Riskgaming

How Applied Intuition used the Valley’s hardest lessons to upgrade automotive with autonomy

Description

⁠Qasar Younis⁠ and ⁠Peter Ludwig⁠ built ⁠Applied Intuition⁠ differently from most other startups. At a time of profligate spending at the peak of the tech bubble, they kept expenses low — and the company cash-flow positive for several years now. When every other company was moving toward remote work or a hybrid setup, they doubled down on the in-person, five-days-per-week office (while continuing a no-shoes philosophy). And when it comes to culture, they don’t just post their corporate values on a wall, but encode them right into the very software that runs the company.

The results? Applied reached a new milestone valuation earlier this year of $6 billion as well as announced a strategic partnership with automaker Porsche. It’s a moment of success years and even decades in the making, with both Qasar and Peter growing up amidst the milieu of America’s auto capital Detroit. Yet, it wasn’t just friends and family working in the auto industry that led them to invent the future of the car, but also a willingness to learn from Silicon Valley’s most thoughtful startup growth practices.

Alongside host ⁠Danny Crichton⁠ and ⁠Lux⁠ general partner ⁠Bilal Zuberi⁠, we weave a conversation about automotive and autonomy while we discuss the key decisions that founders must make when building a startup. We talk about the pressure of capitalism on company execution, using software to manage a growing organization, why Google exported so much talent in the early 2010s, how to protect engineering productivity with a customer-centric culture, how to construct a useful board of directors, and finally, why markets just “whomp” any other factor of success for entrepreneurs.

Transcript

This is a human-generated transcript, however, it has not been verified for accuracy.

Danny Crichton:
Well, let's get started. So before we get into Applied Intuition, all the stuff that you're building and everything, I just want to point out, Peter, you and I have known each other for an extremely long period of time and in the strange bedfellows that is Silicon Valley, you and I met the summer of 2011 at Google in the APM internship program. I was on the Google Plus launch team, a very ill-fated product.

Qasar Younis:
Condolences. Not many people admit they were on the Google Plus. You literally go to LinkedIn's of people who were core and they just say like, "Social products. Connecting people." It's gone.

Danny Crichton:
But, Peter, what product were you on?

Peter Ludwig:
Oh, I worked on Android, actually. I worked on Android Open Accessory, which is I think long forgotten, but it lives on as the underlying protocol for Android Auto. But no, good times. Danny, great to see you again. I think we have a photo on a roller coaster from about 12 years ago.

Danny Crichton:
Yeah. On the classic Google Disneyland trip.

Qasar Younis:
That should be the image for the podcast.

Danny Crichton:
And you've had, I wouldn't even say a roller coaster of a ride because you were in Android Auto and I think you eventually linked up with... Qasar you were there at Google and I don't know the origin story of how you two met each other, but...

Qasar Younis:
We actually worked together on Maps before Android. And so I was Peter's old boss. That's basically the...

Bilal Zuberi:
And a new boss.

Qasar Younis:
We're peers. We're peers.

Bilal Zuberi:
Which one of you decided that we should wear slippers in the office?

Qasar Younis:
That was me. That was me. That was from Japan.

Peter Ludwig:
But no, Qasar had an interesting recruiting method on his team back in those days where this was around like 2012. Correct me if I'm wrong, but you did not want anyone on your team who did not have startup ambitions.

Qasar Younis:
Yes. These are the lost stories of Silicon Valley, but I had had a dozen PMs on my team. One of my interview questions, the last question was like, "Hey, so after this job, what do you want to do?" And if they didn't say startup, I just wouldn't bring them because Google use a whole endless people applying for jobs. And so we ended up having this, whatever, 10 dozen PMs who were rabidly into startups because all of them were like, "This is just a primer." Google has this thing called Googlegeist. I don't know if you guys remember, this is the internal survey.
One of the questions on Googlegeist for employees is how likely are you to be here one year and three years, five years, et cetera. My manager Jen reviewed my results and she goes, "Well, we had this weird situation where you're one of the only managers in all of Google Maps who had a hundred percent of people said that they're going to be here in a year from now. But also you are one of the only managers who also had 0% of your team said they're going to be here five years from now."
So are you running the team so hot that they just can't imagine doing this for a long time or what's the reason. I said, "No, no, no. Actually, that's because I'm recruiting these people who are really into startups." And then I remember her the gears and hatches, "Is that a good thing?" You're defending yourself with this equally bad situation, which is I'm recruiting people who are going to do a startup one day. I said, "Hey, listen. These are the people you want to hire because they're the ones who are thinking with their brain on. They're not the big failure mode."
I think you have the situation. We were talking on the drive up here from our office is you have these large LLM companies right now throwing out these big packages. And then you have Meta, open source llama 3 and you're competing against a giant thing who's open-sourcing everything. So you have all these competitors against them and the way that these competitors are attracting challenges, throwing out really large compensation packages.

Peter Ludwig:
I honestly don't even know if there's a parallel, like a company that's invested so much into the technology and then completely open sourced it.

Qasar Younis:
Yeah. As example we were talking about as imagine if Waymo had done this. Waymo does all this stuff and they're just open sourcing and all the car companies is a very different way of thinking about business in a fundamental way. I feel like this is Zuckerberg, and Facebook, and Meta's true coming out party where they're like, "Okay. You want to fight? We're going to fight." And they're doing things which are actually way more aggressive than they did. I think they did all this stuff previously very logically. This is almost like an illogical move. But anyways, these companies that are throwing out these giant packages to people, whether it's a Facebook or a Google, or an up and coming LLM, which is basically running like a fang.
People go on like they're just on autopilot. They're not really working. They're like, "I'm collecting this large paycheck and then I'm going to leave." It's like you as a manager, and how Peter and I met is like you want to actually filter those people out. So by just saying, "Hey, I want to find startup people, you're just filtering all those people out." You don't want to say somebody who's like, "Oh my goal is to be a product director." And that's actually the default to answer most of those people in those roles. But we created this.
I mean, Michael Del Basso [inaudible 00:04:58] was on that team who started at Tecton. There's a bunch of people on that team that have gone on to do great startup things. So for the FAME listeners, that's a hack.

