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Technology's daily show (formerly the Technology Brothers Podcast). Streaming live on X and YouTube from 11 - 2 PM PST Monday - Friday. Available on X, Apple, Spotify, and YouTube.
You're watching TBPN. Today is Tuesday, 06/03/2025. We are live from the TBPN Ultra Dome.
Speaker 2:Still gets me, John.
Speaker 1:The temple of technology.
Speaker 2:The fortress of finance. The capital of capital.
Speaker 1:We have a great show. We're going through a bunch of stuff. We're covering Kotu's public market updates. We're going through, some news about Nike, some news about Nvidia earnings. We're going through we have a we we have a couple great guests today.
Speaker 1:And we're gonna take you through the timeline, of course. Of course. We also have a new Gong cam, which I think we should show off right now. Jordy, why don't you give it a hit?
Speaker 2:Let's do it.
Speaker 1:Let's do it. Let's let's check it out. The production team has been cooking. Check it out.
Speaker 2:What are we doing?
Speaker 1:It's great.
Speaker 2:But it really is just about Extremely chaotic. You wanna see the vibration. You wanna see the vibration the gong.
Speaker 1:Gong up close for sure. Yeah. You can see it swinging. Swinging. Every time you switch to ramp.com, you earn the right to hit the gong.
Speaker 1:Time is money. Save both. Easy to use corporate cards, bill payments, accounting, and a whole lot more all in one place.
Speaker 2:Go to ram. Let's give it up to
Speaker 1:ram.com. I wanted to cover this yesterday. We didn't quite have enough time, but Mary Meeker dropped the Internet trends report. Code two. Phil Phil LaFlante
Speaker 2:Fired back. Fired yeah. No.
Speaker 1:They did not fire back. Very different take.
Speaker 2:They're going deck for deck, John.
Speaker 1:They're going deck for deck. The Code two deck is a little tighter. They use Sam Altman's face instead of instead of referring to OpenAI as just leading LLM company. Yes. They they actually come out and say what OpenAI is doing.
Speaker 1:And but but it's a great read through. I gave it a I I gave it a full read through this morning, and I thought it would be fun to go through on the show. And so this is from mastersinvest.com, I guess, is the account. Says, Tiger Cub, Phil LaFonte's co two's public market updates. It's too early to tell, but it's surprising how bad sentiment is compared to economic hard data.
Speaker 1:And so, it's a good read. There's Google
Speaker 2:It's crazy you can be Philip Lefonte
Speaker 1:Yeah.
Speaker 2:And still be a Tiger Cub. Yeah. I know. Still a Cub. Still a Cub.
Speaker 1:I mean, Tiger Global is itself a Tiger Cub because they spun out of Tiger management. Julian Robertson's fund, which is very fun. Still using the
Speaker 2:Tiger Imagine if Tyler Cosgrove
Speaker 1:Yeah.
Speaker 2:Our chief intern spins out and just launches TB Global. TB.
Speaker 1:No, TB Global.
Speaker 2:Yeah. Woah, really? Wow. He fully sent it. Don't get any ideas, Tyler.
Speaker 1:Yeah. Yeah. Anyway, this is an interesting fact that they kick it off with. Twenty twenty five was the worst start to the year through April 21. Oh, very depressing news.
Speaker 1:You hate to see it.
Speaker 2:You hate to see it, John.
Speaker 1:But it's really it's really remarkable how how quickly the year just turned from the Trump pump to the Trump dump, and it got real rough there for a second. So in the first in in the first, what, three and a half months, four months of the year, there was an 18% drawdown. And that's compared to 2022 when the market drew down 16%. Twenty, 2001 started the dot com crisis, twelve percent in in February, '10 percent. But then they go on to, and, man, 1998 was a banger year, up 21%.
Speaker 1:That's the the start of the .com boom. It's interesting because it feels like we're in the midst of, like, the AI boom, and yet we had, like, one of the roughest starts to the
Speaker 2:year Yeah.
Speaker 1:In terms of the market.
Speaker 2:Probably healthy in some way.
Speaker 1:Yeah. Yeah. Yeah. Maybe So that is
Speaker 2:Trump just, you know, the the four d chess was, hey. Things are getting a little little overheated. Let's let retail get another opportunity to buy the dip before we go on, you know.
