Palmer Luckey

Why Luckey turned down Facebook's first $1B offer

Facebook's first overture for Oculus was a $1 billion offer, which Luckey turned down believing the company would easily surpass that value. He later sold not for the headline price but because Facebook committed billions per year for a decade to make VR happen faster than venture capital could.

“first time we talked, I think basically we were offered $1 billion to sell. Uh, and we said, no, we're not interested. We think this company is easily going to surpass that value. We think it's not going to be a problem for us to make more money.”

The 100K Club: nobody at Oculus made over $100,000

When Luckey turned down the billion-dollar offer he was on a minimum-wage job, living in a 19-foot camper at age 19 with a few hundred dollars to his name. At Oculus they capped every salary, even the CEO's, at $100,000 and called it the '100K club.'

“We decided that nobody in the company was going to make over $100,000. We called it the 100K club. So we were paying the CEO $100,000. Uh, I was getting paid $100,000. And, uh, to me that, that actually felt incredible. I was like, wow, $100,000. This is absolutely crazy. I can, I can afford anything.”

Build wealth by building companies, not beating the market

Luckey says he kept his windfall mostly in Vanguard total index funds, citing John Bogle's low-fee, buy-the-whole-market philosophy. His view: don't try to outsmart the finance pros gaming markets all day; create wealth by building companies instead.

“I generally don't believe in trying to beat the market through market transactions. I mean, it's one thing to build, like, I think you build wealth by building companies. That's where you should be focusing your effort. Not trying to be smarter than all the finance guys who are sitting around and using every tool at their disposal to try and game the financial market.”

Sold a banner ad for 400 Bitcoin before any exchanges existed

Luckey was a Bitcoin OG on bitcointalk.org before exchanges existed, when coins could only be used in direct trades. He sold a one-week banner ad on his low-traffic game-console forum for 400 Bitcoin, and bought a Samsung Galaxy phone for 800 Bitcoin when each coin was worth well under $1.

“I actually sold a banner ad on my game console modification forum. It was a 1-week banner ad on this forum with almost no traffic, and I sold it for 400 Bitcoin. Uh, and then I ended up, uh, I ended up buying someone's, uh, Samsung, Samsung Galaxy Vibrant, which was the T-Mobile variant of the first Galaxy phone, uh, for 800 Bitcoin, I believe. Which at the time was, you know, well, well under $1 per Bitcoin.”

Know a little about a lot: cross-field arbitrage

Luckey's best ideas don't come from going deeper than everyone in one vertical, but from importing knowledge from unrelated fields and applying it where insiders never would. He makes it a priority to know a little about a lot so he can pull from one area to solve the biggest problems of another.

“Most of my best ideas have not come from that. They've been from knowing things in totally different fields that have nothing to do with the field, or at least people don't think they do. And then pulling ideas from those fields and applying them in a new way.”

Steal thisStop trying to out-specialize the experts in one field; learn enough across unrelated domains to import an outsider solution they'd never see.

Know a little about a lot: cross-field arbitrage

Luckey's best ideas don't come from going deeper than everyone in one vertical, but from importing knowledge from unrelated fields and applying it where insiders never would. He makes it a priority to know a little about a lot so he can pull from one area to solve the biggest problems of another.

“Most of my best ideas have not come from that. They've been from knowing things in totally different fields that have nothing to do with the field, or at least people don't think they do. And then pulling ideas from those fields and applying them in a new way.”

Steal thisStop trying to out-specialize the experts in one field; learn enough across unrelated domains to import an outsider solution they'd never see.

Bitcoin hits ~$100,000 then stabilizes

Luckey says his 2013 prediction was that Bitcoin would rise to about $100,000 and then stabilize, and as of this 2022 episode he's sticking with it. He doubts it has the utility to climb meaningfully higher as a store of value.

“my prediction in 2013 was that Bitcoin will go to about $100,000 and then stabilize. I'm sticking with it. I think, I think it'll get there. I'm not, I'm not sure that it in particular has the, has the appropriate utility to reach a higher store of value.”

Luckey's first Oculus hires were forum moderators, not Ivy grads

Luckey staffed early Oculus from volunteer moderators on his ModRetro game-console-modding forum, people whose multi-year published work proved their skills. His first hire was a moderator he told to skip college, then drove a minivan to pick up from his mom's house and brought to the condemned motel he lived in.

“a huge fraction of the people that I hired for Oculus in the early days were volunteer moderators on the ModRetro forums. Like people always, you know, they hire their network, right? They hire the people that they know that they can trust and that they know are competent. And that was my network when I was a teenager. It was other, it was other loser gamer teenagers on the internet.”

Steal thisRecruit from communities where people have a public, multi-year track record of building things for free; it's a stronger signal than any interview.

Hire builders by buying them any tool they want

Anduril offers to buy any employee any tool they want for personal projects, not just work projects. It's a deliberate filter: people who clock in and out aren't drawn to it, but people who create for the sake of creating treat it as a golden ticket.

“one of our benefits we have is that we will buy anyone in the company any tool they want for their personal projects as well as work projects. And that's the type of thing where people who don't have personal projects, who just, you know, they show up to their, to their wage machine and they clock in and they clock out. They're not attracted by that. But the types of people who want to create for the sake of creation, uh, those, to those people, that's a golden ticket.”

Steal thisOffer a perk only intrinsically-motivated builders would value (free tools for personal projects) so it self-selects the hires you want.