Peter Ludwig:
Hey, one last point though on the open source topic because I think it's super interesting. I'm not aware of any other open source project compared to Llama where this much capital has gone into creating something that's open source. Most open source projects, there's a hundred companies that each have one or two engineers working on it and it gradually gets better. And then you have companies like Hortonworks or Cloudera that are investing in a project, but this is an order of magnitude.

Qasar Younis:
What do you think is the long-term impact?

Peter Ludwig:
I mean, I think it's super difficult for any company doing a very general purpose model to compete. And I think it also, this enables a bunch of specialized companies that will take this as a baseline and then adapt it for something.

Qasar Younis:
Applied.co/careers is what....

Bilal Zuberi:
But the auto industry, automotive and autonomous, will they use open source systems? Will large automotive OEMs be open to that, security-wise, privacy wise, all the things that come with it?

Qasar Younis:
I mean, this is one of those litmus test questions where it's like what's your real feeling on open source? I mean, the general view is I think open source can be more secure. In many ways it's the old Linux versus Windows kind of conversation and there are diehard Linux fans for obvious reasons. I don't think there's... By the way, there's automotive-grade Linux as an example. I don't think the industry automotive specifically is adverse to open source. I think what they do want is they want products that their consumers will buy. They don't care about technology for technology's sake.

Danny Crichton:
Well, let's talk about the next way because you're part of this. You're building up Applied Intuition. How did you get started in the automotive industry? Is this just what you're doing at Google and made sense to continue in the same industry or is this... You looked at a hundred different spaces and did the market map like a good old product manager at Google and you decided to put the arrow on the dot to get going?

Qasar Younis:
Yeah. What's that line from Bane from the Batman movies where he is like, "You merely inherited this industry. I was born in it." I mean, I literally came to the US on GM money. My uncle was an engineer at General Motors. We lived for all the Michigan people between 11 and 12 on Van Dyke, which is literally the residential neighborhood outside of General Motors headquarters. So it's like in Mountain View, if you lived in the first residential street outside the Googleplex. I mean, you walk by, I mean literally in the shadow of the GM Tech Center is where... And then Peter is a third generation automobile. Maybe you can give your background.

Peter Ludwig:
My grandfather spent his whole career at General Motors, my father also at GM and then Delphi. You learn a lot frankly just having a family that's working in the industry. And I think I didn't fully appreciate how much I knew about the industry until we started Applied and so many things are second nature.

Qasar Younis:
It's like anything. Imagine if you grew up in LA and your parents are both in the industry, you just know a lot about the industry. It just stuff you forget or your parents are in the venture capital business and you grew up in Silicon Valley. You're not wondering what's-

Peter Ludwig:
You're not seeing any of those things.

Qasar Younis:
Yeah.

Peter Ludwig:
Only a few. And we all know them.

Qasar Younis:
But the reality is automotive, it is its own universe and I think worth mentioning is the automotive industry is enormous. It is the dominant competitive, international and competitive market in the sense of we think a lot of times about defense contractors as being the core of American IP in some way and security.
For a lot of other countries, Germany and Japan specifically who don't have the similar, it's automotive. That is the next industry. Automotive is 3% of the global GDP. It's the largest part of the industrial sector when you look at these McKinsey charts. So it's a giant industry and I think we were extremely fortunate to grow up in it. And when I left... I went to GMI undergrad and I made a very dispassionate out of the industry. I thought I'd left it. I'd never thought I would go back.
So when I was working at Google and YC and doing startups, I had never thought I was going to come back to the car business. It is extremely fortunate that we timing aligned where the industry, the broader vehicle industry is changing. It's becoming a software business. Not only automotive, it's in defense, it's in commercial trucking, it's in construction, mining. All of these industries, the vehicle is becoming a software thing.
And software is becoming an AI thing. These kind of very tectonic shifts just play very fortunately into our backgrounds. For the wannabe founder at home who's figuring out the plan, ideally work on something that you just know a lot about. And when we started the company, I remember having this conversation said, "Surely, there's going to be other people who know about the vehicle business, vehicle manufacturing business in Silicon Valley." Tesla is right here. And then you come to realize actually very few people in the startup world really are true native in another industry and also true native in Silicon Valley.

Bilal Zuberi:
Yeah. Can I ask something here? Did something big happen in 2004 and onwards when Tesla got started. Just last two days, my partner here had never driven a Tesla before. She got to ride a cyber truck today. She got to drive the FSD yesterday.

Qasar Younis:
Hopefully, she wrote it post the recall because they're all recalled right now because of-

Peter Ludwig:
This is pre-recall. This truck may have needed a recall.

Qasar Younis:
You confirmed that the truck stopped, right? That was the thing.

Bilal Zuberi:
Yesterday she drove a Model 3 with the FSD enabled and it was like magic. I took video for her kids and she couldn't believe it that her hands are off and the car is taking all the way to the GPS location.

Qasar Younis:
She's legitimately impressed.

Bilal Zuberi:
How much Tesla had to do with the transformation that now every automotive company everywhere around the world is feeling that, "We got to go electric, we got to go autonomous, we got to have all these features. Consumer first is no longer about just having more cupholders and car chargers."

Qasar Younis:
Yeah. It's huge. I would say it's the driving reality in the ecosystem and yeah, Tesla started in 2004, but really Tesla in a way, it entered the industry's mainstream thinking when the Model S comes out in 2013-ish timeframe. I would say post 2017 is when the industry stopped pushing back that Tesla is just an anomaly and a factor that we don't need to really consider.
Now, there's zero CEO CTOs in the automotive industry that do not believe that the Tesla model is the future of the industry, which is generally speaking a software first product. I think you can even debate battery electric versus hydrogen versus... But no one is debating software. The software is going to be a huge thing. And then on the point of FSD 1238, I think is the most recent one. Super impressive. There's no other way to put it. Super impressive.

