The World According to Joe Lonsdale

Summary

Podcast Summary: The Compound and Friends – "The World According to Joe Lonsdale"

Episode Details:

• Title: The World According to Joe Lonsdale
• Host/Author: The Compound
• Guests: Joe Lonsdale & Jacob Miller
• Release Date: March 31, 2025

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I. Introduction

The episode kicks off with hosts Downtown Josh Brown and Michael Batnick welcoming their special guests, Joe Lonsdale and Jacob Miller.

• Michael Batnick [00:38]: Introduces Joe Lonsdale, an entrepreneur and investor known for founding several companies, including Palantir and AddaPar, and Jacob Miller, the co-founder and Chief Solutions Officer for Opto.

II. Private vs Public Markets

Discussion on IPO Market Dynamics:

The hosts delve into the current state of IPOs, expressing skepticism about the anticipated resurgence of initial public offerings (IPOs) this year. With the NASDAQ showing significant declines, the conversation pivots to the factors influencing the IPO landscape.

• Michael Batnick [04:04]: Raises the question of whether the IPO window will open and remain open enough to mirror pre-2021 levels of exits and new issues.

• Joe Lonsdale [05:28]: Describes the tech markets as "constipated," highlighting uncertainties stemming from policy and the wave of AI investments. He expresses hope for increased market certainty and the potential resurgence driven by AI advancements.

• Jacob Miller [06:04]: Points out the substantial "dry powder" in private markets—approximately a trillion dollars—which allows companies to remain private longer, reducing the immediate need for IPOs.

Quotes:

• Joe Lonsdale [05:34]: "I'll be honest if it's going to work this year or not. It might take a little while."
• Jacob Miller [06:13]: "The dry powder side, let alone new funds being raised each year."

III. AI Investments and Economic Impact

AI's Role in Future Productivity and Investments:

The conversation shifts to artificial intelligence (AI), its investment layers, and its projected impact on productivity across various industries.

• Joe Lonsdale [14:27]: Breaks down AI investments into five layers, from chips (Layer 1) to AI services in the economy (Layer 5). He emphasizes that the most significant returns are likely to come from innovative companies in Layers 4 and 5.

• Michael Batnick [17:59]: Raises concerns about the macroeconomic implications of AI, especially in the event of a recession, questioning whether AI investments will justify their capital expenditures (CapEx) through tangible ROI.

• Joe Lonsdale [18:20]: Optimistically asserts that AI will enhance productivity across Fortune 500 companies, potentially leading to a "massively disinflationary" effect that benefits especially lower-income populations by reducing costs.

Quotes:

• Joe Lonsdale [14:15]: "Every Fortune 500 company should benefit."
• Joe Lonsdale [22:58]: "It's going to be massively disinflationary. This is going to be... it's so good for poor people."

IV. US vs Europe vs China in Tech and Investment

Comparing Market Dynamics and Policy Impacts:

The episode explores the competitive landscape between the US, Europe, and China, particularly in technology and venture capital.

• Jacob Miller [28:30]: Argues that nothing has materially changed in how Europe or China treats business, advocating for the exceptional nature of the US in attracting top talent.

• Joe Lonsdale [29:13]: Highlights America's dominant position in the AI wave and its ability to embrace "creative destruction," contrasting it with Europe and China, which he perceives as more restrictive.

Quotes:

• Joe Lonsdale [30:08]: "America is so far ahead in the AI wave, it's so far ahead in allowing creative destruction."
• Jacob Miller [37:08]: "If you're ABC and you've backed a lot of the best defense tech startups... it's how these things work."

V. Private Markets in Advisor Strategy

Navigating Private Investments for Advisors:

The discussion transitions to the growth of private markets and how financial advisors can effectively incorporate them into client portfolios.

• Joe Lonsdale [35:47]: Affirms that private markets are expanding and will likely continue to grow, particularly in private credit. He emphasizes the importance of accessing top-tier funds to achieve superior returns.

• Jacob Miller [36:22]: Shares a framework for outperforming markets in private investments, stressing the significance of unique information and access.

• Michael Batnick [43:17]: Raises concerns about the liquidity of private market investments, questioning the feasibility of daily-traded private assets.

Quotes:

• Jacob Miller [36:53]: "If you're working in a market where inside information is legal and you don't have that information, you're going to get crushed."
• Joe Lonsdale [43:42]: "Private markets have much higher disparity, much higher differences in returns than the public markets."

VI. Government Funding in Crypto and AI

Evaluating Public Sector Involvement:

The guests critique the government's approach to funding and regulation in the cryptocurrency space, highlighting instances of inefficiency and corruption.

• Joe Lonsdale [49:05]: Criticizes the U.S. government's involvement in cryptocurrency, specifically the strategic reserve initiatives, calling them "nonsense" and "grift."

• Michael Batnick [51:43]: Supports government actions to curb fraud in entitlement programs but remains skeptical about their effectiveness.

Quotes:

• Joe Lonsdale [49:22]: "There's a lot of fraud and so much bad stuff and we're cutting so much nonsense."
• Joe Lonsdale [52:44]: "There are hundreds of billions of dollars in fraud going on in Medicare, Medicaid."

VII. Elon Musk and Policy Influences

Balancing Innovation with Public Perception:

The conversation touches on Elon Musk's influence in technology and policy, acknowledging his controversial nature but praising his accomplishments.

• Joe Lonsdale [56:11]: Praises Musk's dedication, describing him as a "classic warrior" fighting for civilization despite facing significant public backlash.

• Michael Batnick [55:24]: Discusses the dichotomy between Musk’s technological achievements and his contentious public behavior.

Quotes:

• Joe Lonsdale [56:11]: "He's trying to fight for our civilization. Whether or not you just agree or disagree with everything he's doing, that is the energy he's going with."

VIII. Future Outlook

Optimism Despite Challenges:

In wrapping up, Joe Lonsdale offers a forward-looking perspective, emphasizing the enduring strength and innovation within the US, particularly through private markets and AI advancements.

• Joe Lonsdale [58:53]: Expresses confidence in America's resilience and ability to harness AI for long-term productivity gains despite short-term economic challenges.

• Jacob Miller [60:12]: Supports justified tariffs against China for unfair practices but acknowledges the pain they may cause in the short term.

Quotes:

• Joe Lonsdale [59:39]: "This is what's great about private markets... it's going to be 100x regardless of how big those waves move up and down."
• Jacob Miller [60:12]: "If you're on an anti-competitive sense, steal manufacturing from America, we should fire."

IX. Key Takeaways

1. Private Markets Expansion: Private markets, especially in private credit and technology-driven ventures, continue to grow and present significant investment opportunities. Advisors should focus on accessing top-tier funds to maximize returns.

2. AI as a Productivity Driver: AI investments across multiple layers are expected to substantially enhance productivity and disinflationary pressures, benefiting both corporations and consumers over the next decade.

3. US Leadership in Tech: The US maintains a dominant position in technology innovation and venture capital, outpacing Europe and China due to its ability to attract top talent and embrace creative destruction.

4. Government Oversight Concerns: Public sector involvement in sectors like cryptocurrency has been criticized for inefficiency and potential corruption, underscoring the need for more transparent and effective regulation.

5. Elon Musk’s Dual Impact: Elon Musk remains a polarizing figure whose technological contributions are significant, despite his controversial public persona.

6. Optimistic Future despite Economic Uncertainties: Despite potential short-term economic challenges, the narrative remains optimistic about the US’s ability to drive long-term growth through innovation and strategic investments in private markets and AI.

X. Additional Resources

• Opto Platform: optoinvest.com – For more information on private market investment strategies.
• Jacob Miller’s Blog: Available on LinkedIn for insights and commentary.
• Joe Lonsdale’s Substack & Podcast: Search for "American Optimist" to follow his latest discussions and analyses.

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This episode of "The Compound and Friends" provides a comprehensive exploration of the evolving landscape of private markets, the transformative potential of AI, and the strategic positions of the US in the global technology arena. Joe Lonsdale and Jacob Miller offer valuable perspectives for investors and advisors navigating these complex and dynamic sectors.

Transcript

[Josh Brown]

All right, let's clickety clack it up.

[Michael Batnick]

You live in Austin?

[Joe Lonsdale]

Austin, Texas.

[Michael Batnick]

But how long have you been there?

[Joe Lonsdale]

Five years.

[Michael Batnick]

Okay.

[Joe Lonsdale]

All right.

[Josh Brown]

So before it became cool, my little brother.

[Joe Lonsdale]

My little brother went there a year before me. I went there about the same time as Elon, and we brought a lot of people with us. So, yeah, it's a good. It's a good part of the world. We're building a lot. Did I put this on? Is it something.

[Josh Brown]

Yeah, so you can hear yourself.

[Michael Batnick]

We love Austin. We have a financial advisor there, and we actually have two people there, and I don't know, we there every other year.

[Josh Brown]

We're there a lot.

[Michael Batnick]

Ish.

[Josh Brown]

I like Lambert's the boy ribs, of course.

[Joe Lonsdale]

Good spot. Great city, Austin. Austin's a solid city. It's a great place to build things.

[Michael Batnick]

All right. How we looking, Nicole? We good?

[Josh Brown]

All right, here we go.

