The Intrigue of Quantum Computing with Strangeworks CEO whurley | 7investing
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The Intrigue of Quantum Computing with Strangeworks CEO whurley

August 26, 2021 – By Simon Erickson

Quantum computing’s has the world’s attention, as investors turn a curious eye toward one of the semiconductor industry’s most difficult-to-understand new trends.

This is a completely different approach to computing that is built upon quantum physics principles like superposition and entanglement. Because of its different architecture and design, quantum computers can solve incredibly complex problems in a fraction of the time it would take for classical computers.

Companies have been fascinated by this concept for decades. Large enterprises like IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT) have pledged tens of millions of dollars and several years of fundamental in their attempt to build a useful quantum computer.

But we’re now also seeing smaller companies join the race as well. IonQ is crashing into the public markets via a SPAC merger, and Honeywell (Nasdaq: HON) is spinning off its quantum group into a SPAC of its own. There’s now a publicly-traded Quantum Computing ETF, and venture capitalists continue to pour money into entirely new approaches.

The advantages of quantum could be incredible. A commercially-available, useful quantum computer would disrupt many industries. Materials companies could perfect their design of new superconductors. Logistics or travel companies could optimize their global fleets. Drug makers could use simulations to create new synthetic molecules.

But there are concerns about quantum that are raising a few eyebrows as well. Several of the soon-to-be-public quantum companies have hardly any revenue, yet their multi-billion-dollar valuations have led some to believe there are too many expectations already baked in. There are geopolitical concerns as well, as an international arms race to reach Quantum Supremacy could challenge the internet’s existing cryptography measures or even sovereign security.

There’s a lot going on right now. And there’s a lot more at stake than just bragging rights that awaits those who claim and who use the world’s fastest computers.

So what should investors make of this new quantum race? Is quantum indeed about to disrupt everything? Or are some investing expectations still out of touch with reality?

To answer those questions, we’ve brought in a quantum expert. Whurley is an international legend in the software development world.

After working in R&D at Apple (Nasdaq: AAPL) and then as a Master Inventor at IBM, whurley went on to found and run several startups that innovated the fields of security, open source software, and even FinTech. He has 11 patents, has co-authored two books, and even personally hosted former President Barack Obama at Austin’s SXSW conference. Now as the founder & CEO of Strangeworks, he is developing a software development tools that will help companies define their business problems and then harness the power of quantum computing to solve them.

In this exclusive interview, 7investing CEO Simon Erickson chats with whurley about where the quantum computing industry currently stands. They describe what will drive its future adoption and in what applications it will serve most useful. They also discuss the recent popularity of quantum SPACs and where there could be opportunities for investors.

The two then shift gears a bit, and whurley describes why open-source will continue to be the key for future software development. He also shares his thoughts about what’s in store for cybersecurity and his expectations for virtual reality.

Publicly-traded companies mentioned in this interview include Facebook, Honeywelll, IBM, IonQ (which is coming public), Microsoft, Quantum Computing Inc, Coinbase, MicroStrategy, and Voyager Digital. 7investing’s advisors or its guests may have positions in the companies mentioned.

Timestamps

00:00 – Overview of Strangeworks

09:53 – Commercial adoption of quantum computing

14:06 – Quantum computing companies who are now publicly-tradable

29:43 – Open source software development

31:37 – The impact of Zero Trust on cybersecurity

38:45 – Tempering expectations for virtual reality and the Metaverse

Transcript

Simon Erickson  0:00

Hello everyone and welcome to today’s episode of our 7investing podcast. I’m 7investing founder and CEO Simon Erickson and I’m very excited with our guest this afternoon. whurley is a globally renowned expert on quantum computing and software development. He’s a serial entrepreneur, I also vote that he’s one of the world’s most interesting men. whurley, it’s really a pleasure. Thanks for joining me on the 7investing podcast this afternoon.

William Hurley  0:26

Thanks, Simon. I have to go now.

No, I can’t I can’t live up to any of that. But thank you. That was a that was a very bombastic intro.

Simon Erickson  0:36

It’s always an interesting interview with you whurley  we have a lot of fun stuff to talk about. I want to talk about Strangeworks. I want to talk about quantum. We’re gonna talk about open source, and we’re going to talk about virtual reality. But first and foremost, welcome home, I believe you just had a pretty fun corporate retreat this past week.

William Hurley  0:53

Yeah, yeah, we just, the team, we had an opportunity and we took it. We could have spent some money and flown some our key employees from Europe over here next month. Or since our chief scientist was in Puerto Rico with his family already, it was actually cheaper to fly everybody to Puerto Rico, thanks to a Scott’s Cheap Flights thing that came through. And we just decided a week and a half out, let’s do it, we’re gonna move the meeting up and go there.

Amazing time, of course, Puerto Rico still in need of so much help. You go down there, it’s so sad to see all the buildings and all the damage from the hurricane and so much time has passed. And yet there’s still so much work needs to be done there. So we thought, go down there, support the local economy doing stuff. Meet César’s family, and they made a wonderful meal and hosted at their house. And basically just start thinking about where do we go from here.

Like we looked at, we run things in kind of one year and three year phases. And we’re exited the three year phase, and we’re kind of starting to figure out what the next plan is. And it was an extremely productive trip. I think it was good for, it’s always good for morale too, especially in the days of COVID, right, for people to be able to get out and do something. And so, obviously, we had a lot of, precautions, everybody’s vaccinated. We only traveled in, some vans we had rented and stuff like that, and try to really cut down any exposure with the Delta out there. But everybody made it back safe. We did tests before and tests after and had a great productive trip.