Bilal Zuberi:
And $99 a month apparently?

Qasar Younis:
Super impressive.

Peter Ludwig:
I think, Tesla, they made this stuff cool and that's driving market forces.

Qasar Younis:
And it exists. Everyone had these ideas before it exists. They execute it. The ideas are worth... It's an old VC saying. It's like you can value an idea by going out and saying, "I have a great startup idea. I'm going to sell it. Let's see, let's see who's going to buy it. No one will buy your startup idea. What they'll buy is stock in a company that's executing. And I think Tesla, is that a difference? I think the kind of unfortunate reality is Elon has created a bit of a show, the Elon show, and that's actually taken away from how actually great the company is, but it's an opportunity for every other OEM globally.

Bilal Zuberi:
You talk a lot about relentless execution at the company, I mean ever since the beginning that I've been a part of the company. Every time I've met your team that's like they're hammered into their head. Is that not universally true in Silicon Valley?

Qasar Younis:
Absolutely. There's so many companies you go to, but let me give you, let's say the shadows of lack of execution. A shadow would be you meet teams, they're working on things that they think will be revolutionary, but they have no customer in the loop. They have no user in the loop. They have no consumer in the loop, whatever the product might be. So they're truly acting like a research lab. You'll hear actually founders... In the last 24 hours, I heard a founder who says like, "I pride myself in my research abilities."
And that's like saying research is the polar opposite of what we're in the business of doing. We're in the business of application. That's a business we are in Silicon Valley. The truth is research is best done at an academic institution because you don't have the capitalist constraint on you, which is I need to monetize these employees and their understanding knowledge. Absolutely. And the other indicators is company's been working for years and they haven't shipped anything. Super scary.
And the company will say that they're execution oriented. But I did a Stanford talk earlier this week and the joke I always make is we're all trying to make businesses and just everybody is on the same page of businesses. Revenue minus expenses equals profits, which means all three of those things have to be considered as you are building a product. What is the product? How much is it going to cost and what's going to be the net return? Where the conflation or where the mix happens is the stuff... People see Meta.
They're like, "Oh, Meta is doing this open source stuff. We should too." It's like you missed the super important part, which is you first have to build a

Bilal Zuberi:
$700 million business.

Qasar Younis:
$7 billion business that prints out money to a degree that you can literally give 10 $billion away as a nice gesture to the universe. And so I don't know, what do you think? What's your view on execution versus or why are we so maniacally execution oriented?

Peter Ludwig:
I mean, we're just in a business where there's real production deadlines and so you just can't mess around for very long. When a factory is going to be producing a vehicle and that date is set well in advance, all of those things need to line up on time for that to actually happen.

Qasar Younis:
3,000 employees. It's going to start on this date. That cost is going to be there. That's a $5 billion factor, $7 billion factor. That's decided four years in advance.

Peter Ludwig:
It cannot wait. There is no excuse. It's like you make it or you're fired. That's pretty much what works.

Qasar Younis:
I'm in the fangs who would you consider to be the execution machine? It's Apple, right? And why is that? It's a consumer electronics product that has to hit every year. And so the company is disciplined through the market. Amazon in different ways, true execution oriented companies.

Bilal Zuberi:
So both of you and in fact Danny also were at Google. As I was coming up building my own company and thinking about it, Google seemed invincible. It was just unbreakable. They could enter every sector that they wanted to.

Qasar Younis:
Apex predator.

Bilal Zuberi:
It was building everything from our email systems to our knowledge management systems, to our entertainment systems like YouTube, the cars.

Qasar Younis:
In the era of 2010, two people forget now is if you go back to 2010, Facebook is like a thousand employees. The iPhone is getting its legs under it and the MacBook Air has been announced, but it's not Apple today. Amazon is a shadow. AWS had just started. It's a shadow of the company. Today, Microsoft is run by Steve Ballmer. Google is not just better. It is... And NVIDIA was like starving off bankruptcy. I mean, Google is head and shoulders above everybody.
So it used to be the dominant company and I think we really forget how dominant it was in that era. Capitalism happened. This is the reality. The reason startups will always exist is there's some law physics, which is once you get to a certain size, not many other companies and organizations have dealt with that size. So let's say for example, the DOD deals with that size, but the DOD doesn't have competitors, Google does.
And so you become a 200,000 employee company and people start picking off parts of the empire. They start picking off individual products and you're so big, you just actually don't know how to manage that. And I think the mistake that Google made, I think a bunch of other companies made is there wasn't a lot of focus on efficiency. And so it's like the answer for every question that Google was more people.
Product didn't launch, didn't go well. More people. Wait, what? Why would more people help? Like, "Oh, we could have done this and we could have done that. We were just constrained." It's like there's 2,000 people on this launch. Maybe the product was actually the wrong product for the market and that type of reflection doesn't happen. Then a small company, you get disciplined. You do a bad product launch, the company might die.
And so you're being hyper-focused, but the small company eventually becomes a big company. It's like the old HBO Silicon Valley show. Our goal is to become the thing we hate, which is this giant company. So I think there's law physics. And again, the way capitalism works quite effectively is and the way startups and the venture ecosystem has shown over multiple generations... And I mean there was the HP and the IBMs. IBMs dominated Silicon Valley way more than even Microsoft and Google did.
It really was everything in the business. And so they went to the side. And Microsoft and as the head of resurgent, Microsoft went to the side and now Google is... I think there's a few companies that get to that level and when you get to that level, you don't know how to manage and sustain that size. And so you kind of collapse on your own weight and any misstep allows new players to come in.