[Joe Lonsdale]

The call clock intends episode 185.

[Josh Brown]

Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. Today's show is brought to you by our sponsors at Betterment Advisor Solutions. Imagining a better future is the first step. Investing in that future with Betterment Advisor Solutions is the next. Whether you're launching your own practice, looking to streamline client onboarding, or just searching for efficient ways to scale your firm, Betterment is here to help. They automate to make tax optimization simpler. They provide support to make administrative tasks easier. At Betterment, they're building innovative technology. All for anyone who's ever said, I think I can do better, so grow your RIA your way with Betterment Advisor Solutions. Learn [e-mail] advisors. Investing involves risk performance not guaranteed.

[Joe Lonsdale]

Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnick and their castmates are solely their own opinions and do not reflect the opinion of Redholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

[Michael Batnick]

185. Here we go again. Today is a special edition. We are so excited, you guys. I don't even know if you understand the prestige of this pod. Right now we have two very special guests, two first timers on the compounded Friends. I can't wait for you guys to hear from them. Let's start with Joe Lonsdale. Joe is an entrepreneur and investor who has founded several companies, including Palantir Add a par. I didn't know that until recently. That's interesting. When I ask you about that. And Opto, he is also the founder of 8Vc, a venture capital firm that invests in technology driven businesses. Joining Joe is Jacob Miller. Jacob is a co founder and chief solutions officer for Opto Jacob. The crowd is going. Absolutely. I can't stop them. Prior to Opto, Jacob was a portfolio strategist at Equiem and an investment associate at Bridgewater. Joe, Jacob, welcome to the show. We're so happy to have you.

[Joe Lonsdale]

Thanks for having us.

[Josh Brown]

Say something crazy, Joe.

[Michael Batnick]

Yeah, yeah, Joe. Freak everybody out. I want to add to your bio, if you don't mind.

[Joe Lonsdale]

What's up?

[Michael Batnick]

So just going through some of the things that you've been involved with. OpenGov, which is one of the biggest software providers for local governments.

[Joe Lonsdale]

That's a nice win. Last year we sold a great reporting company.

[Michael Batnick]

Okay. Add a Par is a giant in our industry.

[Joe Lonsdale]

It's huge.

[Michael Batnick]

So Add a Par is what's the best way to portfolio accounting software for Rias? Family office?

[Joe Lonsdale]

Yeah, I mean, it's really the infrastructure for a huge part of the, of the, of the industry, of the wealth management industry. We do a lot of big banks, a lot of the top RIAs, a lot of other IRAs, family offices.

[Michael Batnick]

Okay. And Oscar, which I think most people have heard of, but I know it's insurance related.

[Joe Lonsdale]

Oh, I invest in this. Josh just started that one. That's an insurance company. It's a great company. I've, I've invested in a lot of things because I've run a lot of my venture fund stuff in it. But Mario was a great CEO. Josh Kushner is a friend. So a lot of good companies here. We've invested in town too, here in New York.

[Michael Batnick]

Okay, let's get to our first topic. Israel versus Palestine.

[Joe Lonsdale]

I love it. I just got an award yesterday from Chabad. While I was in town. There were like 500 Jews. It was the more Jewy thing than usual for me. It was like everyone. But it was great.

[Michael Batnick]

Where do they give those awards at Barney Greengrass?

[Joe Lonsdale]

No, it's a beautiful synagogue downtown and you know, they give you a giant kiddish cup.

[Michael Batnick]

Okay, I like it, I like it. So we wanna start with current markets and the macro situation. And both of you guys are uniquely situated to have a point of view that maybe we don't have on the show all the time. We're frequently talking to people that come from Wall street and the asset management world. And I know you guys do as well, but you also have kind of this background technology and probably very connected within Venture capital and maybe just a different perspective. We thought up until a month ago this would be the year that IPOs would come back. I know they're trying. I know. We'll see Klarna. God willing, we'll see Horweave Etoro. Some of these things are gonna get through the gates finally. But like on a day like today, we're recording right now. The NASDAQ is blood red once again. Combination of tariffs and Nvidia stuff. I'm curious if you think the IPO window will actually open this year and stay open long enough for us to get back to, let's say, a pre2021 level of exits and new issues. What do you think?

[Joe Lonsdale]

Yeah, listen, the markets are a bit constipated right now in the tech world. Right.

[Michael Batnick]

It's a great way to put it, actually.

[Joe Lonsdale]

I'm friends with Brandon, who built Corey. He crushed you with that one. I hope he gets it out strong. It's a really great company. Listen, there's a lot of stuff that's doing very, very well in the private markets. It's true. I'm actually a big fan overall of the Trump administration and Elon and many other friends there. There is some uncertainty and markets don't like uncertainty. And hopefully we can give people some more certainty over the next year, be really clear about things. And then that plus this wave we're seeing from AI, I'd assume it opens back up in the next few years, but I have no idea if it's going to work this year or not. It might take a little while.

[Michael Batnick]

What do you think?

[Jacob Miller]

I think it's also about the background of what's happening in terms of private capital. There is enough supply of liquidity to stay private for longer.

[Michael Batnick]

It's a trillion dollars or so in dry powder, just in peak, just in.

[Jacob Miller]

The dry powder side, let alone new funds being raised each year. And so before Amazon IPO'd four or five years into existence because they needed capital to expand operations.

[Michael Batnick]

Okay.

[Jacob Miller]

When you think about why companies are IPOing today, it's not because they need the check in from that to go build the next factory. It's a liquidity event.

[Michael Batnick]

I think the employees kind of need it more than the corporate treasury does.

[Joe Lonsdale]

So at Addepar, for example, we're already getting profitable this year. A huge company. They just raised, I don't know, it's announced. I'll get myself in trouble here. Just raise a bunch of money from people. We didn't need the money just in case to make the company stronger. And, you know, we're doing the law of it for liquidity, for early employees. And so that's one way you could do it, is we'll probably go public at some point, but for now, let's take care of people. If you got married, you want to buy a house with your share, sure, we'll help you get some out. But you don't need to be public yet.

[Josh Brown]

Do private markets need public markets to be open? Like, does the window need to be open for them to throw?

[Joe Lonsdale]

It's not needed, but it helps. At some point. You need wins. I mean, the one thing that really screwed it up even more than that was the FTC blocking a lot of acquisitions. You do need wins when people want to acquire things. And you have. Because if a venture fund sends money back, it shows it's doing well, that it can raise more. So you do need to have something going on. So if we can fix the ftc, which I think we're doing, that does a lot of it. But yeah, at some point, of course, you got to take more of these things public. It's healthy, right?

[Michael Batnick]

Not every exit's going to be an ipo. Most of them aren't.

[Josh Brown]

Most M and A. Yeah.

[Joe Lonsdale]

And we sold OpenGov a couple year and a half ago to Cox for $1.8 billion. A nice win for me. It's funny, because of the ftc, it was one of the biggest wins of the year. Normally that wouldn't be one of the bigger wins, but they're slowing a lot down right now.

[Josh Brown]

But fundraising becomes a challenge, right? Like, if there's not exit, you're waiting.

[Jacob Miller]

A lot of investors, especially on the institutional side, are going to wait for you to return capital and then roll that back in. And so if you can't return, you could struggle to fundraise at some point.

[Joe Lonsdale]

Like, if you see one, like, it's marked. Whatever. I don't supposed to talk on numbers, but, like. But we've returned more money than they've given us for, for our initial fund. And we have things like Anduril in it, and we could sell a lot more. Anduril. Anduril is the defense company's recent round, like $30 billion.

[Michael Batnick]

Anybody will buy that from you.

[Joe Lonsdale]

Right now I literally get like 10 emails a day from brokers, like, spamming me. I can't figure out how to get away from them about it. So investors know that it's real. They know that they don't mind that they don't want me to sell. Most of it.

[Josh Brown]

But you just raised a new fund.

[Joe Lonsdale]

I did. ABC6.

[Josh Brown]

How is that?

[Joe Lonsdale]

Well, you know, it's actually really funny. I'm a little bit controversial. So like five years ago during the height of woke, all the pensions were a little afraid of me and it took a little longer to raise and now I'm doing really well. They're all trying to prove that they're swinging with the pendulum. So now we're like three times oversubscribed. Just like Josh. Yeah, it was very easy. It's a great time for people who are in the middle of the AI wave. There's so much money right now because it's working and they want to be part of it.

[Jacob Miller]

I mean, there's a big dispersion in terms of who has access and who actually knows what they're talking about. I mean, Joe, the Palantir network of engineers, these are the people who are, you know, and then the add a part network that followed that. These are the people who are going to be building that wave. And people know the difference between someone who've spent two years at Google and is like, I'm a VC now and someone who knows all the top engineers. Like that's how you win. You have to attract the best talent.

[Michael Batnick]

And so pedigree is extremely important.

[Jacob Miller]

And Return Capital Network is everything. So we talk to a lot of VCs. A lot of people are struggling. Like ABC did this really quickly because of who they are. A lot of people are really struggling to raise that next round without having Return Capital.

