Trae Stephens - Find Good Quests

**Patrick O'Shaughnessy** (0:00)
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I hosted David on Invest Like the Best last summer, and it's hard not to walk away insanely energized after listening to any episode with him. You can find a link to founders and those episodes in the show notes of this conversation. You can also search all past transcripts on our website, joincolossus.com.
Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts and you can access all our podcasts including edited transcripts, show notes, and other resources to keep learning at joincolossus.com.

**SPEAKER_2** (2:07)
Patrick O'Shaughnessy is the CEO and founding partner of PositiveSum and the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of PositiveSum or O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of PositiveSum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (2:37)
My guest this week is Trae Stephens. Trae is a partner at Founders Fund and co-founder and executive chairman of Anduril. Trae's philosophy can be boiled down to finding good quests, which has led him to investing in businesses that work closely with the government on societally important issues. Clearly, that extends to co-founding Anduril and I would highly recommend listening to my business breakdowns episode on Anduril if you haven't already.
In this conversation, we discussed the importance of lobbyists, why the high-tech defense firms of the past became stale, and how he hunts for disagreeableness in founders. Please enjoy my conversation with Trae Stephens.
So Trae, I've heard you say in a couple spots that most high-margin businesses, I think you were talking specifically about high-margin software businesses, but let's just say high-margin businesses tend to have either no positive impact on society or sometimes even negative impact on society. Why do you say that? What's behind that belief?

**Trae Stephens** (3:34)
There are probably some high-margin software businesses that are really good for humanity, but I think the high-level point here is that a lot of these are advertising. A lot of them are pulling at consumers' attention. A lot of them are really wonky dev tools or something like that for specific enterprise environments. I think the reason that I would articulate that those are maybe bad for society is because they draw engineers and the tech community away from things that have more importance. It's not that the thing itself is necessarily bad. It's that it's a distraction for the things that we should maybe be spending more time working on, which in many cases are much lower margin. They involve critical national resources. They involve different forms of hardware. And so I think it changes the curve and that makes them harder to start, harder to achieve these crazy network effects, but it doesn't make them any less important.

**Patrick O'Shaughnessy** (4:28)
As you think about the things that are, I guess I'll call them bottlenecks to human progress, however you want to define that. If you had to think about it like Thanos or something like you could snap something into or out of existence, what would you snap into an out of existence that you think could most positively impact human progress?