Danny Crichton:
Well, you don't want to turn into what you hate, but you have grown quite a lot. So I'm curious, I mean, this is your second company for Qasar. And Peter, you're first. First of all, second time going through the process. How did you build differently? And second, as you've scaled up, I mean you started as a very small company and now a very substantial successful one. Still working hard, still moving forward, but a much bigger company. How do you avoid that big company feel when you're getting up to a hundreds going on to thousands of employees?

Qasar Younis:
I said this at the Stanford talk as well earlier this week, which is either these videos age really well or these podcasts age really well, they age really poorly. We continue to grow. People are like, "Oh man, those guys." That was only when there were only 6 billion. Or they're like, "Can you believe that company used to be worth 6 billion?"
I mean, that could be a multi-hour conversation. I'm interested to hear Peter's opinion here, but I think the number one risk the company has right now is losing its culture, for lack of better word. And culture just to be very clear what the definition of culture is in this context is it's just how people behave with each other within the organization. So we disagree on something. How do we resolve it? We are entering a new market. How do we resolve it? We have to price something. How do we resolve it? We have a customer escalation. How do we resolve it?
We have a person who wants to join the company, but the compass is too high. How do we resolve it? All of these things, they're done a certain way when you're 10 people and all those questions still get asked when you're 500 people, you're a thousand people. And now maybe the founders are not in the room and the leadership is not in the room and it's people who just joined six months ago.
And they have to make the same decision and they don't have the experience. There's a bunch of things we've done. The heart of it is we actually have internal software that we've built, which I think in the long arc of the company will be one of our true strategic advantages. It's software that helps us run the company, it helps us run everything from performance to customers to anything you can think of. We ultimately put into software.
We do training. We compensate against our values. It's like how does a team continue to be successful after they win a couple of championships? You have to do all the stuff you're doing before and you have to account for the fact that you've already won the championships.
We haven't won championships, but we've been successful as a cashflow positive business for a number of years. So we have to just keep an eye on all of that. How do we get there? And then also with reality of we need to continue to grow. I don't know. It's a very abstract answer.

Peter Ludwig:
I would just add we do a bunch of things in the company that as best as possible really tries to keep the focus on our customers above everything else going on. It's naturalized, the organization grows. I think people have a tendency to think more about the internals of the company rather than the customers. And so through a bunch of different, I would say things that we've done in practical sense, an example is we do international rotations.
If you are an engineer in Mountain View, there's always an open offer. You can rotate to one of our foreign offices. And naturally when you do that, you get exposed very deeply to the customers and the problems that we're facing in that region.

Qasar Younis:
Beyond it being fun to live in Tokyo or Munich or wherever.

Peter Ludwig:
And then you come back after a few months and naturally what are you going to talk about, right? You're going to talk about the customers in that region and it's also codified in the values, just how important it's for everyone to be customer.

Qasar Younis:
Our first value is speed above all things. Our second value is never disappoint the customer. So I think the explicit recognition of these values, talking about these values on a daily basis, we talk about culture and values on a daily basis. The compensation against those values, recruitment against those values that brings everyone... I think it recalibrates and re-centers the company always on these things that are made us successful. And we wrote the values when the company was like 10 people and we had gotten something like 10 million of business and we were like, "Okay, something correct is happening here. Let's write why we believe we've been successful so far." And those turned into the values.
We literally wrote, this is why we're winning and now we just need to keep an eye on these things and even when we get much larger, rather than starting with values before you're successful or having values when you're 500 people and the values are just generic like do good.

Bilal Zuberi:
So let me press on that a little bit to understand that better. Two things come to mind. One is I want to hear a little bit more about the software because you would like Y Combinator. All investors and incubators have obviously, some Salesforce or some CRM, but what Y Combinator built and the power of what they built for all its customers, which are all the startups, effectively, it was very powerful. So maybe there was some learning there and so on. I want to hear about that and how you use that to even train and upgrade your managers and bring them up to speed and how they've grown internally.
Also, you're not scared to do unique things that are unique to your culture versus what may have been accepted as the common wisdom, right? Through COVID you chose when legally possible to be an in-person office when we were all writing op-eds on the world has changed and we are all going to be all distributed all the time and people who are funding companies to build distributed operation software. And you said, "No, in the office." Everybody.

Qasar Younis:
First principles on that topic, and I'll go back to the software question. First principle is thinking. We had probably three, four meetings, not more, not less with the SF group, the new grads, the OGs, the people who started the first 25. I wrote the GitLab check at YC and so I talked to Sid this week. I mean, no, that's the first company that went public as a fully remote company. So I don't have a, let's say dogmatic view on in-person or remote.
So when we had these conversations, we first like everybody, we said, "Oh let's do three days in, two days out." And just going through all the permutations of when customers are coming on site, when we have to do recruiting, when we have this product release conversation, we build extremely complex software. And it's no disrespect to HR workflow or marketing automation or something like that, but this is software that generally hasn't been built in the way that we're building it.
And so you need people in a room and you need a whiteboard and you have these open-ended conversations that are both technical decisions and strategic decisions. All that is done better in person. We also, again, from first principles, we're measuring the company all the time and we saw growth and happiness, which is a metric we measure and the satisfaction of employees. And the productivity employees all falling with COVID.
I don't know it's for other companies but us statistically significant. People were less happy and there were less output. You look at those inputs and it's like the conclusion is we're going to do five days in office. I said really honest and earnestly say we went into that conversation eyes open. We could have walked out of that conversation being a fully remote company if that was the best thing for the company.
I say this at all hands all the time, you can't say culture without cult. And our cult is a cult of finding the truth and how do you find truth? Truth is the valley lies to you. Your ego lies to you. Everything is constantly distorting reality. It's very important for you to look at those first principles and make decisions on those things. For example, you have founders who love to go on podcasts. A very specific example here. We historically have not. We just haven't.
The question is why do people like to go? And they'll say, "Well, it's to promote the company. It's recruiting." It's ego. A lot of times it's founders who just want to... They see Sam Altman. Sam and I worked together a lot in the hill, so Sam is doing this so I should do this because that's what made OpenAI successful. No, no, that's not what made OpenAI successful. The product made OpenAI successful.
And so it's like we're always going back to that first principles thinking, "Look, what is the underlying reason? Even if it's ego and it's like it's not going to pay dividends towards our customers, then we're not going to do it." Another mistake I think that happens in the Bay Area a lot is just lack of focus. When you talk about execution, trying to do all these different things, it's like the only thing that matters.
Even I when have to say, "Do you talk about all hands? We do a weekly all hands." Hundreds of people getting together is an expensive thing. It's like a production and I say, "This is pretend to work. Only real work is measured by what's going to impact a customer." So a one-on-one catch up with a VC, that's pretend to work. That's not real work. The only real work is I'm writing software or I'm selling it to the customer and the customer is getting advantage... Everything else is just like a decoration.
A lot of times, I think, founders, VCs, executives, leadership, they don't realize that they're just focused on the decoration rather than the actual content. In terms of the software, absolutely. I think Gary Tan was the first person who wrote the Bookface from when his first stint as an employee.