[Josh Brown]

So do you guys. I don't know if this is a cynical take or it's just. It is what it is. It is all of the institutional investors that have 40% of their portfolio in private markets, like they're not going to go to 150% of their portfolio. Right. It's a lot harder to raise new money from them. And so the giants of the world are going to wealth managers to end investors to a $5,000 minimums. And that is the next Runway for the next decade. Is this going to set us up for some trouble? They're talking about like there's an article in the FT tapping the $12 trillion retirement system. Like, is this going to be gnarly?

[Jacob Miller]

That's why we're here. It has the potential to be. There's a lot of chicanery out there, a lot of layers of fees.

[Joe Lonsdale]

That is true. There's a lot of people who, the way they access the RIA world is they get paid to sell stuff. Most of what an RIA is hearing from is they're hearing from someone who's getting paid to sell them things. That's really dangerous because when you're paid to sell stuff, you're going to have whatever looks good enough that you can just push as far as you can and you're going to have the things that pay you a lot of money to sell them, which is probably not going to be the very best funds. Right. So. So there is a misalignment.

[Josh Brown]

Right. So we talk about like we hear democratized private investing. Okay, but who's getting the democratization? Like if you're able to invest 10 bucks into something, let's be honest, it's probably not great.

[Joe Lonsdale]

Well, it depends how you're accessing it. Right. So if you, if you happen to know somebody who's built a multibillion dollar company and has like a friend who's at one of the very top funds and they're giving you access, that's probably good. Right. You take that seriously. If you have a broker who's coming from New York and who's paid to sell you something, look at it a, there's a big company pumping. And that's why when we build models for how we're doing things, obviously is we're saying we want to be on the same side of the table as the investor, not getting paid for how much we can push them. That's a really important distinction.

[Michael Batnick]

So we'll go further in depth on what you're doing there with Opto. And I think it's a really good idea because one of the obvious conflicts that I see is most people working in the wealth channel are, quite frankly, myself included, not equipped to vet private market deals for their clients. And that's okay if they have assistance from a platform or from a consultant or somebody is in there with them. But that's probably not how it's going to go. I think you're going to just have a lot of people freelancing, a lot of rep spm basically saying, let's invest in this because, you know, I went out to a really great lunch with the salesperson from he's paying for my.

[Jacob Miller]

Hunting trip to wherever.

[Michael Batnick]

Yeah. The other thing is, I mean, there's a million problems. One of the problems is like, what are the odds that a dentist in Des Moines is going to be offered access to a top quality fund or fund manager? Very, very low, very slim odds. It's much more likely they're going to get the third, fourth or fifth best version of whatever they're investing in. So that's one of the things I think you guys are trying to solve for. Like how does that end investor actually get access to something that's quality? And then of course there is the, the, the agency problem. Whoever is the advisor selling these things or pitching these things or allocating to these things. How upfront are they being about the potential, for example of no liquidity for seven or eight years? How, how honest are they being about the hit rate? You know, it's one great investment in some cases pays for two losers in Pennsylvania or two break evens in venture. Obviously it's a much harder ratio to overcome.

[Joe Lonsdale]

It's a power law.

[Michael Batnick]

Yes, power laws and everything. And how well equipped is the typical wealth manager to even explain these concepts, let alone be honest about them when they're allocating?

[Joe Lonsdale]

No, it's really important and we're living in a really fascinating time because this AI stuff is working. We do see there's trillions of dollars of wages in industries where we've shown we can more than double productivity in double cash flow. So this is like a really important Trend the next 10 years, but it's going to be dominated by probably like a few dozen or maybe like 50 or 60 of the top funds are going to take most of the returns. And the question is, how do you know if you're even accessing one of the top funds or not? And so for me I was kind of disgusted, like you know, obviously. So add a par powers all these things. And I saw the stuff going on in that world. I'm like wow, there's a lot of sketchy broker stuff going on. Let's build something where it's like align with me. And so the way, the way this works for me is that I is that, is that rather than charging by selling it, we actually over a hurdle, over like a 10% hurdle or whatever the hurdle is depending on the space we take 5% carry of the custom funds we design. So our incentive is let's just get the very, very best stuff in. My friends who I think are actually running the best funds and then we only make real money if it actually crushes it. So I think something like that.

[Michael Batnick]

So you're along for the ride with the investors. The better the fund does, the more that carries.

[Joe Lonsdale]

If I can find a fund that's going to be 40% in my mind, it's one of the very best small ones. Let's freaking get as much as we can in there and get to people. And so I Think things like this. And of course depending on the investor, some of it's going to be an alternative credit, some of it's going to be other things that are. But, but, but you know, for my part I'm most passionate about of course is the venture side of it. Let's get the very best things in there and let's make sure we crush it.

[Josh Brown]

So are investors going to get access to like the next wave of AI? Because we've been talking a lot about like are the winners just going to be the incumbents like the Microsoft's of the world or are there going to be smaller winners? And if so like how do we, how do we get access to that?

[Joe Lonsdale]

So, so that, so here, here, here's, here's AI. Let's do a quick investing in AI thing. There's five layers in which you can invest in AI. Layer one is the chips. Layer two is the data centers. So all my friends who built like the big tech companies, they all do all the data center investing, right? And there's tons of money going to that. Level three is the actual AI model companies. This is like OpenAI, Anthropic and Elon's X AI, right. What I'm invested in level four is infrastructure for AI. This is how you deploy AI. It's stuff like engineers, you know, millions use per month to deploy open source AI stuff. Lots of stuff there. Palantir is kind of level four, if you want to think about it that way. And level five is the AI services companies actually performing the service in the economy.

[Michael Batnick]

Right.

[Joe Lonsdale]

So you have these five levels of like AI companies and venture. Of course you could do some level three. There's only three or four of these companies that are actually, you know, OpenAI itself and Xai itself. But most of what we're doing is level four and five. Now the big argument in venture is is level four going to be eaten by level three? Are the model companies themselves going to build out the infrastructure and own it? So how do you think about that? But then the biggest area is this level five thing. The level five is about building things in the service economy. So for example, just to make it clear, healthcare billing is a 280 billion a year revenue industry in the U.S. massive services industry, 120 billion of that's actually paid to companies. 160 of its internal spend. But massive example of an industry right out of the 5 trillion. I know it's like 5% of the whole services economy and that's something where we're making it already three Times more productive, three times higher margins versus thousands of companies using AI. And it takes years to build it out, to get it right, to deliver. It has a moat.

[Jacob Miller]

You have to have a framework. You can imagine having two agents, one for insurance, one for the hospital. You need to have a framework. How do we negotiate on billing, what are the codes?

[Joe Lonsdale]

You stay the same way as any other company, need a big team, you need to iterate, need to do it. And so the venture capital firms that are going to be crushing it, sure some might be exposed to a couple of model companies, whatever, but most of it's going to be level four and five and you have to be in the best firms tied to the best engineers to access that because there's going to be trillions of dollars.

[Josh Brown]

How much money is going to be lost investing in the losers?

[Joe Lonsdale]

Well, it's always the nature of these things is like how much stupid money does a sector attract? And I think this one's going to have. And the bigger a sector is in the returns, the bigger the stupid money it attracts as well.

[Michael Batnick]

So you're saying the most well known companies, to the average person everyone's aware of Anthropic and the Claude model, you're saying that might not be the layer to which most of the gains accrue.

[Jacob Miller]

I don't think it's the layer that 10x is from here or maybe because.

[Michael Batnick]

They'Re already very valuable. OpenAI is already very valuable and it's.

[Joe Lonsdale]

Unclear, but basically, for example, when you invest in the SaaS wave for the last 15 years, the layers people knew about, which might be like AWS cloud, that probably did capture maybe 25, 30% of all the value, which was a great investment. So there probably are some great investments just in the infrastructure layer, everyone knows. But I think by far the best risk reward is the really great companies on top of it that you can back early and that grow into companies.

[Michael Batnick]

Worth tens of billions, which is Salesforce or even younger companies.

[Joe Lonsdale]

Well, I'm thinking for the AI wave, of course you are coming. So the SaaS wave, Salesforce would have been great to get into right at the beginning. Yeah, yeah, that was great right at the beginning.

[Michael Batnick]

So the corollary to that is not necessarily the OpenAI's.

[Joe Lonsdale]

It's the corollary to that to say Salesforce would be like things you don't know about yet, like Cognition or like Bedrock or these companies that are doing AI services on top and they're the best talent in the world for different parts of coding or different parts of, you know, construction using AI or different parts of healthcare billing with candid things like that, which you guys don't know, no one's heard about yet unless you're kind of in the middle of the second.

[Josh Brown]

So do you guys think that this is going to expand margins for all companies? Are we going to go from 18 to 23%?

[Joe Lonsdale]

This is a great question. I actually do think that the whole society does benefit as well. So I think the market itself, there's a big macro question about where the heck things go the next few years. And that's a separate thing. But over the next 10 years, every Fortune 500 company should benefit. If you look at what Dell's doing, for example, using AI, they've already removed billions of dollars a year of expenses. He's probably ahead of everyone else. But all the big companies are eventually going to do that. It is going to expand margins.

[Jacob Miller]

And that's the length of the bet you're taking in private markets. You're talking about a 5, 7, 10 year bet. That's the timeframe over which companies are actually gonna be able to implement this. And we're already seeing the green shoots of that. But there's so much wood to chop in terms of beneficiaries.