Puerto Rico was pretty beautiful place. I think there’s a lot more there than than people know, because I don’t think enough people have actually taken the time to go and visit. But I would definitely encourage everybody to do that.

Simon Erickson  2:37

It was pretty awesome. I enjoyed following along with your Twitter feed. I felt like I was there on the trip from some of the pictures you’re putting out there. But where do we go from here, indeed?

Let’s start by chatting about Strangeworks. Because like you said, three years in now, you guys are developing a platform for quantum computing. And it seems like you are agnostic as to who the providers of the hardware are. You just want to, it seems, make it as easy as possible for companies to get plugged in to quantum computing for defining projects. Is that the goal of Strangeworks?

William Hurley  3:08

Well, the idea, what we started with when we launched and what we’re were still rolling with is humanizing quantum right? We probably should, at this point switch to one of our other trademarks, which is hurting Schrodinger his cats. But yeah, the idea here is that, I believe that 1923 and you think about the the roaring 20’s, so to speak, and the Industrial Revolution, and everything is gonna look like 2023. Except it’s gonna be the quantum revolution, right, you’re gonna start seeing companies spun out of these large companies to do networking things, and cryptography. And all of these things that are that are quantum, use quantum mechanics or in quantum inspired. And so there’s this huge opportunity and out make sure everybody has as much opportunity to play in it.

Because if you think back to 1963, which also is what 2023 looks like to me. You have Jack, coming out with a microprocessor. Nobody’s thinking about drones, autonomous vehicles, or AI or any of that stuff. I think this is going to be one of the biggest shifts in computing that we’ve had. Now, it’s not gonna replace classical computers. But there’s gonna be a whole new set of these these dreams. And we live in this crazy world right now. We can have Elon Musk just stood up on stage and was like, here’s a robot I’m building, which is weird, since he spent a lot of time talking about I’m not really a fan of robots.

So if I worked in a Tesla factory, I’d be worried right now because it’d be like, oh, it can be overpowered by human but can probably do 400 Model Y hatchbacks in in an hour. But it’s such a time we’re living in and with quantum computing becoming very real, much faster than people thought, and there’s still a long way to go in this noisy intermediate era. But I think the the progress is in the last three years is astounding. And I think it’s going to continue to accelerate us into the future. And I’m expecting a major inflection point around 2023. Right. I know Google said they’re coming out with their machine in 2029. And there’s all this other stuff, but around 2023, maybe the tail end into 2024, I think you’re gonna see a lot more eyeballs on quantum, a lot more investment and a lot more action in the space.

Simon Erickson  5:26

Yeah, just a reminder for everyone watching, quantum computing is not just faster computers, they’re completely different architectures than classical computing is. whurley has done a great job at describing quantum computing in the past. He spoke to a packed house at South by Southwest a couple of years ago. In fact, he’s even written a book, “Quantum Computing for Babies”. If you see this signature up there, whurley, I would like to point out, this is your first signature in the book you ever had. That’s my claim to fame.

William Hurley  5:56

Get it to eBay as fast as possible.

Simon Erickson  5:59

I’m holding this one!

William Hurley  6:00

I don’t even if you could sell that book for more than you could buy a new one on Amazon for. But that is the first one, I’ll never forget, we met at South By. I had just received them and you got the first copy. And that was awesome. And that was a great interview, then. And you’re right. So you know what is quantum computing? Think of it this way. The classical computer, classical computing, the iPad, the iPhone, your Mac, whatever, maybe your Windows person or using a supercomputer, it doesn’t matter. They all work on a binary system.

And so if you take a coin, put a heads up in your palm, and it’s a, a one, flip it over tails, it’s zero. And in your hand, it can only be one of those two things. Take that same coin, flip it in the air, when it’s at the apex of that spin, it’s in a quantum superposition. Which is not being one and zero at the same time, which is what everybody says. And when I initially got in here is how I interpreted it to, but more importantly, it is the probability of a one or a zero.

So when you think of the way probabilities work and these kind of large, matrices and things you can do. You can get two answers, or find solutions a lot faster. Like you can use things like Grover’s algorithm to find a needle in a haystack of needles, right looking for an [UNKNOWN] article, and you can pick that out. And a classical reader might take 1000’s of years, or in some cases, millions of years to do that. And a quantum computer might take, we don’t know, it won’t be millions, it probably won’t be a year, but it could be months or weeks or days or hours.

And so these won’t make cat videos on the internet faster. As I told you in that original interview, which I went and rewatched before we came here. But it will open whole new areas of science, right? So new material sciences, you want to go to Mars, you want to set a colony on Mars, probably going to be the kind of power of quantum computing, to do that in an effective manner. You want to discover new drugs, you want to come up with new financial trades, things like that. These are these large, complex problem sets are what these things are going to be good at.

So they’re not going to replace your computer. I don’t believe you’re gonna have a desktop version of them anytime soon, although I know other people you’ve talked to have said that. I would love that. And I think that it’s just the biggest shift in computing over the last 100 years. And it’s all going to happen between now and 2030. I think the time to get involved is now. The time to be looking at investment is actually now that a lot of the risk has been boiled out of the market. It’s still risky.

But certainly when we talked, it is nowhere near as risky as anymore. Just if you look at the amount of governments, France, over $2 billion pledged. Sweden over a billion, you’ve got more money coming out of the US with the new endless frontiers, a lot of that will go to quantum. Germany, a couple of billion. Italy now. China obviously has been investing since we talked originally.