Oculus owes more to the iPhone than anything else

Palmer Luckey funded his early VR tinkering by buying broken iPhones, unlocking and repairing them, and reselling on eBay, making tens of thousands as a teenager. He argues Oculus literally would not exist without that side hustle bankrolling it.

“I mean, like honestly, Oculus owes more to the iPhone than anything else. I mean, like if the iPhone wouldn't have existed, there wouldn't have been broken iPhones for me to buy, unlock, repair, and sell on eBay. Like, cause I made tens of thousands of dollars. As a teenager on that, on that side hustle. Like if, if that had not happened, then Oculus probably wouldn't exist today.”

A nonprofit prison paid only if inmates stay out for 5 years

Luckey's unbuilt prison idea: a nonprofit private prison whose tax advantages undercut for-profit operators, and which gets paid by the government only after an inmate serves their term AND stays out of prison for five years. That flips the incentive from maximizing occupancy to minimizing recidivism.

“So what I wanted to do was go to the government and say, listen, I'll lock up your prisoners, uh, but you don't get to pay us upfront. In fact, you can't pay us upfront. You have to pay us after the person serves their term and then stays out of prison for 5 years. Then you're going to pay me. Uh, and the idea is that now all of a sudden I'm motivated and my whole organization is motivated to get people through as quickly as possible, release them as quickly as possible, and then have them stay out of prison and not return to crime.”

Steal thisRestructure payment to align with the outcome you actually want (low recidivism), not the proxy that perverts incentives (heads in beds).

Petroleum foods: zero-calorie burgers built from oil, not food

Luckey's unbuilt obesity idea: stop building fake food out of food and instead engineer it from inert, nontoxic long-chain hydrocarbons (oil), which materials engineers can shape into any texture. The result would taste and feel real but pass through the body with zero absorbable calories, like fiber.

“Let's leverage everything we know about making inert hydrocarbons that are nontoxic and use that to make fake food for people that tastes and feels like real food but has zero caloric value that cannot be absorbed by your body. It just goes right through you, just like fiber.”

Only 2 defense unicorns in 35 years, both from billionaires

Luckey says 80% of the US defense budget goes to a handful of cost-plus primes, and since the Cold War the government lost its ability to grow small defense firms into big ones. In 35 years only two defense unicorns emerged before Anduril, Palantir and SpaceX, both founded by billionaires.

“But in the last 35 years, there were only 2 unicorns before Anduril in the defense space. And 35 years not just being chosen arbitrarily, it's basically since the end of the Cold War. During the Cold War, we did turn small defense companies into, into major players. But since then it's Palantir, SpaceX, both founded by billionaires and then nobody else. That's it.”

Anduril won a $1B contract by spending its own money first

Anduril built its counter-drone hardware and software for years with its own money before any customer existed, then won a $1 billion SOCOM contract in an open shoot-off. Rivals funded by government money complained it wasn't fair; Luckey's reply: you can't take no risk and expect all the reward.

“we recently just won a billion-dollar contract with SOCOM, Special Operations Command, to do all of their counter-drone work. So basically protecting, like building the hardware and software that is defending them from, from drones that are attacking their installations and positions. And we started working on our counter-drone system using all of our own money years and years ago before we had any customer.”

Steal thisInvest your own capital to build a finished, proven product before the customer asks, so you win the bake-off against rivals still waiting to get paid to start.

Luckey: Russia will use a tactical nuke on a military target

Luckey predicts the odds of Russia using a tactical nuclear weapon in Ukraine are very high, but not on the US or a NATO ally; most likely on an inarguably military target like a port or airfield rather than a city like Kyiv. His contrarian view is that this should not automatically trigger a strategic, World War III response.

“but I think that the odds of a tactical nuclear weapon are very high. It will not be used on the United States. It will not be used on a NATO ally. It'll probably be a tactical nuclear weapon used to strike some inarguably military target. Like, it probably— they're not gonna they're not going to nuke Kyiv. It's much more likely that it would be a port or a, you know, or an air installation or something like that.”

The billionaire who flies coach to not be out of touch

Luckey flies coach even on his own dime because he asks his employees to. His reasoning: if he didn't do it himself he wouldn't just appear out of touch, he would literally be out of touch and lose the standing to set the policy.

“Even when I use my own money, I fly coach. And people say, well, why don't you just fly first class? Why don't you fly business? And here's why. Because I expect my employees to fly coach. And even like, yes, I have a lot of money, but it's— if I don't also do it, it feels like I'm out of touch, or I don't know what it's like”

Palmer Luckey: sold Oculus at ~19, sued Facebook and won, now builds for the military

Sam profiles Anduril founder Palmer Luckey: started Oculus around 16-17, sold it to Facebook for ~$1B, was fired (he claims for liking Trump), sued Facebook for hundreds of millions and won, then built a defense-tech company in Orange County making border-surveillance hardware.

“So basically it started by the guy named Palmer Luckey. And the reason why this is interesting is Palmer Luckey started Oculus when he was like 16 or 17, and then he sold it to Facebook for some, what, like a billion dollars, just like a ton. And it's interesting because Palmer Luckey is very controversial. So he's a big supporter of Donald Trump, which is very atypical in Silicon Valley. He was fired from Facebook and a lot of people, or he was the one who said he thinks he was fired because he liked Trump., and he sued Facebook for hundreds of millions and won.”