[Michael Batnick]

One of the big debates in the market right now is if there's some sort of an economic downturn, whether it's tariff driven or whatever, if we have a deceleration in GDP growth or God forbid, a recession, is it realistic that the spending plans of both the people building out all this CapEx, but also the end consumer, will that hold up? And some of the bulls would say that's when AI spend becomes even more crucial because in a downturn you need to save as much money as you can. And this is in the end about saving potential expenses. All right, I buy that argument. I don't know if the stock market will, at least not on day one. I feel like the stock market's initial reaction is to disbelieve all of the CapEx plans actually coming to fruition. Maybe that creates the opportunity. And then the second part of that, I'd love to hear from you guys if all of this CAPEX is justified by usage and the Fortune 500 is going to start coming out and surprising us all. Like, hey, we said we were going to do $0.20 this quarter. We did more like $0.30. And that's because the money that we're, the ROI that we're getting from all this CapEx spend, it's already dropping to the bottom. Line, is that next quarter or is that 2026? So like, how do you guys think about the macro versus the obvious secular AI build out?

[Joe Lonsdale]

There's definitely big forces opposing each other here which are very hard to tease apart. And it's not what I do for a living. I'm lucky to be able to bet five years ahead so I don't have to worry about it as much. I tend to think if you want to make fun of tech guys, you could say, listen, you guys keep doing all these things you say are so amazing, but productivity hasn't really moved that much the last 25 years. Right? We got some productivity boost from the web.

[Michael Batnick]

We have a measurement problem with productivity.

[Joe Lonsdale]

Partially true, but still hasn't accelerated like as much as. And so if AI actually is being deployed at scale the way it looks like it should, productivity really should noticeably start to surge in the next few years. Right now, all these things I'm doing, I think I'm so important, you know, buying 100 million or a billion dollars to my company, that's tiny compared to our economy. We need to get these things into the hundreds of billions of dollars to really meaningfully hit productivity. I think you're going to start seeing that scale maybe a few years from now. So I think sometimes towards the end of this administration, you are going to see big productivity surging.

[Michael Batnick]

When do you think it's obvious to Main street that this stuff works and it's productive and it's like it's becoming.

[Joe Lonsdale]

Obvious in some places now, but a lot of those are too small. So I think, I think it is like the next two or three years the market probably does start to realize, I mean, that may be why the market's held up as well as it has, is that there is this big thing coming despite the challenges.

[Jacob Miller]

I also think a lot of this is just going to be so ingrained into the way people live day to day that I don't know if they won't even notice. Aha moment for many.

[Michael Batnick]

So we like, we hear from. So Klarna is coming public and they were one of the first companies to come out and say this technology is now enabling us to not hire the next 2,000 people that we otherwise would have had to hire. We're utilizing it in customer service in such a way that we're like saving tons of money already. That's a tech company saying tech is good. Well, I'm waiting to hear like McDonald's say, hey, profit margins are up 1 percentage point worldwide and it's due to this particular AI investment we've made. And I know that might be a little while.

[Joe Lonsdale]

And Klarna is interesting too, because the other thing, I don't know if they're saying it in public, but I'll say it because I've heard through friends, they're trying to rebuild Salesforce. They have to fricking pay Salesforce. I don't know, like 100 million something a year. And they're like, you know what, we know the screens, we know the data, we have AI, let's just like rebuild it internally and maybe we can turn it off. So in some cases this is good for tech. In some cases there might be some older companies it's not as good for.

[Michael Batnick]

Okay, here's another thing that you'll hear from. Not bears on AI, but bears on the economy. If even half of the promise of this AI technology turns out to be real, that's actually horrific for the American consumer because even if they get new jobs or we invent new jobs down the line, there's going to be a huge gap between when a lot of these people are employable and when actually there are these new jobs created to replace whatever the AI is now doing more efficiently.

[Jacob Miller]

I'm a student of history. This has been, they say it in every era.

[Michael Batnick]

In every era. I agree.

[Jacob Miller]

And it's.

[Joe Lonsdale]

Destroying jobs is a good thing, which is the opposite of what politicians have to say. Because also building jobs is a good thing, but destroying jobs through efficiency has always been a good thing for everyone.

[Michael Batnick]

Yes, but not right away and not for each person.

[Joe Lonsdale]

That's true. There are some people that are going to have a tougher time, but it's vastly better overall for everyone around them. And if this AI even works well.

[Michael Batnick]

That'S been the history.

[Joe Lonsdale]

If this AI even works near even a tiny bit, it's going to be massively disinflationary. This is going to be. It's so good for poor people.

[Josh Brown]

So that comment obviously pisses people off.

[Joe Lonsdale]

Right?

[Josh Brown]

It feels insensitive, but it is the history of, like, progress.

[Joe Lonsdale]

But. And the thing is, it's not just like, oh, I'm saying it's good for rich people or good for me. It's actually especially good for all the poor people because all of a sudden everything in their life is way cheaper. People have no idea, like, how cheap everything should get and how convenient everything should get for these people, like a whole nother order of magnitude if this thing stuff works. So it's really good, like, rewind 200.

[Jacob Miller]

Years, a pair of shoes was like two months pay. Yeah, that's not a good world to live in.

[Michael Batnick]

All my shoes still are.

[Jacob Miller]

So we got to talk after. But you know, there. Yes, there are, there are dislocations and actually you have some interesting adult education companies that could help with some of that transition. But everything gets cheaper for everyone. And this is part of the measurement problem you're talking about. You went from I need to either have a Blockbuster subscription or buy the DVD to I pay 9.99amonth and I have access to every movie that's ever made. GDP actually shrinks. Yeah, but everyone has a movie of.

[Michael Batnick]

Everyone'S what they call a hedonic adjustment. Like everyone's quality of life is better, but they might not even perceive the.

[Joe Lonsdale]

Consumer productivity stuff is hard to measure. You're right what you say with that. But it's better for everyone. But the thing I. People don't realize. So what's actually problematic in our society is the stuff that's gotten more expensive. Right. Let's be honest, we're talking about like well being of people.

[Michael Batnick]

College education, auto insurance, healthcare.

[Joe Lonsdale]

Exactly. These are in education in general too. And probably home prices. These are all the areas that actually AI is really, really good for. Right. And so, and this is partially a policy problem as well as a tech problem. But if the tech makes it so obvious how to do these cheaper and better, I think we're going to be able to break through in fiscal policy.

[Michael Batnick]

All right, so just as an example, how does AI make housing cheaper?

[Joe Lonsdale]

So multiple things there. One is that any permit should be able to be approved instantly right away. There's just no reason you need like Betty in the permitting department who's an angry 66 year old who hasn't retired. Like take sitting on your thing for four months and like a bill.

[Michael Batnick]

I'm going through this right now.

[Josh Brown]

Don't get me started on title insurance.

[Joe Lonsdale]

Yeah, well, that's racket too, but, but housing, so, so it's the permitting. It's, it's, it's the actual, it's the actual building. Like we have a, you know, bunch of guys who are some of the best guys from Waymo, for example, now doing construction and actually it's actually working. It's you know, way, way more efficient, way better. So that part's there. And then I'll tell you the other one. That's crazy. It's kind of AI, it's kind of just elon stuff in general. But if you could actually make infrastructure really cheaply, like tunnels and other Things far out of cities, but then you can live somewhere cheap. But then get to the city right away and be part of the economy that massively reduces.

[Josh Brown]

Is that ever going to happen?

[Joe Lonsdale]

Yeah, we're doing it. We're building right now.

[Josh Brown]

Where? Who's building?

[Joe Lonsdale]

Boring company is all over Vegas. We're doing stuff in Texas, doing stuff in Florida and getting going on it. So I mean, it's accelerating. It's going to take a couple years.

[Josh Brown]

So obviously we're on the east coast, like Josh and I were talking. We don't see Waymo, so we don't see the driverless cars. There is magic happening.

[Joe Lonsdale]

Not just people are going around.

[Jacob Miller]

Walk around Austin or any city on the west coast and it's coming to dc. Yeah, you will see many cars with no driver and it's magic. And think about the productivity from that too. If you have a lot of commuters in this country, even if the productivity is just you're resting and listening to some music instead of focused on the road. But let alone you can take calls.

[Michael Batnick]

Yeah, no, I love that idea. And as a parent of teenagers, I wish this had come like five years earlier because I'm teaching them how to drive. I've taught one of them. I wanna shift gears and talk about something that I also think is one of the biggest debates on Wall street and get you guys to weigh in on it. So to start off the year, the US Stock market stumbled out of the gates. That happens. But it was a really big surprise this time because in December, all of the strategist notes were about American exceptionalism. And in the post Trump election period, stocks were just ripping. People were pumped. They were excited for lower tax rates. They sort of disbelieved worst case scenarios about tariffs. And earnings had been growing and the Fed was cutting and it just, it felt like, yeah, this long US ignore the rest of the world thing, it'll keep going. That reversed really hard. European stocks are up big this year. German stock market. There's a lot of talk about the revitalization of those economies being the thing that Trump actually made great. Which is an interesting and ironic twist. But I want to share something with you from Rusher Sharma of Rockefeller International, who wrote in the FT this week and just see what you guys think of it. As investors, many of the people who hyped the election of Donald Trump to the White House as a huge boost for American exceptionalism now see the recent decline in U.S. stocks and the dollar as a sign that this era of US dominance is under threat. They tie it to Trump and tariffs, et cetera, et cetera. But then, he notes, even after the declines of the past month, the real value of the dollar remains at highs rarely seen since the end of fixed exchange rates in the 70s. The S&P 500 is down less than 10% from the February peak, still trades 25% above its rising trend line. Despite the sharp rally in Europe and China, it's still a 50% premium to international markets. That's the S and P close to the widest leads on record. America's share of the main global market benchmark remains well over 60%, even though we're only 30% of global GDP. And I guess the question now is, like, do you chase this rally in international stocks because something has materially changed about American exceptionalism, or is this a blip?