Speaker 1:I mean, I hate to somewhat agree with you.
Speaker 2:I mean, there was Yeah. I do think there was this there was this sentiment that people were so bearish Yeah. A couple months ago
Speaker 1:Yeah.
Speaker 2:That it felt like retail was gonna look really silly for buying the dip. Yep. Because retail over the past five years has just trained always by the dip.
Speaker 1:Always by the dip.
Speaker 2:And it and it's played out generally well. Yeah. And so far Yeah. So good. But
Speaker 1:And so that's the I mean I mean, that is the interest interesting narrative here is like, this a crisis or a correction? Yeah. And and is this really, like, the the, like, the end of the of the of the AI boom? Is this the end of all the fun? Is the party over, or is this just, like, some slight turmoil?
Speaker 1:And so, Cotu does a great job of kind of giving examples of crises and corrections and how they kind of, they bucket together. Yeah. And so, for crises, for crises, they they highlight in recent memory, the dot com crash, the global financial crisis, and COVID, they put kind of in half crisis, half correction. And this was the question that we, that we were talking about with the tariff. The tariff drawdown was, is this something that's out of the government's control?
Speaker 1:Can they pull it? And if they pull back from the brink, it winds up looking more like a quick down and up Yeah. Versus something that's, you know
Speaker 2:It's almost more of a a reaction Exactly. Versus a a
Speaker 1:yeah. Yeah. Yeah. Yeah. And and so and so it's a little bit so because it's kind of manufactured by the administration, they can they can, by definition, pull back from the edge Yeah.
Speaker 1:And that leads to this falling more in the correction category potentially. But that's the question that CO2 centers in on during this, in this presentation. So, for crice for crisis, the first crisis that they highlight is, the 2000.comcrisis, which was incredibly long. And so the drawdown for the .com, crash was a hundred and thirty three weeks. So over two years of the market sliding downwards.
Speaker 1:And then the and then the recovery to get back to where they were took two hundred and forty two weeks. Insane.
Speaker 2:Yeah.
Speaker 1:The global financial crisis was similarly long, seventy four week drawdown, so a little
Speaker 2:bit faster on the way z Yeah. Or even young millennials have not experienced a drawdown like that.
Speaker 1:Like the global financial crisis?
Speaker 2:Yeah. Really, really ever. Right? We have, like, the the entire the the the new generation of investors has only experienced sort of kangaroo market.
Speaker 1:Yeah. Yeah. No. No. Exactly.
Speaker 2:Up and down and up and down and up and down and up and down.
Speaker 1:Yeah. And so COVID was similarly a crisis, very significant, but the drawdown was only five weeks. But it was the craziest five weeks where there were circuit breakers breaking on the on the exchanges, and there was a constant, like, oh, the market's down another 5%, and then the market's down another 5% or 7%. Yeah. And so those five weeks were were miserable, but then the recovery happened very, very quickly.
Speaker 1:Only twenty one weeks to recover and get back to the previous high, essentially. So with and then they also highlight the the peak to trough for the S and P 500. So the you can think of the .comcrisis as as like a 49, 50 percent drawdown. The global financial crisis was even worse at 57%. You're thinking about, like, you just bought all you own is S and P five hundred index, and you're down almost 60% of, like, your wealth, all the money that you've had invested.
Speaker 1:Very, very rough. And there were also commensurate earnings reductions in the .com and the two thousand eight crisis. So companies actually started making less money. So it wasn't just speculative. And this happened in less.
Speaker 1:And this happened in COVID too. Twenty nine percent
Speaker 2:dot com, '40 '2 percent in o eight.
Speaker 1:Yes. Exactly. And so significant impact, and that's the difference between a crisis and a and a correction. Yeah. Like, obviously, corrections are shorter, but they also don't hit earnings as much because companies don't have enough time to really react and and and drastically change their their strategies.
Speaker 1:Actually lay people off. Actually cut back on spending. Actually, you know, retool the business.
Speaker 2:Or in a case that terrorist way to
Speaker 1:the economy. Sort of
Speaker 2:temporarily, you know, unsustainable.
Speaker 1:Yes.
