#14: Choosing Good Quests: Innovation, AI, and Winning in a World of Regulation

Overview

This episode explores the concept of Good Quests in entrepreneurship, emphasizing the importance of mission-driven ventures that tackle meaningful, often challenging problems. Trae Stephens, General Partner at Founders Fund and co-founder of Anduril, shares insights on navigating government sales, the role of AI in defense, and strategies for building resilient companies in regulated markets.

Notable Quotes

- You need to wake up every morning in a cold sweat thinking about what Lockheed is trying to do today to take you down. – Trae Stephens, on the paranoia required to succeed in defense tech.

- Too many people in Silicon Valley are starting tequila companies instead of building important businesses. – Trae Stephens, critiquing the lack of focus on meaningful ventures.

- The future of warfare is hundreds of low-cost, attritable systems — and AI is the only way to command and control them. – Trae Stephens, on the transformation of defense through AI.

🧭 The Philosophy of Good Quests

- Trae Stephens defines a Good Quest as a mission deeply tied to personal passion and societal impact, rather than a vanity project or market arbitrage.

- He criticizes whiteboard entrepreneurs who pick ideas without genuine conviction, arguing that the best companies emerge from irrational obsession.

- Founders should ask: Is this advancing humanity, or is it just self-serving?

- He introduces a framework:

- Feels Good, Is Good: Popular but commoditized areas like healthcare and education.

- Feels Bad, Is Good: Taboo but critical sectors like defense and nuclear energy.

- Feels Good, Is Bad: Opportunistic ventures like OnlyFans or certain drug markets.

- Feels Bad, Is Bad: Universally harmful areas like crime.

💼 Navigating Venture Capital and Governance

- Founders Fund avoids taking board seats to stay aligned with founders, focusing on upside potential rather than downside mitigation.

- Trae highlights the power-law nature of venture returns: only a handful of companies drive the majority of returns.

- He warns against kamikaze rounds — over-raising at inflated valuations — which can hinder long-term momentum.

🏛 Selling to the Government

- Selling to the government requires understanding its complex procurement ecosystem, which involves end-users, decision-makers, Congress, and political appointees.

- Hiring a lobbyist early is critical; Trae notes that Anduril’s first hire was a lobbyist, leading to rapid revenue growth.

- Founders must maintain paranoia, as legacy players like Lockheed and Boeing will actively oppose new entrants.

🤖 AI and the Future of Defense

- The future of warfare lies in distributed, low-cost, AI-driven systems rather than expensive, manned platforms like fighter jets.

- AI will play a pivotal role in command, control, and decision-making across thousands of assets on the battlefield.

- Anduril focuses on integrating AI into defense systems to address these emerging needs.

🚀 Lessons from Anduril’s Founding

- Anduril was born out of Trae’s realization that no existing company was addressing the need for a software-defined defense prime.

- Early success was driven by leveraging lessons from Palantir and SpaceX, including the importance of patient capital and navigating government bureaucracy.

- The company achieved $10M in revenue within 22 months and scaled rapidly, demonstrating the value of a clear mission and strategic execution.