[Jacob Miller]

Nothing has materially changed about the way that Europe or China treats business. Like we talk, the best founders in Europe moved to America for a good reason. This is, we are an exceptional country.

[Joe Lonsdale]

America is so dominant right now. It's actually ridiculous how dominant it is. Doesn't mean we should have hubris about it. Like, we should watch, we should get better. We shouldn't it up with a bad trade policy. But listen, I have hundreds of friends who are very successful. A lot of them going into the election were terrified and were saying, I'm gonna have to, like, protect my gangs. I'm gonna move somewhere else. I'm gonna go live somewhere else out there. I'm gonna be a target. It's just really scary. And then so many of them instead now are saying, wow, this is great. It's time to build. I'm gonna start new companies.

[Michael Batnick]

They were worried about Trump.

[Joe Lonsdale]

They were worried about this before the election. They're worried about the radical populist left targeting them and taking after. And they were very cynical and very negative. And I had friends flee the country, go to Switzerland, go to Singapore. These are successful people who are like, America is going to demonize me and attack me for being too successful. And by the way, that's what happens in China. I literally have friends who were killed in China for being too successful and being multi billionaires who were speaking up and who were not kowtowing. Friends, don't let friends become Chinese multibillionaires. 72 of them disappeared. And a lot of American billionaires saw what was happening with the same energy and said, wow, this is terrifying. And all of a sudden, instead, they're all investing in building. And I'll tell you what, America is just so far ahead in this AI wave, it's so far ahead in allowing creative destruction. What AI is about is about changing the fundamental way all these services, economy, businesses work. And this stuff's working and we're going to let it happen here. Europe and China are mostly not going to let that happen. Right. They're too hampered by how they would do things.

[Jacob Miller]

And also, I mean this is sort of less a market point, but China has artificially suppressed the value of their currency in a non competitive way, which did contribute to the shelling out of American manufacturing. Other tariffs, I'm not sure I totally understand the thrust behind, but we should tariff China until that feels fair and we should rebuild here what they've taken from us. And we shouldn't rely on them for key industries.

[Joe Lonsdale]

It's a fair point of view.

[Michael Batnick]

Foreign investors like Australian pension funds, Japanese insurance companies, they're still buying U.S. stocks. So there's been 16 trillion.

[Josh Brown]

That's how much they own.

[Michael Batnick]

Right. So they own. Foreign investors have tripled their equity holdings in the United states to like 20 trillion over the last decade. Foreigners now own 30% of the US stock market, which is still a record high. So all the talk about everyone's pulling their money out. Maybe people are looking at ETF flows and they're getting carried away.

[Josh Brown]

It feels like New York is dead.

[Michael Batnick]

Remember during COVID like as stupid as that.

[Jacob Miller]

Nvidia is worth more than the German stock market. We produce exceptional companies and many exceptional companies also choose to move here.

[Joe Lonsdale]

When I was a kid, Europe and us were kind of like the same civilization. We basically had about the same standard of living a lot there might be a little more regulated, whatever. It's a different civilization nowadays. We're literally our poorest state. When you think, when you make fun of poor people, you make fun of what you think. Make fun of how poor certain places are. In America, they are richer than UK and Germany, our poorest states. West Virginia, Louisiana, the back country of these places. They are richer than the rich European countries like this place. Europe's just like, it's like a bombed out mess of itself. It's cynical, it's arresting people for crazy things. It's like the best people there, they are fleeing to be part of building here. Like they make fun of us for working too hard. That's about as much as they could say. It's like, it's like, come on.

[Michael Batnick]

So when Macron says the French government's going to put up $100 billion worth of funding for AI startups, why would you Try companies like Mistral. You don't believe that this is like a new mentality, but also, why would.

[Jacob Miller]

I believe that the French government is good at investing?

[Michael Batnick]

Oh, I don't think any government's good at investing.

[Joe Lonsdale]

I think it's great that certain leaders there see how far behind they are and they want to fix it somehow. I think it's misguided for government to fund these things. Like, they're desperate to support their own stuff and there are some stuff there. It's going to be okay. There's some good companies there, but it's just if you look at the ratio of the number of unicorns here to there, it's not even close.

[Michael Batnick]

So you're a backer of Anduril, which has been an outstanding success so far.

[Joe Lonsdale]

Invested every round.

[Michael Batnick]

Yeah. Good for you. By the way, congratulations. Thank you. It's obviously not only doing amazing things, but it's like conspiring so many other companies. Some of the big things that we've heard overseas are like Germany saying, why don't we have a defense industry? The United Kingdom, all those stocks started to rally after JD Vance's visit where he basically said, hey, this is not gonna continue where we just pay to support NATO and you guys do nothing.

[Joe Lonsdale]

It's important they try. The real context here is that after the Cold War ended, a bunch of our defense plans were forced to merge and they became very bureaucratic, very much an arm of the government. And there was really two companies that broke through as new companies, new primes. One was SpaceX, one was Palantir. And the DNA out of those companies has now formed a bunch of others. Anduril's the most important new one. Three of the guys who started it were from Palantir and then my friend Palmer Luckey. And so there's people like Sirotic now is building hundreds of ships. Also multibillion dollar new company I helped create with a bunch of Palantir, SpaceX, other DNA. And so you have these new winners here. They're growing really fast. It's interesting, eight, nine years ago, when I first started building in defense again, people would attack me. They say, I don't want to work with you anymore. It's so immoral, unethical to build in defense. And now everyone realizes it's.

[Michael Batnick]

I remember Josh Wolf from Lux having that same, like, people would go at him on Twitter that he was funding defense investments. And it's almost like, you understand I'm American, right? Yeah.

[Joe Lonsdale]

We want America to be the strongest in winter.

[Michael Batnick]

Oh. So I Actually wanted to ask you about that. So of course the success of Palantir and the stock market over the last year I think woke a lot of investors up to the idea that like not everything being built in Silicon Valley is for like a social media app. Like there are people building serious things that are gonna maybe save our lives. Oh yeah, I kind of like that. I feel like it's made venture capital investing more tangible to the average person and I feel like there should be a bigger awareness of like, hey, we're not just funding like Instagram clones, we're funding like, like metal.

[Joe Lonsdale]

We're curing diseases, we're delivering healthcare, we're running the global logistics industry, we're building defense, we're doing advanced manufacturing here.

[Josh Brown]

I mean this is one of the biggest differences between the USA and the rest of the world is our venture capital. The vibrancy and the dynamism of willing to take chances and risk and fund things that might be zeros.

[Jacob Miller]

Yep. And attracting the best talent to do that. But this is the difference between, you know, in my mind between great and just okay, venture capital of if you can get some quick wins in a social media company that attracts a bunch of users quickly, it takes time to build a Palantir, it takes time to cure diseases. And I think the best VCs think big and think long term enough to see those bets.

[Josh Brown]

So let's talk about the rise of private markets from the advisor's point of view. You should see my inbox. I'm not saying it is a bubble. It feels like a bubble. Just based on the volume of emails I'm getting from private real estate, private credit XYZ John throw up chart 4. We have this from Torson slot comparing public and private markets. So the Global Private capital AUM is a staggering $13 trillion. But it pales in comparison still to the global fixed income which is 103 trillion. Global equity markets 101 trillion and the global size of banking sector balance sheets, 98 trillion. Are private markets going to continue to eat into banks and public markets?

[Joe Lonsdale]

They're definitely growing on a second.

[Michael Batnick]

Where does it come from? Like if that goes from 13 to 26, where does does it come from fixed income? Well, I mean does it come from. The bulk of.

[Joe Lonsdale]

It is going to be, I think credit, because that's in nature is the credit market numbers are bigger. Just. That's just the way it works. But I mean there will be a few trillion dollars, I think in new private companies created with the AI wave and the growing venture Wave. And that's going to be a big part of it. There's going to be a lot of derivatives, mostly credit off of those companies as well. And the thing about this is private markets have much higher disparity, much higher differences in returns than the public markets.

[Michael Batnick]

And so what that, oh, that's interesting. Why? Because people are less benchmark aware and they're more focused on the returns. They're not looking like others.

[Joe Lonsdale]

They're not as standardized and regularized. It's much easier for a person who doesn't know what they're doing to come in and lose all of their money on it. It's also a place that the very, very best stuff exists. And so it's one of those areas where it's really important. You're accessing the top talent, the top things, because if you're not, you're going to get crushed.