Speaker 2:And then they got pulled back to the point of still meaningful Yeah. But potentially less of a of a broad market impact.
Speaker 1:And so then the fifth the fifth indicator that Kotu identifies here is the the weeks of elevated volatility in the VIX. And so the dot com crisis had forty one weeks of higher volatility. The global financial crisis had forty nine weeks of of elevated volatility. COVID had twenty six weeks where the market was in turmoil essentially essentially with elevated VIX. But then you go to the other corrections that they highlight, Black Monday, Gulf War, long term capital management, failure in Asia crisis, sovereign debt crisis in 2011, the Powell pivot in 2018, and the inflation interest rate hike in 2022.
Speaker 1:Now that the the the the they call it inflation. We call it the end of the zerp era in Silicon Valley. We call it the SVB crisis. But it but that really was what were happening. There was there was too much money printed during the the the COVID relief era that led to some inflation, and that re then that resulted in higher interest rates, which, of course, blew up Silicon Valley and a bunch of and literally blew up Silicon Valley Bank.
Speaker 1:And and and the inflation correction, they don't put it in the crisis bucket, but it does have similar Yeah.
Speaker 2:Obviously, the the SVB crisis wasn't directly because of, you know, overinvestment in venture. Yeah. But venture got so ahead of its its skis in 2021 and early twenty twenty two that and the and and in some ways, like, the the failure of the bank was was this that Yeah.
Speaker 1:It was very symbol symbolic.
Speaker 2:Right? Even though a lot of their issues was that they had a bunch of really long term
Speaker 1:Yeah.
Speaker 2:Loans that Yeah. Yeah. That were, you know, priced well below Yeah.
Speaker 1:Sort of a sort of mismanaged was. Yeah. Mismanaged balance sheet. So, yeah, that inflation crisis, just to compare it
Speaker 2:to funny that Silicon Valley Bank could not imagine effectively, their balance sheet said, we cannot imagine a world with rates higher than 3%. I mean, I talked to just rocketed.
Speaker 1:Yeah. I mean, I talked to I I talked to people in the public markets who who had a similar sentiment that interest rates would never go up because if they did, the the government debt would be so unsustainable. And yet interest rates had to go up at a certain point because inflation was a was a was a tougher pill to swallow. And so the Fed had to take their medicine and raise interest rates, which caused that correction. Now that that correction was pretty long, forty week drawdown, sixty six week recovery.
Speaker 1:2022 was a rough year for sure, and the market drew down 25%. But CO2 still puts us in the correction category, not this crisis category.
Speaker 2:Yeah. Crisis, just to give you some insight into o eight specifically, Apple went from a hundred and $94 a share to $85 a share, 56% decline in Apple. Yeah. Google fell 55%, six hundred and eighty, Alphabet was 685 to 300
Speaker 1:seven And those companies weren't even particularly indexed on housing. It was just that the housing market collapsed and when people lose their homes or their mortgages spike in in payments, they stop buying iPhones. And so it really was just this broad economic sell off and and economic crisis. Whereas the inflation issue, yes, we saw a 25% drawdown in the S and P peak to trough, but the earning earning reduction was only 1% that Yeah. That during throughout that crisis, which is pretty remarkable because firms were still able and maybe that's a function of inflation, but firms were still able to this was like the the the other term that was coined by Kyla Scanlon, who we should have on the show, was the vibe session.
Speaker 1:This idea that the market was was in turmoil. Everyone was talking about how bad things were, but day to day unemployment wasn't spiking. It didn't have all of the trappings of, like, the global financial crisis even though it felt very doom and gloom at the time. And there was a question about, can we get to a soft landing? Can we pull back from inflation?
Speaker 1:We kind of wound up doing that, but it was still a very tumultuous
Speaker 2:time.
Speaker 1:Yep. And so the big question is, like, where do tariffs sit? Like Yeah. Are we in correction or crisis territory? What how long will this last?
Speaker 1:What is the drawdown? Already, we're at 19% off of highs or or or, you know, we we we were in the beginning of the of the of the tariff correction.
Speaker 2:And just to give you some insight back into venture, in 2,008 Mhmm. In 02/2008, venture firms raised 25,000,000,000.
