meetings where some of these auto guys were like, "This can't be done." Watch us.
Um, so it had all these unintended consequences. We then took that and moved it across their companies and learned this, learned this, uh, this, this, uh, this lesson. And today, you know, I gave out this book last year at the holiday, um, called Freedom's Forge, which is about re-industrializing America before World War II. And,
It's super important, man. And we are at the forefront of this. I mean, we're trying to help as much as we can, but all of you here are working in in atoms. I mean, we need to re-industrialize America. It's a strategic imperative now, and we have the tools. We know how to do it. We just got to get it done.
Yeah. Let's, uh, end on a bit of a note of prognostication. This is a talk about seeing around corners. And if the past is prologue, we can expect that there's going to be these unexpected and sharp turns ahead. And so, when, uh, when we come back for either the five or the 10-year reunion here at the Upfront Summit, and and are talking about, uh, things, what are some of the surprises that when we come in five and 10 years, we're going to be talking about that, uh, that people would be surprised to hear about today?
Man, you know, it's, um, I'm wearing my Star Trek socks today. Okay. I've got my, uh, my yellow Star Trek socks. I want to see those. [laughter] I wore these. Thank you. It's because I, you know, the future is public and uncertain.
Yeah.
And, um, I choose to believe in the future. I think the the prevailing narrative is that AI is going to be terrible. Job losses, you know, social unrest. What are we going to do, uh, before we get to this like post-economic world?
Yeah.
And I think this is not true. I'm, in fact, I, I'm going to work really hard in the next five or 10 years to make it not true. And that's the point.
Yeah.
Everyone here will make this not true or true. If you want to live in a term of your future, give yourself in a dystopia. Listen to the news about job, about job losses and how bad the world's going to be. Listen to that. Believe it. That's dystopia. But if you want to be courageous, and you want to have some compassion for your fellow humans, and you want to seek truth, build a world that's better than we have today with the technology, and you can do that. It's, it's in our hands to do this. The reality is, you know, I had, I was talking to a young woman before this, um, before I came in here. She was telling me about someone who was up here that built a, you know, a billion-dollar company with three people. All these people are going to lose their jobs. It's going to happen. For sure, true. When this happened in the steel industry with mini mills, we actually had a very, very high cost of retraining. People didn't retrain because they were, they were working steel mills. The knowledge workers losing their jobs, they can go across the street, start a company with three people. Used to take 300 people. That is using low code, no code, um, who knows what they will build. And if half the people do that, it's unbelievable what will happen. The amount of productivity unleashed, the amount of entrepreneurship unleashed, that's what we should work toward. All of you here, entrepreneurs, please, I mean, go for it. Get at it because we shouldn't just sit down and think it's going to be bad. It's not. We will decide. You will decide if this is this is good or bad. We will decide whether we have a utopian future or dystopian future. And I bet would be five, 10 years, there's some in this audience we're going back and go, "That person made it happen, made a difference in the world."
Yeah.
Or more than one, hopefully.
Antonio, I want to end where we started, which is thanking you for being a true partner to so many people out there, including me.
Thank you.
Please join me in thanking Antonio Gracio.
Thank you. Thank you.
Great, man. Thank you very much. Thank you, brother. Thanks so much. [applause]