[Jacob Miller]

Yeah, I have a really simple framework for this. If you want to outperform markets, it's a really hard thing to do. I think there's really only four ways.

[Michael Batnick]

Maybe for you.

[Jacob Miller]

Yeah, again, you have really nice shoes. It's true. Four ways. You can have unique information, unique access, unique insight. You can get lucky. Okay, first two are illegal in public markets.

[Michael Batnick]

Okay, that's a great point.

[Jacob Miller]

Do not pass go, do not collect $200. But that's the lifeblood of private markets and not in some nefarious backroom dealing way. It's, you know, if you're ABC and you've backed a lot of the best defense tech startups, if someone, you know, if the best scientist and someone coming out of procurement team up and they're building a company, who's their first call.

[Joe Lonsdale]

Yeah, the top guys out of Anduril want to do something else, then I'm going to know about it. This is a Peter Thiel point, which is a very good point. It's what Jake just said. If you're working in a market where inside information is legal and you don't have that information, you're going to get crushed. So it's not unethical, it's just the nature of private markets. You do have more information, you're going to win.

[Michael Batnick]

I think there's a fifth way, but maybe you could kind of fold it into your second point. I feel as though in private markets, more so than in public markets, you have more of an ability to actually affect the outcome because you're an influential investor.

[Joe Lonsdale]

That's a great point.

[Michael Batnick]

You can't. So is that the right choice too?

[Jacob Miller]

I would put it into access. Because part of what a great LP.

[Michael Batnick]

Brings is access and influence.

[Joe Lonsdale]

Yeah.

[Jacob Miller]

And so you can bring new clients, you can grow revenue by if you are connected with a great logistics family and you invest in a shipping company, you can connect those.

[Michael Batnick]

Now you could do that in the public markets if you're Bill Ackman or you're Carl Icahn. Carl Icahn famously got Tim Cook to pay his first dividend and do his first buyback at Apple. But it's harder for. You can't have 50 of those people. Whereas in private markets you can have a commercial real estate expert who just by giving his imprimatur to a deal in real estate, other people are going to want to fund that deal and therefore he or she is actually impacting the outcome of the investment.

[Jacob Miller]

It's the size of the basis thing too. Like if I find a company that right now is doing 25 million ARR and I know I'm connected with a group who would be a great client for them and would be a $50 million ARR client, that's a huge impact. I can 3x that business by being an investor.

[Josh Brown]

Okay, so the area of my inbox that is most crowded, not unique to me all advisors, is private credit. And Jake, you and I were talking earlier that the idea that a loan should trade on a daily basis probably like doesn't make that much sense. Like I loan you money, you pay me back, you pay me interest and you pay me, you pay me back. But the size of the private credit market is getting so big that there is now more money chasing fewer deals and therefore the terms are getting a little bit looser. And so is there going to be like a blow up, a day of reckoning or is this gonna be a slow bleed or low returns? What do we think about private credit?

[Joe Lonsdale]

There's just lots of areas of private credit. Right. I think there are probably more popular areas that are dangerous. I think there's still a lot of of esoteric areas, certain parts of assets and venture, for example, that I'm not seeing very many bids to loan against. And so I think if you have someone with unique access who's really good at this game, I think there's still just like everything else in private markets, there's going to be some really good stuff to go into.

[Josh Brown]

So what should advisors be aware of? Like if we don't have expertise, what should be like the stay the hell away from this.

[Jacob Miller]

Yeah. So I mean in the private credit space in particular, where we get most concerned is the mega loan space. So you have a small handful of these super large BDCs that raise billions of dollars a quarter and basically have to put that to work really quickly.

[Michael Batnick]

And they're paying huge dividends on a quarterly basis. They're trying to yield.

[Jacob Miller]

The issue with that is there's only so many companies that, let's say I can write 10 loans and I got to deploy $4 billion. Those are big loans. There's only so many companies in the world that can take that size of loan and me and the five other big people are trying to lend to the same companies. And that's where you get that bidding down.

[Michael Batnick]

So you're willing to accept less in exchange for the risk.

[Jacob Miller]

You got to put the money to work. You accept lower returns. Now to your question, Micah. I don't see this right now as a blow up. Where you get bubbles and blow ups is really high levels of leverage, insiders selling to outsiders and unrealistic expectations. Expectations are a little unrealistic. Leverage levels are totally in control and these firms are large sponsors and can basically roll their own loans if they need to. And so it more looks to me like if you've averaged 10, I'd probably haircut that by 3 to 5 for the super big stuff. But to Joe's point, if you go below 200, certainly below 150 in loan size, it's like the world you'd expect. Rates have risen, banks have stepped back, spreads are wide, covenants are really strong, and collateral is good.

[Michael Batnick]

So I think there's an illiquidity risk that's. I wouldn't say underappreciated, but I don't know what you do about it. We had this blow up with B REIT a couple of years back. Kind of, kind of smoothed itself out. But effectively you had a market disruption where a lot of people wanted their cash out of that at once. And of course the outdoor is only so big because the underlying holdings are like buildings.

[Josh Brown]

So quick sell the hotel.

[Michael Batnick]

Yeah. So obviously, so obviously written into those documents for the people that invested is like you might not be able to get your money the exact second you summon it. It's not. Yep, it's not an ETF that's trading treasury bonds. Like, you might have to relax for a minute. People didn't like that. Everybody investigates it. More recently we had an ETF come public. PR IV was a private market etf. A little bit of an evolution. Now effectively you can buy private assets via an etf and when you redeem or sell the etf, there's a company standing behind it saying we'll buy those assets automatically, no matter what, and we'll provide liquidity. I guess when they say democratization, that's what they mean. Not every asset class should be democratized. I think would be my comment. Maybe that's a neat gimmick. But do we really need that sort of daily liquidity in private markets?

[Joe Lonsdale]

It's very dangerous. Also, when something starts working there, there's not gonna be the money there if.

[Michael Batnick]

Something goes wrong or the company that's on the hook for it maybe is on the hook for more than they thought they would be.

[Joe Lonsdale]

Exactly.

[Jacob Miller]

I mean these assets are fundamentally not liquid. Now they range. They're not all 10 year things, they're three year things and five year things. But anytime you might need liquidity before that, that introduces risk. Now I might argue that that's also true in public markets. It can take seven years for a bet to pan out in terms of your capex, but you're subject to the daily fluctuations.

[Michael Batnick]

Philosophically, are these really still private markets? If they're 100 million individual participants, are they actually private anymore or are they just illiquid but highly public markets? I know, it's.

[Jacob Miller]

This is a really good question. We talk a lot about the beta vacation of the space right now. There is no index. That's part of the other reason why you see a lot of dispersion. There's no benchmark to even track against. I think this is almost the start of the development of that. There will be essentially private market beta definitely in credit, maybe in other spaces. It'll be harder to, probably impossible to do in venture, harder to do in private equity. But you shouldn't pay a lot for beta.

[Michael Batnick]

Yeah.

[Jacob Miller]

And these still have fees as if they're alpha like funds. That's a big watch out for. Democratization to me is a scary word in this space. I think you want to be working with a fiduciary and that fiduciary should be picking a partner. And there's a lot of layers of diligence that need to go into making sure you're investing with the best.

[Josh Brown]

So give a plug for opto. What are you guys doing with advisors?

[Jacob Miller]

Joe and I looked out at the space in 2020 and we're, you said it earlier, pretty disgusted by how things generally run, which is people build platforms, Those platforms charge GPS 2, 5, 10% to raise capital. The best funds don't have to pay to raise capital. And so it's generally the biggest stuff not the best stuff. And someone shows up, the wholesaler, drops a book on the table, gets you to buy some stuff and then you never hear from them again when it's down 5% and they just want to know why. It also was crazy, laborious and difficult. If you have even a few hundred families and fifteen funds, you might choose from the factorial of all those families to all those funds and all the subdocs and all the K1s. No one wants to or should hire the staff out to do that.

[Michael Batnick]

RIAs are not set up to manage that.

[Jacob Miller]

And that'd be a bad use of.

[Michael Batnick]

Time, pieces of paperwork.

[Jacob Miller]

And so combining those two things, how do we build a technology platform that's aligned with clients and makes us as turnkey as possible while maintaining quality and maintaining what's unique to that firm? And so it's not one off the shelf fund to fund with 50 things in it and they're at different vintages. We sit down, have a goals based approach, say what do we need? We need the Josh Growth fund and the Josh Income fund. Do you want to co invest vehicle? Should it be by asset class? What will work for your clients? What's the right risk level? Create that as a custom object. It's your fund, it's a separate entity. It's single sub doc, single K1. We're even building some of the registered space as well. And then have a timeline to go out and find the best. We don't have to deploy all day one. We can go do thorough due diligence across sectors, across asset classes and bring the best to portfolio.

[Michael Batnick]

In the wake of the financial crisis, the last people standing were hedge funds. Not all hedge funds, of course. The ones that got, quote unquote got the crisis right and they had positive returns while everyone else got destroyed. So of course there was this huge outcry from retail investors. How come I can't access those hedge funds? And Wall street did what Wall street does best. They spun up all these fund to funds businesses, all these platforms. Anthony Scaramucci came along and democratized it, but like the idea was like the idea made sense. It's like, yeah, people should have access to strategies that don't do what the S and P does or can bet against the housing crisis or whatever. The outcomes though ended up obviously not being great. And when you talk to a lot of the financial advisors at Morgan and Merrill and you ask them like, why are you allocating to these particular funds or hedge funds, period, it was like it's a differentiator. Like what can I do that Vanguard can't? I could do this shit.