So you’ve got that, but you’ve also got venture money has come into the space, fairly heavy as has private equity. And more importantly, as you know a lot of these companies are starting to SPAC, working on their de-SPAC’s. And, and there’s already companies like QCI (NASDAQ: QUBT) that are public. And there’s already publicly traded companies that may very well be spinning things off, we saw the Honeywell QCI spin off, right? So this is a pretty exciting time to be in the space, but also to be looking at investment in my opinion.

Simon Erickson  9:22

Let me double click on those SPAC’s in a moment whurley  But first, let’s get back to what you just said about 2023. Because like you said, we’re seeing a lot of interest in this space. Obviously, it’s very disruptive. In computing as a whole, we’ve done the best that we can in solving things like material science or drug development or wherever the places that quantum computing could be applied. But this could really unlock a whole lot of value. That was just completely unfeasible before. The 2023 number is an interesting one, because there’s some forecasts out there that said that today, or more specifically back in 2018, less than 1% of companies had any kind of budget whatsoever for quantum computing.

William Hurley  10:01

I would think that that is the case still today. But I would also say that large scale enterprises, although they often see themselves as innovative, are often kind of not early adopters, but late adopters. And so I wouldn’t be worried about like, I don’t look at [INAUDIBLE] all right, starting to get them into pharma and finances and stuff. And they’re small, like you’re 100%, right? And everybody, every time I see an interview, or see somebody talking about, like, a billion dollars in quantum. It’s like, you’re 100% not.

But what I track is how many people at those enterprises are playing around with frameworks and toolkits and computers and things like that. If you look at when I left Goldman Sachs (NYSE: GS) to start Strangeworks, there wasn’t really a quantum team, that’s maybe a couple people, right. And now like, Will Zeng’s over there, and they built that a team, I don’t know, 30-40 people maybe there’s more. But there’s a considerable group of very talented finance people and physicists working together on the applications of quantum and finance.

And they’re not the only one, right? I’d say, very few finance companies don’t have it. And then you go to pharma. And obviously, they completely have all of the key problems, right? They understand exactly what they need, they run, molecular bindings, and some of those experiments, they run them on these NVIDIA’s (NASDAQ: NVDA), maybe six or nine months to finish a set and the modeling and stuff. So, there’s plenty of appetite for faster compute in all of these industries.

But until it comes out, I mean, like, it’s going to be just like. Quantum computing will be just like the internet. So remember when Barnes and Noble was like, Amazon (NASDAQ: AMZN), we don’t need a website to sell books. Have you seen all the stores? That’s a pretty direct one-to-one relationship. What I think in a couple of years, people will think about quantum, and they’ll be like, “Well, I mean, I don’t know we’ve got an HPC center”. And it’s like, right, but they do two different things. Right.

And so once that happens, when people show something demonstrable that has a big return on investment, I think you’re going to see that change a lot fast. And just like the adoption of the internet, or any new technology, right, you’re going to see this like kind of slow, stop at the beginning, and then you’re going to hit an inflection point. And you look at any of the major technological changes. That’s not a newsflash, right. I mean, that’s how how these things most often end up in the market.

I mean, go back to IBM’s (NYSE: IBM), CEO, saying there’s no need for three or four computers in the whole world. Right? Glad we didn’t listen to that guy. My entire career is based on the exact opposite of that. So I think that while there’s no budgets, you starting to see the work happen. And then you’re going to see progress made in the number of qubits. Ion traps will soar first. Then there’ll be some, I believe, there’ll be some physical limits to the physics. You got people like [UNKNOWN NAME] you doing helium stuff, you’ve got all the cold atom guys, of course, Atom Computing, just recently got some funding. PsiQuantum just did a $450 million round. And all the SPACS and stuff that you’re going to get to later.

But it’s like, there is activity in the space that I think now that momentum carries through, and it makes the market real. Three years ago, three and a half years ago, when we talked we weren’t there, right? There was a lot of country investment. There was some VC investment, everything was very hardware focused. You’re gonna see between now and the end of the year, several software companies make pretty considerable funding announcements, right? And you might even see some SPAC and you might even see some other action. I think that, I’d say well the SPACs they’ll announce it this year and then sometime next year they’ll de-SPAC, right? I still don’t think anybody in quantum and SPAC’ing understands exactly how complicated that mechanism is. But that’s me. Maybe they do.

Simon Erickson  14:06

So let’s chat about that. Because really our audience for 7investing is individual investors, right? And we’re seeing those SPACs are seeing those there’s makers of quantum computers coming to the public markets, right? IonQ (NYSE: DMYI.U), $2 billion valuation, middle of a SPAC right now. We saw Honeywell is now actually spinning off one of its quantum divisions also going with a SPAC. Quantum Computing Incorporated (NASDAQ: QUBT), not a SPAC, but publicly traded right now. And it’s available.

William Hurley  14:32

And to their credit was the first so. So you’re starting to see these things in the public markets. I think public markets will be very hard on quantum. That’s my opinion. Nobody agrees with me, everybody, public, private, two pools of funding all of this. I think, if you have any impropriety, and there’s none that I know of, but in all industries there’s going to be as it starts becoming more attractive and more money people get greedy. You get the balance and the counterweights, right, and you get the short sellers will come in and say, well, quantum, they said in an interview that it was gonna happen in three years, it’s been five years, and it hasn’t, and there’s little revenue. So let’s short that right.

I think SPAC’ing puts a very big target on your chest that I don’t think the industry needs right now. So I’m not a fan of the SPACs. I’ll announce mine in March, I’m just kidding I won’t do that. But I understand the need for them in the industry, because this is hard. And it is a very deep tech and pulling in hundreds of millions of dollars, sounds like a lot. Some of these things sound overvalued. Maybe they will maybe they won’t. But we can’t talk out of both sides of our mouths. We can’t say this will be trillions of dollars of market. But you got to look at Peter and say, hey dude, that SPAC, $2 billion, do you really think you’re worth that? It’s like, one of those has to not be true, right?