Peter Ludwig:
Actually, I'll bet there's a bunch of folks listening who don't know what the software is.

Qasar Younis:
Oh yeah. So Y Combinator, accelerator, Garry Tan, a person who is the CEO there now as context. And there's this software called Bookface, which is a joke of Facebook and it was like an internal directory originally for founders like who is a founder who's funded?

Peter Ludwig:
The internal software for Y Combinator.

Qasar Younis:
Yeah, for the founders who come through YC. But it's a founder-facing thing. It's not a external-facing. To be very direct, our internal software called Anaheim, this is where first, the street of the house where we started the company at, Anaheim wasn't. It wasn't emulating. Bookface is more for founders. This is just company operations. We're a product company. It's very different from YC, but I think it's like... I was originally a mech E and started... My career was in electrical electronics, not software.
And so then I have, I say often, the zealousness of a convert to software. I look at software as the solution for every single thing. And so when the scaling questions start, if you're in YC or you're around startups, you're at Google, you know that if you do this right, you're going to have these problems in the future. And these problems can be defined as the human behaviors which underwhelm that core customer-serving goal.
What Peter was saying is exactly true. As the Roman Empire grows, you're not on the front lines of the empire and you're just in Turin or you're in Rome, you forget that this is an empire. There are things happening in the front edge, there's violence happening as the Roman Empire expands its territory. The same thing happens in companies. Now, you have folks working on products and revenue just keeps growing. Profits come in and they forget that we're actually in a competitive environment. And it is, for the lack of better word, a violent environment.
It's a environment where sometimes our customers... We have a zero-sum outcome. They're going to pick us, we're going to pick somebody else. We got to win that deal. We can't lose focus. So if you're naval gazing and you're looking at the remote in-person debate... There's companies that spend all this time doing this. You have to have that conversation and then you have to move forward. And the companies like you can even look at the founders calendars and you can see what of this is, how many customer meetings are on this week and how many are recruiting because that's what you can do that's levered.
Everything else is either can be done by other folks or shouldn't be done. So that's kind of the way that we took the software to keep us focused on the stuff that's important and we just measure, measure it.

Peter Ludwig:
Yeah. I would say as a software company, vast majority of our expense is our people. And so that means the efficiency with which people are working is everything in the business.

Qasar Younis:
And Beyond scale. That's truly the first order. It was like our biggest cost is our people. Let's really think about that. And that's not in a pejorative sense. It's just the reality. And so it's like how do we make them more efficient? How do we track them? How do they know that they're getting better at what they're doing? How are they getting feedback? All of those things. I think we've done it well enough where we have people who we retain because they're getting growth out of this internal system that we've built.

Peter Ludwig:
So specifically a software that helps us run the company and it helps us with everything from customer success and tracking that and understanding things that we need to improve to even simple stuff like the org chart and knowing where people sit. That's all sort of in this internal software that we've built. It really is the entire company in a software tool.

Bilal Zuberi:
Yeah. I've been on dozens of boards and it is really impressive because every company, every CEO you talk to will tell you that they manage people and they managed productivity. But doing so in the way you've done it in software where it's very quantitative and everybody internal to the organization can see where they are, where they're progressing, how they're going, and it allows people to move from individual contributors to becoming managers. it's no surprise that some of your top management team are people who go up.

Qasar Younis:
80% of our managers are [inaudible 00:30:56]

Bilal Zuberi:
You don't go out and hire C level executives like most people in your size organization would be doing. "Oh, we need a CFO that need to have been a public company CFO." You have somebody who joined you earlier who are into that role.

Qasar Younis:
If you can have those conversations with them and say, "Hey, this is where you're missing and they have the raw cognitive ability and ambition and the work ethic in order to fill those gaps, you'll fill them." By the way, sometimes people when they hear this and from a floodgate, she has a class at Stanford, maybe, I don't know, a year ago or something. I did a talk there.
One of the students summarized the company as from my talk as work hard and shut up. It's not that. It's not that. And to be very clear, even productivity as an example, me personally, I worked at GM and Bosch and Sears and General Motors over 10 years as an employee in companies that have over a hundred thousand employees.
There are founders in the Bay Area that have never been an employee. I empathize with employees who have shitty management. And so we also don't want to become that overbearing leadership team which looks at folks as these interchangeable cogs. Our business is more obvious where we work on really significant technology. So it's harder to say. More obvious where they're not interchangeable cogs, but even if the feeling shouldn't exist.
Exacting efficiency is not the entire goal. It is creating an environment where you can perform the best, which means different things in different roles at different leadership levels. Overall you do get more efficiency.