[Joe Lonsdale]

And if you, if you look so, so, so I, we started add a par 15 years ago and, and I'm allowed to see the aggregate data, right? I don't, I can't look into the specific families and stuff. That's not appropriate. But I see a lot of aggregate data and I study it and I talk to a lot of people because RAs come and talk to me all the time. And it is interesting. The very top performing people tend to be family offices with access. There's some RIAs, they're top performing too, but they tend to be the very top families. They're still run by usually patriarch who built the business, knows a bunch of friends in the space and they get access to the best funds.

[Michael Batnick]

So they have the best returns.

[Joe Lonsdale]

They have the best returns. Those are people that tend to have the best returns. And it's usually the. Because more of their money is in the space, they know well or they know who the top people are, whether they're an energy family or a tech family or whatever else. Right. And that's like, and that's how these things work.

[Michael Batnick]

They have a domain expertise, they want.

[Joe Lonsdale]

People and that's how I've been lucky to be able to do that too. I have a pretty good network now having built all these companies having mentors and friends who've done this. And so the question is, how can you offer that to an RIA really easily in a format that's really positive. And so the idea is let's build all the technology, let's build all the frameworks to help them build a custom fund using that access of what you know, we're going to help them what we think's the best. Usually it might be five things, 10 things in the custom fund. Two or three of them might be stuff that they really like as an RA they already know about. And some of them might come from my network, some of them might come from another network. Now of other, you know, billionaire friends.

[Michael Batnick]

They can do that all through the opto platform.

[Joe Lonsdale]

They put it all into one custom fund.

[Michael Batnick]

That's cool.

[Joe Lonsdale]

And they offer it to their clients. It's aligned and we, and we only really make money if we get that 5% on top, which by the way is much less in fund of funds charge. So it's like a much cheaper, more customized version using tech than the other solutions.

[Michael Batnick]

So the client household of the advisor effectively is building their own fund of funds.

[Joe Lonsdale]

And for, for cheaper and better and customized for the client and making it easy.

[Jacob Miller]

Then there's a power of being part of this network. And so, you know, we're working across many, many RAs and family offices and not every deal is going to have excess capacity. But sometimes if you can go from a 5 to $20 million check, you can get a significant discount. And so if we can find multiple people who want to participate, everyone can benefit from that. We don't pocket the difference. It flows through to the end client.

[Josh Brown]

Okay, so Joe, a lot of Silicon Valley like infiltrated politics and won in a big way, obviously between Elon and Doge and Sachs of Cryptozar.

[Joe Lonsdale]

Well, we red pilled Silicon Valley first and then they infiltrated it.

[Josh Brown]

So Chamath and Freeberg interviewing Lutnick and Besant. But a couple of weeks ago you, I don't know if it was a quote, unit or whatever, but you called out some of the nonsense or perceived nonsense with the bitcoin strategic reserve. And I know you're friends with Sachs, right?

[Joe Lonsdale]

I'm good friends with David Sachs.

[Josh Brown]

But you disagreed?

[Joe Lonsdale]

He gave me a hug a couple days later. So we're good? Yeah.

[Michael Batnick]

You're not anti Bitcoin? No, not at all. You're anti taxpayers funding a bitcoin strategic reserve.

[Joe Lonsdale]

Even beyond that. I'll tell you what happened. But listen, this is very funny first of all, because there's like 30 things that I agree with going on with Elon and the administration that I'm helping with. And then I think I've called out too. And whenever I call it out, of course it gets a thousand times more attention. Which is fair. Which is fair. The thing I called out in that case. And listen, again, I'm a very pro. A lot of stuff going on there. I didn't think it was very presidential or appropriate for the people to influence the President to put out the names of coins in a tweet that might go into a reserve. And you go to those markets and you see ahead of time that there's someone who's making 50, 100 to 1 bets. I'm not saying it was necessarily something the President himself did. There were probably people around him playing games. And that's just, you know, we're finding so much fraud and so much bad stuff and we're cutting so much nonsense. And I'm so proud of this administration.

[Michael Batnick]

Why do that with the left hand?

[Joe Lonsdale]

Why have this other thing going? Oh, let's be perfectly clean, let's be really careful. So I actually agreed with what David Sack said, which if you're going to have seized Bitcoin anyway. If you want to keep that in some government account versus selling it, that's very reasonable. But let's just not play any games with which currencies are going to be in a tweet and someone's going to trade it or whatever. Let's just. You gotta be really clean, you know.

[Michael Batnick]

Okay, so. So on the scale of 1 to 10. 10, no problem. One like this made me want to throw up. When you saw Melania coin come out on the day of the inauguration, what was your reaction to that?

[Josh Brown]

I was a negative 30 on your scale.

[Joe Lonsdale]

I didn't love it. I don't know if it's like it's not more important to me than all the good things happening, but I just think that all these things going on with crypto in that way, that's not to me the highest end and purpose of crypto. And so, so it wasn't my favorite use of it.

[Michael Batnick]

I think like $5 billion went into the coin, which is now worth zero. So effectively people lost a lot of money. And my best guess is there are people who either thought they would be smart enough to outsmart other people.

[Joe Lonsdale]

They're gambling. You know what if people want to gamble? Buyer beware.

[Michael Batnick]

But I think it's a lot of poor people that don't know better.

[Joe Lonsdale]

This is what happens with all gambling, which is why gambling itself is a very questionable thing. In general, we use gambling to fund a lot of things. With the lottery, maybe it's a good way to fund things you're taking money from.

[Josh Brown]

So what's your favorite thing that they're doing? I guess, I don't know. Pick on Doge, whatever you want.

[Joe Lonsdale]

I mean, I mean that's so many favorite things you're doing. I think, I think I'll give you two on Doge. Like one is that, is that this USAID stuff actually was extremely corrupt. It was tied to grift. There was a federal Mediation and Conciliation service which was like a nine story office with 60 people in it that was buying art, including from the wife of the boss and was spending money find people all around the world. And they were all commenting how they're not really working and they're just using the money for sketches, things to pay their friends. Clearly just nonsense going on. And even beyond just nonsense, there's activists, they're funding for hundreds of millions of dollars to push a very ideological agenda. So I mean, that kind of stuff's really terrible. I'll tell you the craziest one, they just didn't.

[Michael Batnick]

Most Americans like that. Most Americans like that. They got rid of that stuff 100%.

[Joe Lonsdale]

I'll tell you what, crazy one. Yesterday they did the executive order on it to turn them all off. I think they found 17 magic money computers. Did you hear about this? So usually when you issue a check from somewhere, it has to come from an account that's like a normal thing. In this case, government accounts never quite balance and no one really knows why. But one of the reasons why is there's these computers in hhs, in dod, in treasury, just issuing money to people. Money doesn't come out of anywhere. It's just being paid.

[Michael Batnick]

How or how they draw a check. How do you get on that list?

[Joe Lonsdale]

Everyone. Exactly everyone. Like, I'm sure some of it was legit, some of it wasn't. It sounds awesome, but it's like finding the genie's lamp or something. And then instead of using it for themselves, which a lot of people currently been doing, these have been around for a while. Some of them are used. Well, some are not. They turn them all off, you know, which is great.

[Josh Brown]

Is there so much fat to cut? Or like, what if we get too close to the bone?

[Joe Lonsdale]

There is so much fat to cut. I'm involved in hundreds of companies and some of them don't work. And then someone get broken. Some of them get really broken, and you have to. They fail. Imagine the most broken companies that you've ever seen, and a lot of them get pretty bad. And imagine instead of failing, they just kept being given money for 50 years like that. Some of these departments.

[Michael Batnick]

I liked what they did this week.

[Joe Lonsdale]

It was crazy.

[Michael Batnick]

They took this list of people that were listed as over 120 years old, receiving Social Security. So let's just. We don't have to say it's definitely fraud. Maybe it's benign neglect.

[Joe Lonsdale]

Maybe.

[Michael Batnick]

I'm trying to be charitable optimistic here.

[Josh Brown]

Who cashes those checks? Or is it automatically somebody's cashing these.

[Joe Lonsdale]

Checks, Their kids that are still around, the illegal immigrants, using the numbers. I mean, it's all sorts of.

[Michael Batnick]

So I love that they did that. I don't know a single person. I don't care if you're a Democrat, a Republican, a libertarian, if you're a centrist, you have to like that finally somebody looked at that and I don't even know the amount of money. It doesn't matter. It's just the point that nobody's looked at this in 50 years, 100 years.

[Joe Lonsdale]

And there's hundreds of billions of dollars in fraud going on in Medicare, Medicaid. I talked to President Obama about this. He criticized me for not wearing a tie at the time as I learned the lesson, you can always wear a tie with the President. But he agreed with me. He's like, yeah, Joe, let's go after this. And then his office, Valerie Jarrett, those people, they stopped it. Cuz politically it's not useful for them to find fraud on these entitlement things. Plus, my hypothesis is the law of the fraud's probably some of the friends of the friends of the people in the party, because of course, that's a great way to find things.