Speaker 3:Mhmm.
Speaker 2:02/2009, people were were saying basically, woah. Fifth only raised 15,000,000,000 in 2009 Mhmm. Which then, obviously, last year was was over 76,000,000,000. So very, very low.
Speaker 1:Yeah. And so Code two goes on to kind of try and define the difference between crisis and correction a little bit more. So crisis, the drawdown the duration of the drawdown is long. The magnitude is gonna be more than 35%, whereas in correction, it might be less than 25%. Earnings cuts are gonna be more than 20% with an average of of 35% earnings cuts, and corrections are less than 10%.
Speaker 1:Capitulation, peak VIX is, more than a year for the crisis, but just a few months for a correction. And the sentiment, bearish in both in both cases. Boo. So the question is great sound effect. Is will we look back on 2025 as a crisis or a correction?
Speaker 1:And we've talked to a lot of people when the tariffs were happening who were telling us that this is an absolute disaster. This is a crisis. This is a permanent change in the dollar, permanent change in the the global economic order, and things looked really, really bad as they were selling off. We we were we I mean, we saw whole days where the market traded down 5%, but we have obviously built back up. And so, Kotu mentions here that 2025 may qualify as a correction.
Speaker 1:So they're tracking the S and P 500 since Liberation Day. The tariffs came in on April 2, just the day after April Fool's Day. It's rough rough timing.
Speaker 2:Everybody says it was this a social media post? Yeah. Seriously. Meant to go out a day earlier?
Speaker 1:And so it's they highlight two key moments here. Is there a market put? Government announces a ninety day pause on tariffs. That was, the actual the market bottom on April 8. And then on April 11, the regional Fed president says there may be scenarios in which the Federal Reserve would need to add temporary liquidity, saying that if the tariff situation continues to worsen, if companies are really suffering, we might need to stimulate the economy through Temporary.
Speaker 1:Temporary. Temporary.
Speaker 2:Always temporary.
Speaker 1:And so the big question is on earnings per share on corporate earnings because that is one of the biggest differences between a correction and a crisis. In a crisis, the economy truly stagnates, and we've seen that over the the the the first fifteen months on average of a of a true crisis in in CO2's definition, earnings per share dropped by 35%. In corrections, it's more like 3%. And so we are now about halfway. We're about eight months into this crisis as they're tracking it.
Speaker 1:And and 2025 is at just just 5% off of earnings. So not really tracking with the average. Doesn't mean that we couldn't see things fall, but that's where they're seeing that. And then also Yep. The VIX spike was brief.
Speaker 1:The the the volatility peaked and and has since fallen from 52 to to 23. And if you're trying to track any of this or you're trying to, get in on the action I'm more in clearing order. Public.cominvesting for those who take it seriously. They got multi asset investing, industry leading yields, and they're trusted by millions, folks. Head to
Speaker 2:publicinvesting.
Speaker 1:To to check it out. Public. Let's see. So the question is, where are we today? Forty eight days in, there's a severe year to date drawdown, which we saw 19% peak to trough in the last twenty four days.
Speaker 1:Rapid stabilization.
Speaker 2:Rapid stabilization.
Speaker 1:We love this.
Speaker 2:We love that.
Speaker 1:Love that. Rapid stabilizations. So we're up 14% since year to date low in the S and P. So the question is, are we are we on the verge of a breakout, or is this a false start and we'll retest the lows? And so they introduced the the CO2 hard truth index, a great coinage.
Speaker 2:Love to see a coinage.
Speaker 1:And this is economic hard data divided by sentiment.
Speaker 2:I would actually name this the Lefont Truth Index.
Speaker 1:Truth Index. Just the truth.
Speaker 2:Just the truth. Yeah. Purely truth.
Speaker 1:And I I mean, this is a good this is a good kind of more quantitative way to look at what Kyla Scan was talking about with the the Vibe session because you can open up the cover of the Financial Times and see a bunch of doom and gloom, and and and the sentiment can be very bad even among consumers. But when Christmas comes around sentiment
Speaker 2:is good for the news
Speaker 1:business. Is.
Speaker 2:It really is, unfortunately.