We, can’t say quantum computers and change the world, be this massive shift in humanity as far as what we compute and how AI is used in material sciences and drug discovery and finance and the list goes on and on and on. And then say, but, I mean, those guys think they’re worth $2 billion, with a piece of hardware. It’s like, those numbers match. And the thing I’d like to see in the community and with investors is people take a realistic viewpoint. You either believe it’s worth trillions of dollars, and then you understand why they’re worth that much. Or you don’t believe either of those, right? But you can’t believe it’s worth a trillion dollars. But then nobody’s worth any money in the space. That’s that doesn’t make sense to me. Like, not at all, because you’re not making a direct comparison.

Everybody wants to compare quantum to a bunch of different businesses that are irrelevant. And we have not seen the effects of quantum. And when you say quantum you say quantum computing. Know that Cisco (NASDAQ: CSCO) is working on quantum internet networking, the government just announced a big $61 million dollar funding package for quantum information science. What about quantum sensors, right? What about quantum sensors in oil and gas? What about quantum sensors in medical and these other fields?

So quantum is much bigger than computing. And some of these companies that are SPAC’ing, I don’t know what their plans are. But I would imagine a few of them have plans beyond just a compute, right? Just a device. And so this is going to be an incredible opportunity area for investors. But because it’s so complicated and deep tech, you’ll really have to start judging these companies, I think, not on the tech or the science, but on the same fundamentals, you would do any other trade?

Simon Erickson  17:43

It’s gonna take patience, right? It’s going to take investor patience. Right, we get quarterly results from biotech companies, when in reality it’s, are they commercializing new drugs that might be years out.

William Hurley  17:54

That’s right.

Simon Erickson  17:54

In quantum computing we don’t care about the quarterly earnings. We care about the problems that they’re solving out there.

William Hurley  17:59

Well look at Pfizer (NYSE: PFE) and J&J (NYSE: JNJ) and Moderna (NYSE: JNJ), right? The vaccine for COVID kind of made Moderna, and there’s other stuff they’ve done. I mean, that’s an example in a biotech, there’s an event, there’s something, oh, no, they have this cure for this or this thing. Alzheimer’s, cancer, whatever. All of a sudden, that thing that’s been kind of just trudging along is, billions and 10’s of billions of dollars.

I think, that’s an okay, way to look at quantum. I think it’s different than that. I think there’s immediate, availabilities, machines today. People are like, well, they don’t have 400 qubits or a million qubits? Well, that’s true, but most of the circuits people are writing right now are like seven qubits, right? We’re playing around, we’re like trying to figure out, how does this apply in these areas? Where can we show these proof points? We’ve moved from quantum supremacy to quantum advantage, right? So we’re going to say, Okay, this has an advantage. And that advantage could be in speed or performance or cost or whatever. And these machines are going to be great for the environment, too, because they use a fraction of the energy of an HPC center.

So I mean, there’s a lot of things to consider when you’re looking at this. And I think, the market has changed so much, in the three and a half years, since we sat down the first time, that it is absolutely deserving of everybody paying extremely close attention to it. And if we talk again, and another three and a half years, it will have moved further than I think anybody realizes today. And that includes all my friends that are physicists and my investor friends that are investing in this. I just think everybody doesn’t understand that it’s got the financial momentum, billions and billions of dollars being poured in. It has some of the smartest people on the planet working on this.

And they’re starting to go from 10 people over here to 130 person team like with Frank Leymann in Stuttgart, right? Or, go in to China, they’ve now got three companies building quantum machines. And no they’re not sharing them outside of there, and I wish they would, but of course, the geopolitics is gonna come in and affect quantum. And we talked about that in our first interview. I think you’re starting to see that right? Like, Australia has just put a lot of deep tech stuff on an export list, the US is certainly looking at it. China isn’t exporting.

So one of the fears I have for an investor is, if you’re not investing in the US, or you are investing in US? What if the biggest market is somewhere that, you can’t sell the machine? Or what if there’s a problem with the import thing? So take a dilution fridge? What if that’s, or helium that some of these things need, right, which is something that we’re running out of, right? So there’s a lot of points of concern. But at the end of the day, when you have this much money, billions and billions, and 10’s of billions and, and probably a couple hundred billion dollars, that’s in or coming into the space. And you have this many people that are literally the best in the field, at IBM, and IonQ, all of these companies, PsiQuantum and Atom Computing and [UNKNOWN] arrow Q and all these amazing. I mean, I probably just pissed off, 15 other hardware people because I didn’t, because I didn’t, because I can’t think of their names.

And they’re all wonderful, like they are all amazing, which is what’s great about our business, is we’re building an infrastructure layer that, the users and all the hardware providers can can play on. And it’s amazing to see. I mean, I hope there’s, they don’t, but I hope there’s 50 more, and you look at what Bleximo is doing, right? Alexei is making specialized chips, for quantum for just a specific task. Riverlane, what they’re doing with their system on a chip. This has come a long way since we talked three years ago. But we’re still all focused on the wrong goals, right? People are still trying to patent algorithms, bad idea, you shouldn’t patent math. I’m never gonna not be against that. I’m old school type guy. But you could patent the circuits. That’s very interesting, right? Everybody’s trying to build communities of large users. But really what we want is the time on these machines being booked, right?

So I feel like we were just slightly off in the alignment of the enterprise and the market timing. And I think over the next couple of years, those things kind of fit in. And when they do, they’re going to instantly lock and when that when that bond is made, quantum computing takes off, and literally legends will be made in the space. I don’t want to be one of those. I just want to watch all of them and cheer them on from the sidelines.