[Michael Batnick]

So you're like part of the PayPal mafia. Let's just tell people, for people that are not aware, this is in a good way, it's not in a negative way, but you're one of the early people that built what is arguably now one of the most important technology.

[Joe Lonsdale]

I started Palantir. I was a kid at PayPal. I'm not gonna take credit for the work there, but I was a kid there. And listen, the way I think about PayPal is you had Peter Thiel and Max Levchin and a bunch of their smartest friends, legends, David Sachs, right off. And then you got Elon Musk and his smartest friend, and they were competing. And by the way, the Silicon Valley was a place that a lot of the smartest people in the world came at the time to compete. These were two of the very best teams there competing. And then they merged and that was PayPal. So, of course, when you have all that talent, you're gonna have, you know, dozens of top multibillion dollar companies coming out of this place. And so, yeah, as lucky as a kid to learn from these people. No credit for PayPal, but I did start Palantir afterwards.

[Michael Batnick]

But so here's where I wanted to go with that question. I think you are a huge fan of a lot of the things that Elon is doing, but you probably are thoughtful enough to realize the manner in which he's doing some of them. Or maybe the stuff that he's putting out on social media while he does them is probably making his job harder, not easier. Do you get a chance to be like, dude, you're crazy for those last four tweets, but I love the things that you're actually accomplishing. What if you did one without the other?

[Joe Lonsdale]

I'm close enough to know where he's coming from and how frustrated he is with some of the things. And also his sense of humor that I Like where he's coming from. It's totally coherent and it makes sense and I know why he's doing it. I think the thing that we're gonna try to do is we're gonna try to keep communicating this in new different ways. I have a bunch of friends who guys like Tim Urban at Wait Butweiler, who Elon likes, who's great at communicators, better communicators than me. We need to try to convince some of them to help us communicate some of this stuff better. Because I think Elon's communicating some pretty well. But the press is just so noisy and so negative that we need to get our story out better.

[Michael Batnick]

There's a story today. Elon is back in the building. Of course, by which they mean Uber headquarters. That's probably a healthy thing.

[Josh Brown]

He means Tesla.

[Michael Batnick]

Excuse me, Tesla headquarters.

[Josh Brown]

Holy shit.

[Joe Lonsdale]

Yeah, because Travis is done with that.

[Jacob Miller]

Did he bring a sink too?

[Michael Batnick]

No, but there's an article today, it's like almost celebrating Tesla's in a 50% drawdown. A lot of his political activities are driving negative attention on Tesla, which of course it has nothing to do with it.

[Joe Lonsdale]

I'm sure the consumer thing makes it tougher. I mean, you have to be a really bold, courageous person to be willing to be controversial in public. When you're a CEO of a consumer company, that's tough. My friend Omid runs Tesla with them. Amazing guy. They have such great talent there. These are just good people. And you saw they built the factory in 18 months where we live in Austin, biggest factory in the world. I mean, extraordinary stuff they're doing. I think a lot of the new technology at Tesla is going to be. You've seen like the self driving stuff. It's going to be, it's going to make the cars worth a huge amount more. I mean, there's great stuff coming there.

[Michael Batnick]

If you were giving him advice though, you would have probably told him, go back to Tesla. Like keep doing what you're doing, but like also go back to Tesla or you wouldn't have said that.

[Joe Lonsdale]

I think Omid's really good at what he does. I'm sure Elon and him are in close touch. Like the thing, the thing I would say is it takes so much courage and so much of a warrior spirit to keep doing what he's doing at the government. Like he has lost a lot of money from what he has done here in terms of he gets him attacked, it's not fun. His life's under threat constantly. He's had to cancel a lot of things because people try to kill him. Where he shows up. I mean, this is not something where, of course, he has a sense of humor and has to joke about it because what else are you going to do? But it's not something where he's just doing this on a whim or something. He truly believes, and I believe he is, too, fighting to save our civilization. And so I really honor him for that. Whether or not you just agree or disagree with everything he's doing, that is the energy he's going with. Elon's kind of a classic. He's a warrior in the tradition of. He's not about luxury, he's not about living. Well, I think there's memes.

[Jacob Miller]

Wow.

[Joe Lonsdale]

The memes are a sense of humor. But he's sleeping on the floor, he's sleeping on the couches. He has the smallest office. I see where he lives and stuff. He's not. He doesn't care about having yachts or having, like, living. He's literally like. He's like a classic warrior from the ancient tradition, and he's trying to fight for our civilization. So whatever else you think of him, I think he's an extraordinary man.

[Michael Batnick]

I want to end by just asking you guys not whether or not you agree with the ideas of besant and musk and, like, some of these things that, like, feel like they have to get done fast. And right now, even if we ruffle feathers and the tariffs cause a slowdown, how do you generally feel about how this year ends up? Because we're, you know, we're gonna do this April 2nd tariff announcement, and it's a big thing. They're handcuffing a briefcase to Howie Mandel, who's gonna open the briefcase and announce what the tariffs are. It's very exciting. It's very exciting.

[Joe Lonsdale]

We're all very excited. Listen, Trump's a good negotiator. I hope he gets it right. I hope he gets it.

[Michael Batnick]

That's what I'm asking is, like, is this not to agree with it, but, like, are we going to come out the other side, like, not as damaged as some people feel we're about to.

[Joe Lonsdale]

America is a free society. It's a great society. It's attracting the top talent in the world. This AI stuff is working. This is a civilizational level shift right now that we're going to make these things multiple times more productive. Like, as an investor in private markets, my focus is like, is this real? Do we have the best people on it? Is it going to be worth billions of dollars? As it scales the next five or 10 years. And that's the focus. This is what's great about private markets is that it's like there's this ocean and the waves are moving up and down and if you look every day, the waves moving up and down, we're like building steadily and strongly from the bottom of the ocean up to the top and it's going to be 100x regardless of how big those waves move up and down.

[Michael Batnick]

And it's worth risking a trade war that potentially causes a recession because the benefit of living through that, everyone would be better off.

[Joe Lonsdale]

Listen, it's super complicated, right? If you get the deal right. And I do have more companies building more things in the US now because of what they're doing. I get where JD and him are coming from. They really do care about the working class and bringing back our manufacturing base. There's legit parts of it. I tend to not be as excited about tariffs as President Trump, but he's a rational actor in this case and I see where he's coming from. Jake.

[Jacob Miller]

And I'd separate in my head again, I separate the China tariffs from everything else. I think those are more than justified and I personally even go further. And again, if you in an anti competitive sense steal manufacturing from America, we should fire.

[Joe Lonsdale]

Well, there's two things there. One is China's an adversary and they steal stuff from us and they devalue things artificially. Two, let's be real, whether or not you're on the left or the right, I don't think any of us want our oceans polluted plastics dumped everywhere like nasty environmental stuff. That is what happens. These other countries, if they're not going to have the same environment, if they're not going to have the same environmental regulations as us, we should probably tariff them for the damage they're doing. I mean that's very reasonable, right? So there's things like that we can all agree on.

[Jacob Miller]

In terms of this year though, I'd separate tariffs will definitely be quite painful. For the large cap equity indices.

[Michael Batnick]

You have a really high that'll continue to roil.

[Jacob Miller]

I mean you'll be offsetting that with expectations. I'm not necessarily calling like a sell off, but it's most painful for those companies. They have the highest overseas sales growth, they have the highest overseas dependence from the manufacturing and staff. That's who's going to get hit. There's a difference between that and the real American economy. And will that show up in the small caps? I'm not sure the Small caps have basically, like they're less relevant because of private markets where we're seeing the building and the innovation people building new factories, logistics centers, applying AI to traditional industries in interesting ways. It's happening in the private markets. And so if I think about where at the end of the year is the average person going to feel they are? Well, a lot of people, when you survey them, look at the stock market and say, I feel good or bad based on that. But if you look through that, I think there's a lot of green shoots to think about how a normal person will be living over the next five years.

[Michael Batnick]

That's a great place to leave it and really appreciate hearing you guys say that. And thank you so much for doing this. I want to tell people where they can go to learn more about Opto and to read more of your commentary and just generally subscribe or whatever you start. Tell us where people can learn more from the investing side.

[Jacob Miller]

Yeah, go to optoinvest.com optoinvest.com okay, and then I have a more off the cuff blog, blog on LinkedIn if you want to follow that. That's where I'm a little less filtered now.

[Michael Batnick]

Can that site be accessed without a VPN?

[Jacob Miller]

I wouldn't recommend it.

[Joe Lonsdale]

Okay. And I'm J.T. lonsdale on you. I get your stuff and you got my stuff. And I have a substack. I publish things. I have a podcast called American Optimist. It's honored to be on, guys.

[Michael Batnick]

Thank you. Okay, awesome. Thank you guys so much for joining us. Ladies and gentlemen, this has been Jacob Miller, Joe Lonsdale, and please go check out Opto Online and by all means subscribe to these gentlemen's podcasts and blogs. We appreciate you guys for being here. Thanks everybody for listening. Subscribe, do all the things, and we'll see you soon. So that was kind of like the warm up. I just wanted you guys to get a sense of the show.