Peter Ludwig:
I'll also add one of my favorite engineering metrics, which is unusual, but I think it's actually really interesting is you can ask engineers how productive do they feel? So it's quantitative but not quantitative, right? It's like it's a mixture of quantitative and qualitative because you can look at across the company, if you imagine a scale of one to 10, how productive do you feel?
Of course, you'll get a variety of answers there. But the reality is when you're hiring very smart and ambitious people, they want to be productive. They want to feel productive. And if there's something about your system or your company the way that you have it set up that's not allowing people to do their best work, you can actually reveal it through that kind of survey. And we've used that kind of survey pretty effectively.

Qasar Younis:
There was a dinner in SF and one of our team members was there and there was a bunch of people introducing themselves and he said, "I work at Applied Intuition." We're a company that, funny enough is not really well known." OpenAI is well known and let's say Scale.com is well known, but we're not a small company either. Generally speaking, I think [inaudible 00:33:26] we're not an SF crowd. Partly me and Peter are not on social media.

Danny Crichton:
You don't go on podcasts.

Qasar Younis:
I mean, this is a side rant before I talk about this dinner is if you only spend an hour a week on Twitter, one hour a week, that's nothing. People spend an hour a day. That's a full working week at the end of the year. That's 50 hours that you could have put towards your customer, you could have put towards staring at the wall, relaxing, enjoying with your kids, whatever it might be. So if the easiest productivity hack for a person which then relates to a company, because by the way the company emulates the leadership is get off Twitter.
It'll give you at least a week. So anyways, but to this dinner, one of our team members there and introduce me. He says, "I'm an engineering manager at Applied Intuition." And somebody says, "Oh, isn't that like the Bay Area Bridgewater?" And he came back. So our staff meetings, our senior staff meetings, we record them and we share them with all the managers in the company, which is also... We do all these operational things.
And again, the first principles is when we originally thought about recording the top whatever, 12 people in the company having very open conversations about a customer, about productivity, about individual managers, about individual people, individual products, everyone tenses up. And my point is, "You should be able to say in this room what you are willing to say in front of those people." We shouldn't have that. That's politics. Politics is, I tell you something slightly different. I tell you something slightly different and it's just optimized for everybody else.
And the staff meeting which is recorded. The question, "Hey, this is bridge barrier or Bridgewater comment. Is this a pejorative? Is it positive negative thing?" And I said, "Bridgewater is known as a third of the people on board get fired." Nobody looks at Bridgewater as an easy fun place and we're in a competitive ecosystem.
We're recruiting people who have lots of options. But the counter is like Bridgewater is also one of the most successful hedge funds in the history of mankind. So it's like they do what they do extremely well. There's many hedge funds. There's very few Ray Dalio, right? And so in that situation, they've done something that he can talk about over a 30, 40-year period is what made them effective.
I think we think it that way. It's all first principles. So maybe it's positive, negative, but I think we have a bit of that of now unlike Bridgewater where the outcome is a decision, an investment decision. Our outcome is products. So it's not optimizing how well a meeting is and do you have good opinions in a meeting? That's what Bridgewater does. For us, it's like are we making the right products or pricing them correctly and are they actually stable and effectively being deployed and they're actually making an impact at the customer?
One of the things that we talk about, again, at the all hands is it's not enough to win the contract. That's the lagging indicator is a customer doesn't get value out of the products. We will see that come back. And so very much it's like we're always asking are they actually getting value? Are they actually getting value? It's not a quantitative thing, it's a qualitative thing. Are they actually getting value? They keep getting value, then everything will work out. If they don't, no matter how many what your revenue numbers are, that'll catch up.

Bilal Zuberi:
Interesting. So I just want to point out Danny that in that conversation we just had, you and I as VCs were called decoration. We may not have faces made for TV, hence we're on a podcast, but we were called decoration.

Danny Crichton:
I'll say in the journalism world, it is generally a rule that you should spend about four hours a day on social media in order to be competitive in the industry. So 20 hours a week, there's a couple work [inaudible 00:36:52]

Bilal Zuberi:
It doesn't apply to VCs.

Qasar Younis:
Being a reformed VC, I've left the institution and I've gotten back into society as a valuable member. The fundamental truth is half the job, at least half the job is marketing. At least you're selling money and anytime you're selling money, you have to be known. One of the reasons I think... I mean, I like YC, but I think the reason I left is that doesn't satisfy me. Of all the VCs, it's great because you don't have to source. The most annoying thing about being an investor is you have to go in and source and win deals. And YC, they just come to you. And still it was like, I like building stuff.
VCs, as you know, is more of a lone wolf sport. We're building a company building products as a team sport. It's not just what my opinion is, it depends on what your skills are and what industry you're in, but generally speaking, social media is bad for you.

Bilal Zuberi:
I'll point that for the people listening who are building companies, and again one of those things that Silicon Valley has certain things that we take for granted but may not be true. You have present company excluded some amazing VCs on your board. The board is a formal structure in the organization. They're not your employees, but their income is very directly tied to successes of companies like you.
What do you think about VCs that have invested in you, the value they bring to you? How can they add value to company? You've gone through when it was two guys, and I don't think they were the dog, but they were certainly slippers to now where you large company, what role can they play to be positive contributors versus BS'ing pretending to know what they're talking about when they haven't had a job or if they haven't run a company before or at worst giving bad advice.

Qasar Younis:
I mean, I'm not saying this just because it's a Lux podcast, but I think you guys have been phenomenal investors. I mean-

Peter Ludwig:
Yeah, I second that. absolutely.