But there are a lot of extremely smart, extremely deserving people. You look at Ari Tuchman and Entanglement Technologies, right? And that team and what they’re doing with quantum sensing, in environmental areas. Like this is going to spill far beyond computing. Far beyond everything, and it’s going to touch every aspect of our lives at some point in the not too distant future. And fortunately, you and I will live to see that day, right? I’m not I’m not that old, but in 30 years, I’m gonna be doing a startup where it’s a new technology, I’m probably gonna die before it becomes real.

Simon Erickson  23:01

whurley you said you’re not doing a SPAC. But if you do do a SPAC, I’m your first investor. And I’m telling all my friends to also buy in.

William Hurley  23:11

You want how many shares that are couponed did $10?

Simon Erickson  23:15

Count me in for as many as I can buy!

William Hurley  23:21

I don’t know. SPACs are interesting. But I’m going to stick to a very traditional, very focused approach to how we’re funding it. Remember, we’re the smallest, almost, not anymore, now there’s two and three person shops. But of the companies you hear about in the news all the time, we’re the smallest least funded one. And there’s a strategy there. Everybody else is raising hundreds of millions of dollars. I’ve raised four or five, like, I’m gonna raise more soon. But it’s like, I think quantum is a marathon with a series of sprints. And I think I want to raise right before the sprints happen, and catch those waves and keep up and not just be like, Oh. I mean, like, what if you gave me $300 million? Like, we wouldn’t. Where would we deploy that capital, right?

Getting investment is about leveraging that money. And, and for us, it’s leveraging less money to get direct revenues to get to profitability as fast as possible. Even though quantum is amazing tech, the rules of business won’t change, right? The rules of the market won’t change. The market will find the things that are BS, and they’ll reject them and they’ll find things that aren’t profitable, and they’ll devalue them, and on and on and on. Right?. That’s kind of the kind of interesting thing about the market is it does work. And with a new technology like this it’s gonna be very interesting to see how it works.

Simon Erickson  24:49

Speaking of that, the technology and the IP behind this, do you see quantum developing regionally. Where obviously the chip making industry is global Right?Everybody’s selling to everybody across the entire world. But you kind of see these political tensions, right, of like quantum supremacy. Does China have a faster quantum computer? How is that going to impact internet security and everything else that’s being talked about there. Is everybody going to use each other’s technologies? Or are we going to have different quantum in the US, North America than Europe or China has?

William Hurley  25:22

Well? So that’s a great question. And the geopolitics of this are coming in right on schedule, right? Everybody thinks. Here’s the problem. People like you. And I mean, in your industry, doing the podcast talking about investing. I think they’re overselling what it is and what it does. Don’t get me wrong? I believe it’s trillions of dollars in market, I believe it changes the world. But right now, I believe there’s still some time period between those. So when you look at something like security, and you say, Oh, the same way that happens, I think people say, oh, quantum computers break all security. It’s like, well, okay, well, hang on, maybe not true. And what we’re really about worried about in the security industry is, we’re really worried about very specific things.

So for example, we know that files that were encrypted 20 years ago have been leaked, and you can’t really break them on a computer, but you could probably break those on a quantum computer, right? So we’re trying to post-quantum protected materials over here. There’s already materials that are leaked, and people are trying to get the tech to break them.

Security is kind of a shitshow, right? I build a wall, you knock it down, I build a bigger wall. My investment partner Mike Erwin and I, we founded a company called Symbiot that was infamous for building countermeasures on the internet, because until there’s a repercussion of financial damage, it’s going to continue to be in that thing. And so, yeah, no kidding. making a key longer, so that it takes you more time and resources to break it. That doesn’t sound like the greatest security plan anyway, right? That sounds like, eventually, you get to some number of qubits. And I don’t know how long you would make stuff where quantum wouldn’t just break it. And people are working on all these different ways of encryption. And I have no doubt that they’ll fix it. Because you can remember something called the Enigma machine. And that was, at the time, the state of the art, no one could do anything with it. Right? Like, you could not break it.

And so, you look back historically, and you say, why are we worried about quantum computers bringing security, like, we know they’re coming, we’re gonna work on it, we’ll do what we’ve always done and advanced it. But why do we not use 128 RSA keys anymore? Right? Why do we not use, it’s because we advance. The tech advances in security advances with it. And I have faith that the people in the security industry, especially some of the new startups, even the ones that are focused on stuff like supply chain management, the threat warriors of the world and stuff like that. They will be taking all of this into their thoughts and designs. I think they’ll work with quantum companies, and you’ll have a security that will go past this quantum error.

I don’t think it’s the end of security or privacy or anything. I think we overdramaticize that a lot outside of the industry. I think if you talk to anybody in the industry, it’s like, we’ll ya no kidding. But as computational stuff advances. You gotta advance how you’re protecting it and it changes the way you’re doing keys, the way you’re managing stuff or whatever the case may be.

The biggest security leak hasn’t always will be people, right? Like most of the stuff you see that are breaches aren’t because quantum computer prototype was used to break the key for all of these records at company X. It was somebody that works there and has a password sold it, and they got caught. Right? So, I don’t know that security is in some horrible state now. I mean, we’ve got all of these different things that affect, average Joe, right. You’ve got the phishing scams, and this and that. But I think it’s more prevalent, but I don’t know if it’s any worse than it used to be. I can remember people getting ransomware in the 90’s. John Oliver talked about it two weeks ago like it was this new thing. And it’s like, yeah, that’s been going on.