Speaker 1:Yeah. And so the question is is, you know, what is the strength of the consumer's balance sheet? What how is the strength and and the true health of the American consumer? And what's the state of the of the job market? So they they they they identify Co two identifies a few different metrics that they're traggings tracking.
Speaker 1:So lagging data like job market inflation, leading indicators like consumer spending, orders, bookings, and permits, and then bleeding edge, indicators like proprietary Co two data available on a daily basis because, of course, they're they're tracking all this stuff very closely. Then on the sentiment side, they're looking at business sentiment. Are businesses investing in growth or delaying capital and hiring plans? Or is CapEx increasing at important companies? Investors, are investors optimistic about future returns?
Speaker 1:So there are polls that go out to investors just to ask them about their sentiments. And then if you aggregate all of those, you might get a picture of how the sentiment in the stock market is doing. And then you can decide if that is if if if the if the investor sentiment is out of step with the economic hard data. And then, of course, consumer sentiment, you can look at consumer spending or and saving rates. And so in terms of sentiment, it's not looking good.
Speaker 1:Twenty five year sentiment indicators are
Speaker 2:at peak negativity. Across every sector. So investors, businesses, and consumers, everybody is bearish. Everyone's black pilled. And I'm a contrarian, John.
Speaker 2:Yeah. No. It's funny. I was having a conversation with a buddy of mine. I won't I won't name him.
Speaker 1:Yeah, sure.
Speaker 2:But he started a a a widely used unicorn.
Speaker 1:Okay.
Speaker 2:And we were grabbing lunch last week.
Speaker 3:Mhmm.
Speaker 2:And the restaurant was just absolutely packed middle of the day. Yeah. It felt like it was and it was a restaurant that both of us go to routinely. Sure. And we're like, we haven't seen this place this packed Yeah.
Speaker 2:In a very long time. Yeah. And it felt like the roaring twenties.
Speaker 1:Was about to drop the roaring twenties.
Speaker 2:Just dropped in there. And granted that's in Los Angeles, on the coast.
Speaker 1:Yeah. People are wealthy.
Speaker 2:Yeah. But it still felt, you know, it it in that environment, if you asked everybody individually Mhmm. How do you feel about the economy right now? Whether they're a business owner, investor, consumer, everybody would have been like, like, feels shaky. Yeah.
Speaker 2:Yet their actions are saying something else, which is that the consumer is actually decently strong.
Speaker 1:Yeah.
Speaker 2:Right?
Speaker 1:Yeah, yeah, yeah. Yeah, it is very interesting. And I mean, it comes back, I mean, we're gonna get into this, but it comes back to that idea of like the picking up pennies in front of the steamroller that is AI. Yeah. So there can be like all these crazy things that are happening and it makes so much sense when we talked about when the terrorists
Speaker 2:were initially happening. Yep. It was like, hey, is this a distraction from just winning
Speaker 1:Yes.
Speaker 2:In AI? Yes. Jensen is obviously conflicted, right? Every CEO, he's heavily, he's basically an index of AI progress. Yeah.
Speaker 2:But in many ways, like if we are entering a new type of industrial revolution in intelligence
Speaker 1:Yeah.
Speaker 2:And, you know, probably that's the only thing that that matters is to really
Speaker 1:Yeah. Win. I mean, we should probably cover this when we go through NVIDIA earnings, but the, like, as soon as the tariffs hit and NVIDIA was hit very hard, I remember there was there was this massive drawdown in NVIDIA specifically. And there was, you know, huge questions about NVIDIA's China business and and just overall GPU demand, DeepSeek and Jeben's Paradox stuff. Yeah.
Speaker 1:He was very much saying, like, no. Like, things are gonna continue to grow. Like, we're gonna be fine. And and the big question is, like, is, like, was was that ever Cope, or was he just actually right the whole time? Or did he, more importantly, execute very strategically in a tumultuous time to outmaneuver something that could have actually been pretty bad for his business?
Speaker 1:And so I'm sure we'll go into that during the NVIDIA segment. But if you're speaking of widely used unicorns, you gotta get on Figma, Figma dot com. Think bigger, build faster. Figma helps Faster.
Speaker 2:Design and development teams build great products together. It is a tool we use all day long. It's amazing.