Qasar Younis:
And so let's just use that as a use case, but we said this on the drive over, I feel that we can reach out to you about any topic, good or bad. There isn't a formality. The relationship transcends an economic transaction. Counter of that is true for the bad relationship. Bad relationship is an economic relationship. It is one where you have a formality. It's one where you're not working on things together.
I think both parts of any relationship like a VC founder relationship is you need strong awareness on both sides. Our series B lead was Hemant who you work worked with at GC. Hemant just said, "I'm in the healthcare business. I don't know the car business. I will help you where I can help you." And he's done customer reference calls for us. He's done sold candidates for us. He's put us in platforms and stages where we need to [inaudible 00:39:46] So he's aware that he's not going to tell us what product development automotive is. Whereas Shaheen at Lux who worked at GM is going to have a more strong view on that and that's completely okay.
And for the folks who are listening, our board is Marc Andreessen. It's Bilal here and then it's Hemant. And then Mike Maples is our seed investor from the beginning. These folks have been in all of our board meetings in the five to seven years they've been with the company and they just have a lot of context. We know the strengths and weaknesses of each of those people relative to our business. So I think you have an awareness of what you need, awareness of what they can provide, and then there are just also just the brass tacks of being a good VC and being a good founder. I don't know. What do you think has work? What do you think has not worked?

Peter Ludwig:
Yeah, I would just add I think one of the biggest values that we get from our major investors who are in the board, we can describe any tricky situation that we have and they can immediately give us a set of examples of other organizations who've navigated similar things and what they did and then we can pattern match how similar or not are those things to what we're dealing with. I can think of many cases in the history of the company where that really saved us, I would say a lot of angst and gave us more confidence to make big decisions.

Qasar Younis:
So if you're picking your founder, you're picking investor, you want to pick an experienced investor, that it's just super obvious, but somehow you see founders who have great options for them. They pick an associate who let's just say is not Bilal, Hemant, Marc Andreessen, and or Mike Maples. I mean you take Bloodgate as an example. There are many seed funds and we picked Mike and Anne for a very specific reason. They've been in the business. We're going to give the same level of dilution, but this guy comes with 15 years experience. So that's a positive.
Then we also recognize Mike and Marc have invested together. Marc and Hemant have invested together. Bilal and Hemant. Everyone knows each other. How are they going to play together? How are they going to work well together? It's an alloy. It's all these different people coming together.
So if you're in the fortunate ability to pick the people, you want to also think about how they're going to interact with each other. I think we've had a phenomenal board. It's not a monotone board. It's a very diverse board that has very strong opinions and very different directions. I think between you Marc and Hemant, you guys have occupied every space of every debate. So it's not like the board just comes and says the same thing, three people saying yes, yes, yes. Also, to our credit, the company has done well. So have that conversation.

Danny Crichton:
Well, I know we're almost on time. Just set us in 2024. It's April going into May. We had this correction over the last two years. A lot of things have changed in the startup ecosystem. AI has really become the theme versus crypto versus FinTech and a lot of other categories. If you're a founder looking into the market today, we talked a lot about company building. What are you building today? If you were just getting started, we were just talking about Llama a little bit, 70 billion, huge amounts of money going into this.
It seems like a big pocketed, deep pocketed kind of game. What do you do if you are similar to you two coming out of Google, coming out of one of these companies, wanting to go build? What does the world look like for an entrepreneur either trying to spin out just building their first company?

Qasar Younis:
There's this class that I was originally an engineer, but I did an MBA at Harvard and at HBS there's this class called the History of Capitalism. Fantastic class run by this professor. I don't know if it's still out there, but in the many years ago when I went there run by Richard Tedlow, he wrote this book called Titans. And the history of capitalism is different from every other class in HBS because the cases are not on companies, they're just on epics, eras of American history. So it's like a case on steel, a case on rail, a case on retail, a case on all the big industries emerge and whatever the 13th or 15th case in the class is Silicon Valley.
Professor Tedlow said, this is 2008. He said, "Frank reality is if you're a mediocre in Silicon Valley, you're going to be better off than being exceptional at steel. That's just a reality situation. And you would think the smart, highly attentive Harvard Business School MBAs would all run to Silicon Valley. That didn't happen. I certainly took that note. I'd still remember it many years later. There's that microcosm exists in markets within the Bay Area. So you can go into social media. You can do that.
But social media is not the growing industry right now. It's got existing players. It's extremely the blue ocean kind of analogy or a framework. It's extremely competitive with large, dominant players will copy everything that you come up with and do very, very quickly. They don't care about startups as proven by Instagram taking Snapchat features. They don't care about that.
So I think as a founder you have to simultaneously come up with the... The first thing as a market is after your co-founders what markets are growing and don't have established dominant players. There's a very clear answer there. That's gender AI. Right now that is that answer. It's cliche, but it's not cliche to everywhere else. What becomes cliche in Silicon Valley is also interesting. It's like if you're in any sub sector of, you're really into mechanical keyboards, if you're really into jazz bars in Tokyo, whatever thing you're into, once you meet people who are really into that thing, they'll almost make these pejorative comments about like, "Oh, that's only a WASDE keyboard and how pedestrian."
And it's like the people in Silicon Valley will say that. They're like, "Oh, it's gen AI." That's so cliche. Well, the reality is if you zoom out, most people don't use mechanical keyboards. Most people are not going to jazz bars in Tokyo. Most people don't know. The population on the planet. There's a chunk of the planet doesn't even have phones. Gen AI is not on the mind of even a majority of engineers in America because the majority of engineers, by the way in America are not software engineers.
So I think it's very obviously that's the area and I think it will be the area for a while. And then lessons for companies like ours in a growth stage, we start a synthetic data sets team about four years ago at this point. So it's not like... We've been in this space for a bit. Obviously, the technical breakthroughs are forcing us to think about everything. How should we change our tools? Should we change our technical reports anything? Should we generate data in a different way as an example? But that would be my view is pick a growing market and be mediocre in it. That's much easier than find a market that's established and you have to just claw your way into even an existence and watch the next big company will be a social media company. Peter, what's your view?