I have high hopes that quantum will actually improve security, not because it will force it to change. But because we’ll start thinking about things using quantum mechanics or be completely new security paradigms, completely new investment paradigms, completely new AI modeling and quantum machine learning and things like that. So I have faith that is going to help. I don’t think security will be in as much disarray because of quantum that people that people think it will be.

Simon Erickson  29:43

The Biden administration’s calling for zero trust architecture for cybersecurity measures out there. He’s calling for all companies and all governments instiutions to adopt this. Does that integrate with quantum any thoughts on the states of cybersecurity?

William Hurley  29:55

I mean, like state of cybersecurity is I think, I’m a big fan of [UNKNOWN] threat word. Full disclosure, I invested in it too. Okay. Because you look at these attacks, they’re supply chain attacks, right. So the attacks have moved from, like. I think what the Biden administration is doing is admirable. I definitely think everyone should have great security policy, and they’re working on it.

But the attacks are moving. Now the attacks are like, a vendor of a vendor used some software and that’s where the problem is. And it goes all the way up the chain, right? The supply chain management, think about killer chips in jets, right? What are we worried about right now, we’re worried that all the chips are made in China, and they could have some piece of code that just kills that chip, and the $80 million plane doesn’t work, right?

So it’s like, I think we have to start shifting our perspective in security. We have to make it a little bit more far reaching. It’s not just about what you do for security. It’s about what the people on Zoom (NASDAQ: ZM) did that we’re using to record this right now. It’s what the hosts that AWS or Google or Azure, or wherever Zoom has hosted, did for their security, that by the way, we’re both using right now. It’s what are the components, they used to build those services, that by the way we’re using right now, right? Like, it’s gotten much more complicated as it goes deeper down the stack and across things to where I think a focus and security on the supply chain of where that software is coming from what’s software’s integrated. I think you’re gonna see a lot more of that. And I think that’s a huge opportunity. Or, as I said, full disclosure, I invested in a company, because I believe in that. I mean, that’s where my focus on cybersecurity is today.

Simon Erickson  31:37

I’d like to use that as a segue to talk about open source. I know you have a lot of background in this too early as a software developer. But we’ve kind of seen at least from cloud computing perspective, you’ve got the cloud titans out there, right? You got Azure, like you said, Microsoft (NASDAQ: MSFT), you got Amazon Web Services, everybody builds on the infrastructure they have out there. It’s all about these ecosystems that people kind of using the big guys tools and ecosystems that they build.

But then we’ve kind of seen even them kind of moving more to open source, right? You’ve got GitHub, the acquisition that we just saw, Microsoft buying GitHub, and then also IBM buying Red Hat. I mean, even the big players are saying more and more we want open source. You see Kubernetes out there, a new way to start bringing containers in for software development and things like this. How do you see the future of open source developing and where do you think it’s offering the most value in corporate America?

William Hurley  32:26

Open source drives 90% of corporate America anyway, right? From Brian Behlendorf, going from a fledgling website administrator at a fledgling magazine called Wired to the Apache Foundation, so. Open source is always in there. Most of these products people are building, they’re downloading code off of GitHub, right? Like there’s developers that write code, right? And there’s all the people that went to coding schools that, although they they write code, and they understand the basics. They’re really chaining together pieces of open source, people’s other stuff. So it’s permeated everything. I doubt there is a piece of closed source software, outside of like a secret government project that hasn’t had open source touched in some way. And of course, we’ve already been through all the licensing battles and all of that.

I think, I said the future was opened in in 1993. I think we’re in the future, I think it’s very open. I mean, just look at the resources you have now. I think, open source can help quantum in that, originally Strangeworks started as a Linux Foundation project. I was going to go and create a giant open source infrastructure, and nobody wanted to work together. So I said, well start a company to do it. Now I think people are starting to open up a little more. And of course, every quantum company frameworks in open source. Security companies have a very good stance on open source. There’s the argument of more eyeballs on the code. There’s also the arguments of, too many competitors, and somebody slides something in.

So I think you have to be really balanced on the view of open source, but it’s everywhere. It has been a standard in software development for over 25 years, 30 years, and it’s not going anywhere, anytime soon. What you’re talking about is investment opportunities. How can you look at is there a company that uses open source? And does that drive value or describe value of that company? In the case of Red Hat? Frankly, I don’t think IBM should have paid what they paid for it. I think Red Hat’s an amazing company. I think Jim Whitehurst is a phenomenal CEO and did an incredible job. And then they had the value, there’s no doubt they’re tremendously valuable.

But I think IBM overpaid and I think, IBM doesn’t give itself enough credit for all the open source it does. I mean, it has a billion open source projects, right? You look at the transactions. I don’t think it’s about whether the software is open or closed. I think it’s about the value that the user gets. The monetary transaction that the company gets for that value. And then what is the EBITDA. Like I said, all these things are gonna come back to basic fundamentals of companies, right? The only problem is a lot of this area. When you look at some of the new security stuff, we look at quantum and these areas, we’re new, we’re new fields. And so it’s going to take a little while to gel.

But I think open source has been the greatest thing to happen in software ever. I think it has advanced things, I think it’ll continue to advance things. I’d like to see more open source examples of quantum algorithms and quantum code and things like that. We’re working with universities today to do that. We’re working with partners in our quantum syndicate, which has grown tremendously, like pretty much everybody’s in that. We’re looking at work with them on, how can we take the code that’s open. Because that’s the only way to give it to somebody and let them use it, right? You can’t take proprietary code and give it to a pharma company and be like, go build all your stuff on this thing, we’ve done that, then we’re going to try to come and sue you because we patented it or whatever. You can get them to adopt stuff by saying, here’s code that’s under a license that you can take and integrate with what you’re doing and go do.