Speaker 1:Know. We love Figma. Anyway, there are some more consumer data points that Kotu calls out here. One from Visa, all spend bans remain resilient and consistent with past quarters. Overall discretionary and nondiscretionary spend remains strong.
Speaker 1:We have not seen any signs of overall consumer spending weakening, says Visa on April 29. What was that? Pump it up?
Speaker 2:That's Ben. That's Ben. Okay. Ben. Pipe down, Ben.
Speaker 1:Capital One also says spend trends were largely stable through the end of q one. Bank of America says consumers are still spending money. American Express says we're we're seeing our customers act as if they have act as if as they have acted in the past. What's happened with the stock market or consumer confidence hasn't been associated with our card member spend. They continue to spend, and they're not spending off what's in the market.
Speaker 1:And so consumers consumers continue to spend, and so there's this the the vibe session narrative is still going strong, which is very Yeah.
Speaker 2:I mean, it's interesting because Yeah. Obviously, we're seeing exceptional growth in AI, but we're also seeing pretty exceptional growth in the core business infrastructure. So Ramp, other companies in the payroll space, like Riplane, things like that, are seeing tremendous growth as well. And I just, you know, and and AI is also a factor in that. And
Speaker 1:so CO2 actually support. CO2 actually charted this hard truth index, and they and they track they track sentiment as the blue line here, and then they track green and green hard data. And so the Evercore company sales report. And so these should track very closely. Like like, the the sentiment should match the hard data.
Speaker 1:But from 2021, '20 '20 '2, '20 '20 '3, sentiment was lagging the hard data, which was very, very positive. And then more more more recently, sentiment has taken a massive spike down at negative 1.4 where the hard data is basically neutral at negative point three. And so, yeah, again, we're seeing more quantitative analysis of the vibe session, and it just doesn't seem to be going anywhere. And I and I do wonder why we're seeing you know, this this data goes back twenty five years, and the dislocations are pretty, pretty rare. You can see there's it feels like there's a little bit more more there there's sometimes a little bit of more more oscillation where the hard data is a little bit more aggressive than sentiment.
Speaker 1:Actually, during the .com boom, sentiment was more neutral even though the hard data was worse. And same thing in same thing in the in in in the in the global financial crisis.
Speaker 2:Everybody's everybody's, like, you know, spraying champagne in each other's faces. Meanwhile And the economists are like,
Speaker 1:this is terrible. Like We're cooked.
Speaker 2:You We're cooked.
Speaker 1:You were valuing companies with $5,000,000 of revenue at 10,000,000,000. What what were you thinking? Everyone's like, it's fine. It's fine. Well, now now we're seeing the opposite.
Speaker 1:And so to recap, Kotu sums it up. Says this does not seem like a crisis yet, more like a sharp correction. It's too early to tell, but it's surprising how bad sentiment is compared to hard economic data. And someone must be wrong between Wall Street and Main Street. And so this is this is the question
Speaker 2:that we're trying to trying
Speaker 1:to, dig into. So sentiment sentiment alone, they say, is not enough of a buy signal. When business sentiment is below the tenth percentile, the S and P 500 has top twenty percent one year return, 35% of the time. 8% of the time when business sentiment is below the tenth percentile, the S and P five hundred has a bottom twenty percent one year return. And and and you don't know 57% of the time.
Speaker 2:More than half the time, you just don't know.
Speaker 1:You just don't know. So based on history, they're looking at next twelve months price to earnings of the S and P five hundred, and the market still looks expensive. But, of course, a lot of that is driven by tech companies that that are growing very quickly. We talked about this interesting data point that something like the mag seven grew revenue in q one at something like 30% annualized, where the rest of the of the Fortune 500, the the the two ninety three that aren't magnificent, apparently, they grew at, like, 8% less. Magnificent.
Speaker 1:The less magnificent. And so, I mean, the the interesting thing here is that tech has seen a notable multiple reduction. And so if you you can track the price to earnings multiple of all the tech companies, which here are in where which one is which? So the tech companies are in blue, and the nontech companies are in purple. And the tech companies, you know, you go back to the .com boom, they were trading at incredible price to earnings multiples up in up at 45 x on average.