Peter Ludwig:
Spin out of TikTok. I totally agree with that. I think it's also important for the aspiring entrepreneurs to view gen AI as a tool, right? It itself is not a business opportunity, but can do so many things with it. I think we're still discovering what all of the possible use cases are. The impacts it's having, let's say on Adobe and their offerings and creative aspects I think are really, really interesting. But I'm sure if you think hard about the applications of the tool to every industry, you can come up with a huge list of opportunities.

Qasar Younis:
Yeah, it takes two to four years after the iPhone comes out, before you have Instagram, WhatsApp, Uber Snapchat. That slew of apps that came out, which were... How do you even think about Instagram before a mobile? Even on the first iPhone, you don't have front-facing camera. The market is in such an embryonic phase. You actually don't know where it's going to ossify and where there's going to be big platforms.
So that volatility equals opportunity. So you don't want to go in the dated spaces, you want to go in volatile spaces, and that's it. As much as the jokes I make about VCs being decorative, just to be very clear, you can't build a company today that's competitive, that's not venture backed.

Peter Ludwig:
It just get steamrolled.

Qasar Younis:
You get steamrolled. It's like the performance enhancement drug of capitalism. And so you [inaudible 00:47:45] You can be a natural weightlifter, but you're not going to look like Arnie in '78, Mr. Olympia. So anyways, the point being is, and the thing that VCs do really well is they think about themes. They think about fundamental tectonic shifts because they, I think very emotionally understand that HBS point that I made, which is actually funding an okay team in a big booming market is way better than funding.
Talk about painful lessons I learned at YC, one of the painful lessons that I learned is seeing great founders not be successful. They're doing everything right. Wake up early. They know their technical domain. They treat their employees well. They're responsible fiduciaries of the capital that they're handed step and they fly the plane right inside the mountain. They're doing everything and the company doesn't go anywhere.
It's the market. The market just whomps, whomps people. And so you as a budding entrepreneur, you have to really think I could do everything right and actually fail. Why is that? The dominant version of that is actually the bad market?

Bilal Zuberi:
Can I ask one thing there? We often say at Lux that we like founders who are mission-driven versus mercenaries. Mission-driven, but obviously driven to succeed and driven to win and build big companies. If you ask generally VCs, what are big sectors that you're seeing mission-driven founders in? You would hear things like artificial intelligence. You would hear things like defense tech and you would hear things like climate tech.
And in some ways Applied Intuition is a company that is involved in all of those above, right? You're enabling electric cars and you're enabling... Obviously, you work in defense sector as well and have big business there. That said, these are some of the more difficult industries to penetrate large entities that are not necessarily very tech driven. They need to be transformed as we all believe, but you can only do so much from the outside.
How do you think about that? What has been your catalyst for success in these spaces? You've gotten large OEMs to sign up. You've got major primes. Everybody shits on the primes in Silicon Valley and you went and worked with the primes.

Qasar Younis:
Yeah. We work with the old and the new primes. We work with the upcoming. They're our customers and the ones that have been established for 70, 80 years. The automotive side, the answer is very clear. We know the business. We sit across the table from a senior automotive leader and they're like, "You went to GMI and you took a car to production in 2002, the Cadillac SRX. Okay, great. You know the business. So I think that works well. In our business that really works. We're bridging Silicon Valley and Detroit and Detroit-like industries.
And then once you have momentum, then we then went to defense and went to construction and mining and the patterns start bridging. So for each company, there's just an infinite number of paths to success. So I think you as a founder, it goes back to finding the truth. What are you strong at? Where's the market at and the correct analysis there and then going into it.
Danny, to answer your question from before, did we have a methodical approach? We actually did have a very methodical... We say we know the car business, but after that, we had hundreds of pages of notes. We interviewed people. We had a very methodical approach of going into Applied. It was not a whim. We take the business incredibly seriously. I think that's like... You talk about what founders do wrong or maybe the... It's a big deal. It's not a joke. And I think a lot of times people take it as a project or if it works, that's cool. If it doesn't, it wasn't my money anyways. We don't treat it that way.
I think somehow that permeates through the culture of the company as well. But I think advice for complex, let's say customers that are resistant to change, you need to meet the customer when... A willing student is always better. And our willing students were taught as in our customers were taught by Tesla and they're taught by the changes in consumer electronics. If we underestimate the fact that every single buyer of software and enterprises has an iPhone or a Pixel or whatever in their pocket, and they're used to great software now.
That wasn't the case in 2002. See, that's why the SAP's of the world could dominate because the only time you interact with soft growers for a couple of hours a day in a procurement thing you had to do, and you're just like, "I got to call the SAP analyst and he's going to help me build this inventory order to get this part from Bosch... Stuttgart to Bosch, Farmington, Hills. But now it's like you do the same interface. You're like, "Why are we doing this? My phone is way more sophisticated and we don't pay millions of dollars a year for these.
Again, the broad themes is a lot of times people look at the application layer, all these sub things have been changing. So even you look at an iPhone going from an iPhone, whatever, 14, 15, what do all the YouTube reviewers say when the iPhone 15 comes up? It's just like iPhone 14. But if you look at the 15 versus three or four, huge progress have been made. So there's the glass has slightly gotten better. Power management has gotten better. Apps have gotten better.
Everything, it's gotten a little thinner. The buttons have gotten a little... Everything has gotten... That compounded, creates this giant innovation. So as a founder, you're almost looking at that French proverb, which is like the drop of water that overflows the vase. The market is filling up. How can you be that drop of water that overflows the vase? And you take the return. And super abstract. But if it was very easy, lots of people would be doing it. So if it was very easy, everyone would be a PhD in electrical engineering. It's actually difficult and that's why there's not many.

Danny Crichton:
So Qasar, Peter, Bilal, thank you so much for joining us today.

Qasar Younis:
Yeah, thanks for having us.

continue
listening