So, open source the benefits are countless. And you know that leads to a lot of people saying, well, why isn’t Strangeworks platform open source? It’s like, well, we do contribute to open source in some of the things that we integrate. And we are going to be announcing our own open source, but not anything big. We’ll be announcing some bigger stuff, as we move into the future. It’s just like what we’re building would be, you have to think about is a project useful as an open source project. The incredible plumbing that we have built is probably not useful to anybody open except for a competitor that wants to do what we’re doing.

So it has different values in different times. I personally think a good, some stuff you you keep proprietary, some stuff you have open, that’s always been my stance on open source, I think it’s valuable. For example, you have a platform, you have a way to connect to the platform for a hardware provider, it’s probably a good thing to have open, right? So they can see the code and understand it, see what it’s doing. You have a platform, and you have a super customized optimization. Maybe that is your value. And that needs to be proprietary. I mean, it just, it depends. It’s a case by case basis on the open source software.

Simon Erickson  37:27

Speaking of open source, I believe that your name “whurley” was associated with Unix, right, the Unix operating system?

William Hurley  37:34

Well, a long, long time ago, Sebastian Hassinger, who is coming into Austin tomorrow. And I was gonna have drinks with him, and now maybe I’ll punch him in the face. He put whurley into a system at Apple, he and Mike Erwin and I we’re all working there. And locked in that name to never be changed, as opposed to me getting a cool name like he was Singe. And Mike was Draconus. And they had all these cool names. So yeah, it kind of grew in the open source community a little bit, and not big. I mean, I’m not, Tarus Balog, or, Ethan Galstad, or Brian Behlendorf. I’ve never created some big open source project. I would just help with a bunch of projects and help, but I kind of built a reputation there. And then in 2016, I hosted President Obama at South By,

Simon Erickson  38:23

You showed me that clip, I remember that

William Hurley  38:26

And then he said it, and then my mother in law calls me whurley. So yeah, I don’t, I don’t care. Will, William, Willie, anything? Can’t call me Bill that’s my dad’s name. Don’t call me Billy. My mom calls me that, I’m not a fan.

Simon Erickson  38:39

Whurley has stuck. It’s stuck for a couple of decades.

William Hurley  38:43

Yeah, it’s stuck for a while now.

Simon Erickson  38:45

Let’s transition, talking about open source. Let’s also talk about virtual reality. A fun little spin on this one too whurley  Because I know you have a background, what was it Chaotic Moon Labs where you guys were actually kind of doing the interfaces with people and devices and things like that. But I mean, it seems like everyone’s talking about VR and the metaverse these days. Is this all hype? Or is there something to this?

William Hurley  39:04

Yeah, I am very openly not a fan. So I moderated Stanford, MIT’s virtual labs on AR and on VR. I helped co-found the augmented reality event, which is the big event for that stuff. And I worked on some of the stuff back at Apple in the early days and even worked on it for customers at Chaotic in the in the early 2010-2012 timeframe.

Putting a screen this close to your face is never going to be a good idea. You just gonna burn your retinas out, right? AR if you want that. Christof Koch says it best in the movie, the Singularity, kind of a documentary and all these kinds of things you’re talking about. He says, oh, to do that, you’d have to pop your eyeball out and put a synthetic eyeball in and it worked with the way your brain and your optic nerves and everything works. And he’s like, I’d be the first to sign up. That’s so exciting.

But it’s like, in 1993 there were three primary uses for AR/VR. And people think AR is the like, I mean, none of this is new. This goes back to like the 60’s, where there were physical devices, right? So this is not new. So you look at the history of it say, let’s just say since 1990. It’s 2021, right? So 31 years ago, what were people selling on air? They said it’ll train people in dangerous situations without doing, okay? Still not doing that? Right?

If you go to an AR conference today, you will be sold on, in the future, the same vision I heard 31 years ago. Oh, and we use for gaming and you see things that blow up, right? Pokemon GO blew up, but like, are you hearing about it anymore? Can you name one other AR game? Like any game, right? And then VR, you see, like Facebook (NASDAQ: FB) bought Oculus, I’ve always thought all the investors in Facebook must have been investors at Oculus or something. There’s something there that just doesn’t make sense. Either that or Mark Zuckerberg has read way too much, William Gibson, and he’s like, holy crap. In the future. Everybody be on universal income strapped to a chair with a VR thing on drugs? Right. so that we, we placate the masses. And that’s a scary thought.

But when you when you think about it, I don’t want to say it’s pointless? Obviously there’s things you could do, and it absolutely makes sense. But AR and VR fall in the category of just because you can do something doesn’t mean you should. Right? Like, like, how many times a day do you use VR? Let me ask you a different question. How many times a day does anybody you know use VR? Can you even name a person you know who’s a fan who uses VR more than once a month?

Simon Erickson  41:55

No, actually, I can’t, to be honest with you. And I do not use it on a daily basis either.

William Hurley  42:00

But even the people I know that are in the industry that work at some of these companies. They’re always calling me about their careers. And I’m like, you’re still hawking the same stuff. Right? Like, I’m not gonna let my kids have an AR game set a VR game set? Why? For one, they’re just going to destroy the house? Right? We don’t we don’t? We don’t. We’re missing all the other stuff you need around it like motion? Yeah, when you get to a Star Trek holodeck, call me. I’ll put my kids in there for hours. But I mean, the reality is, is we’re not there. And I just don’t think it has as much use as people want to imagine it has. What about Magic Leap? Like? Billions and billions and billions of dollars? Where are they today?

