Interview: Goldman Sachs Asset Management and Joe Lonsdale

This article is taken from: “Interview with Joe Lonsdale,” Goldman Sachs Asset Management — Perspectives July 2016.

Joe Lonsdale, Founding Partner, 8VC, shares his views on big data and examines some of the companies pushing the boundaries of the technology today

As we think about big data, what are Smart Enterprise Data Platforms and how are they helping companies improve the way they operate?

Joe Lonsdale, Founding Partner, 8VC

Smart Enterprise companies leverage the billions of data points that now exist in the world to empower knowledge workers — employees who contribute value by applying knowledge and analysis to data relevant to their tasks to solve complex, non-linear problems. Many of the software platforms that underlie the world’s most important industries, such as finance, healthcare and business services were written in the 1970s and 1980s, before the invention of cloud storage, distributed computing and big data analytics frameworks. With the increase in the amount of data in the world and the rise of cheap and fast processing and storage, the delta between what is possible in software and what exists in most industries is enormous. Smart Enterprise Data Platforms, which are often vertically-focused, integrate heterogeneous big data sets, structure the data in a useful manner, and ultimately help people make more informed decisions. They often have a network effect, powered by shared data across different players in an industry, where the value of the platform increases exponentially with the number of users on it.

What was the catalyst for starting Addepar and how is it helping improve the productivity of financial advisors?

We created Addepar because we saw a place where a multi-billion dollar global platform clearly should exist — but did not yet — to fix many of the challenges that exist in the finance industry. We saw the dysfunction in the technology and processes around wealth management as a perfect entry-point into the market to create a data platform that sits at the base of global finance. Addepar not only helps improve private wealth management workflows so that advisors can do a better job at what they currently do, but it also helps build a data-driven and integrated view on top of the many important financial decisions within a client portfolio. These include better connecting financial products and opportunities to relevant portfolios and enabling asset allocators to better understand how their investments relate to others. An example is finding interconnections among new types of tailored benchmarks or dashboards and how much clients are spending on particular fees and services relative to others.

How is OpenGov transforming the way cities and municipalities are evaluating their budgets and resources?

Cities allocate trillions of dollars and they mostly run on decades-old technology. We initially started a non-profit group to help California and other governments learn about their allocation of resources. When cities asked to be included and wanted help unearthing their accounting data, we looked into it and realized there were many challenges. We discovered that a for-profit model was the best and most sustainable way to fix the esoteric but massively important area of municipal finance. OpenGov now powers about 1,000 cities across almost every state in the US. It is helping them not only increase transparency, but also to do things like contextual budgeting, with which they can compare their spending to other cities with similar features. Organizing the data to enable these kinds of workflows requires a system that is built in a way to complement the processes the city managers and their staff manage with budgeting and decision-making.

You were listed in 2016 as the youngest investor on the Midas List (Forbes) for other investments, but you are still best known for founding Palantir. What inspired you to found it?

We founded Palantir in 2003–2004 because we perceived a giant gap between how the defense and intelligence community was harnessing technology to achieve its goals, and what we had seen was possible in Silicon Valley over the last decade. The goal was to build the best technology culture possible, and a core driver of ours was to overcome a false trade-off between civil liberties and strong defense — we believed that a superior system could both “watch the watchers” while also going up against wasteful multi-billion dollar contracts that we saw as horrible examples of cronyism and the defense-industrial complex in the DC beltway. A few years in, we also started the commercial division, developing products to empower tens of thousands of analysts and core workflows, not only in many areas of defense, intelligence and other parts of government, but also to confront the hardest problems in global finance, energy and healthcare, among others.

How do you inspire innovation and drive a leading edge?

A lot of innovation in our companies comes from a frustration or dissatisfaction with something we perceive as broken in an industry, combined with an inspirational view of how much better it could work. A key part of the vision and mission of many of our companies are hypotheses about better ways the world should be working, and the confidence that with hard work and the best people around us, we can achieve great things and fix the problems we have identified. Many people have written about how to maintain an innovative tech culture, but at a company where the best ideas win, the technologists are empowered to be leaders rather than to report to people on the business side. In a well-run tech company, small, elite groups who have ownership in the company are given the freedom to define and achieve their tasks in line with a broader mission that they have internalized as their own.

Can you speak to other emerging trends beyond finance where big data is being used to help people make better decisions?

Big data is the trend in every major industry. We speak about finance and government above, but many areas in healthcare including insurance, personalized medicine, outcome analysis, genomics, as well as other sectors of the economy such as logistics, manufacturing, education, energy, and even consumer, and the sub-sectors for each of those sectors — are undergoing a transformation. Creating the platforms that enable data to be organized and properly used in processes core to each of these industries is the big focus of the current technology wave. Just as consumer-oriented platforms like Facebook and Google became far more impactful and valuable than people expected, we believe that emerging Smart Enterprise platforms will help major industries run in far better ways, creating tens and hundreds of billions of dollars for the entrepreneurs and investors in the most important and best-run organizations in this wave of platform companies.