Simon Erickson  42:45

Still, doing mostly R&D, right? Yeah.

William Hurley  42:49

Right. Again, you want to replace your eyeball. Okay, you want to build a holodeck or something? Those all sound super awesome. And eventually people will do that. But the AR and VR it’s not practical.

When Motorola (NYSE: MSI) first sold the Golden Eye, you remember those headsets. They were red headsets with that little screen right here. And they sent them out to oil rigs. Because its a dangerous environment and that’s where people are gonna use them. What do they do? Whoops off in the ocean. I don’t want anybody monitoring that. Those roughnecks, those wildcatters are like, oh, yeah, let me report exactly everything I’m doing, that that thing went in the trash.

So there’s even a question of, some of these dangerous industries you’re talking about, would the workers even use them? Or would they just see it as a, as a burden? So I, don’t want to I don’t want to harp on anymore. I have so many friends in that industry. If they see this, they’ll be like, God, why are you trying to put me out of a job.

Simon Erickson  43:46

There’s a lot of hype in it right now. That’s a topic, metaverse and everything it certainly seems like they’re selling it.

William Hurley  43:51

Yeah, but they talked about metaverse in the 80’s. Like that’s not a new. It’s like AR just goes through the same cycles. And, I don’t remember, but if you go to Google, which I’m going to do right now we’re talking. And people want to know. Well, okay, look I just typed in AR and the first thing that popped up is, “AR and VR why it hasn’t worked”. [whurley Google Searching] I’m having trouble finding it because I think it’s Limber, but no, but I wrote a piece on this years ago.

Anyway, I’ll find this interview and send it to you. You can share it when you mail out stuff. But I did talk about it in November 2014. And then before that I had written a piece that was basically why it hasn’t went anywhere, why it won’t go anywhere. And I will find that piece and it to you to share with your audience. It’s so far back in my background, I’d be willing to bet that everything I wrote 20 years ago is still true today.

That’s not an industry, right, like quantum taking, 70 years, 100 years to become reality since like [INAUDIBLE]. So that makes sense, right? AR, and the other thing is, it’s  positioned as an industry, when it’s just a feature. I mean, you saying that a virtual reality headset is an industry is equivalent to me saying, I have a screen on my iPhone. Screens are their whole? No, it’s a component. It’s an interface. It’s a, it’s part of something else not I don’t think it should be an industry to itself. So anyway, that’s my thought on on that one.

Simon Erickson  46:12

One more for you whurley  One more question as we close this out. I want to ask you, I mean, you’ve seen some really progressive and innovative stuff out there. What is it you’re really excited about right now? In quantum computing? In the internet? In open source? In anything we talked about? What is it that you see that’s really got you interested?

William Hurley  46:32

Well, so first of all, environmental startups. Very, very interested in those. I love the idea that people are like, wait, maybe the environment could be solved with like entrepreneurship and startups. Super, super cool. So that’s probably the most interesting thing to me.

Second to that, of course, I started a FinTech company before this, I love what I’m seeing in FinTech and services, getting to people that are in underserved markets or communities, things like that. Those those two things are very interesting because they have a direct impact on people’s lives right.

Outside of that. I mean, we live in the greatest time to be alive. I mean, think about. Think about this. Jon Stewart made a YouTube short, have you seen it? Called Dicks In Space about Elon Musk, and Jeff Bezos and Richard Branson and everybody, billionaires going into space. Think about that for a second. He’s making comedy making fun of the rich guys going to space. And the point I would remind all your viewers and listeners is, they went into orbit, because I sat on playing with Buzz Armstrong one time and said space and I meant orbit, and I get a three hour lecture about whole flight and orbital mechanics. But does nobody stop to go yeah but, they went up there, like that’s mind blowing.

To think that we’re thinking about these things like we’re talking about going to Mars with SpaceX and NASA everything. And it’s a realistic thing that’s going to happen, right? Elon Musk just introduced a humanoid robot this week. Like what an incredible time to be alive.

So, if you want to get into it, there’s 100 fascinating things, right? Like look at what Boston Dynamics has done in robotics. Look at what some of the carbon sequestration stuff has done for the environment. What FinTech has done, a company like Robinhood (NASDAQ: HOOD), Vlad and I met when I was doing Honest Dollar. Look at what look at what those guys have done to bring all of these financial resources to people that never happened before, right?

This is an incredible time to be alive. And I think this is the time where technology really, really comes in the into this, like, driving the society forward. And I stay on the positive trip. I don’t see it as draconian stuff, look at vaccines. What about these MMR vaccines, like so many things that are going on right now, that if you look historically, and you look at and go, this is a time to be really paying attention as an investor to deep tech, which is now got a faster pass the market. To the environmental companies, to all of these things, what an incredible time to be around?

So it’s like so many things, it’s why eventually at some point, I will just be a GP at the fund. And all I get to do is look at these amazing things and write them checks and watch everybody else work till two or three in the morning and wake up to take their kids to school at 6:30 because since we’ve talked I’ve also turned 50. And so now, I’m like Danny Glover in Lethal Weapon, too old for this shit.

Simon Erickson  49:50

Still going strong though whurley. Hey, I always appreciate hearing your opinions on what’s going on out there and best wishes with Strangeworks and quantum computing. I really appreciate you being on the podcast this afternoon.

William Hurley  50:01

Thanks for having me. It’s great to talk to you again and let’s not let it be three and a half years before we do it again.

Simon Erickson  50:05

You got it, sounds good. Looking forward to having whurley again in the future. Thanks again for tuning in to this edition of our 7investing podcast. We’re here to empower you to invest in your future. We are 7investing

 

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