Speaker 1:And then post COVID, there was a dislocation again where tech was pulling away, but got up into the twenties and thirties, but is still trading at at 24 x earnings where the nontech companies are at 18 x. So there's still this there's still this spread. So during COVID, there was an eight x spread. AI had a nine x spread, and the current spread is six x. And so AI is not the the the subcategory, but, like, the trend that kicked off in 2024 when the when the AI trade got really, really heated up.
Speaker 1:And so some tech franchise names
Speaker 2:were small, and know, the the we keep coming back to this, but Google is actually down 3% over the last year. So, again Yeah. Despite being, you know, one of the greatest AI innovators just not getting any credit.
Speaker 1:Massive beneficiary even even this year. But, course, the the stock has traded up a bunch. And so some tech franchise names look more reasonable today. Reddit is down 49%. Tesla's down 40% off of the fifty two week high.
Speaker 1:Arm is down 34%. Shopify is down 23%. Nvidia is down 23% off the peak. Amazon, twenty two percent. Meta, nineteen percent.
Speaker 1:And so there are still some some tech companies that are are lagging their all time highs. And it it's always interesting to kind of go to the the the the public filter for what are the kind of power law, super dominant tech companies that are still in founder mode, still led by founders and and and and investigate those businesses and see if they do have if they are set up for the next for the next wave, they could be good they could be opportunities, especially if they're getting beaten up for kind of some macro trend that they will that you would expect a tech founder to be able to dig their way out of the hole, like what happened in COVID and like what happened during the, during the the the Powell pivot Yeah. And and the interest rates. Like, when interest rates went up, Shopify, Palantir, who else? I mean, a lot of these tech companies got absolutely beaten up.
Speaker 1:And the ones that really emerged, a lot of them were founder led. A lot of them were were willing to not really change course. Or if they needed to change course, they did it quicker than the other companies. And so they include a a quote from Charlie Munger here all the way back from 1998. Charlie says, forget what you know about buying fair businesses at wonderful prices.
Speaker 1:Instead, buy wonderful businesses at fair prices. And so the question is, is the glass half full or empty? Half full? You know, the the bull case here, AI is exploding. Clearing order inbound.
Speaker 1:Macro is he macro will heal it will hear will heal itself. The half empty, the value investor, they say there's a recession on the horizon. They say there's tariffs. Berkshire Hathaway has a $350,000,000,000 cash pile. Lots of things that look not great.
Speaker 1:And so what is Cotu's view? They believe that tokens are more important than tariffs, And this is the this is the AI being more important
Speaker 2:than money people will want. A crypto coin.
Speaker 1:No. No. No. Don't even joke about that.
Speaker 2:Yeah. Don't we don't joke about that.
Speaker 1:That's the one thing we we will never joke about.
Speaker 2:It's It'll take it out of context. Pump fun about it with Yeah.
Speaker 1:In fact, just to clear the just to clear the view, let's tell you about Vanta. Automate compliance, manage risk, prove trust continuously. The the the opposite of a of a of a fly by night meme coin, 1 of the most reliable businesses in the game. Vanta's trust management platform takes the manual work out of your security and compliance process and replaces it with continuous automation, whether you're pursuing your first framework or managing a complex program.
Speaker 2:Some of the best businesses in the world use Vanta. That's true.
Speaker 4:Ramp.
Speaker 2:Yeah. Duolingo, Intercom.
Speaker 3:Very
Speaker 2:cool. Mistral. Really? The French prominent French AI company. I love it.
Speaker 2:Gotta Iceland Air. Iceland Air.
Speaker 1:We haven't talked to them yet.
Speaker 2:People never think about Iceland Air being on the cutting edge
Speaker 1:of the Have you been to Iceland?
Speaker 2:I have.
Speaker 1:You have? Was it nice?
Speaker 2:I had to go there. I I once was in Africa. Okay. And I I was in college and I had $400 in my account.
Speaker 1:Okay.
Speaker 2:And I had to get back to America.
Speaker 1:So you went through Iceland?
Speaker 2:And I and I charted the most heinous route from like from Morocco to London Mhmm. To through Iceland back to San Francisco, then I made it back.
Speaker 1:What's the bull case for
Speaker 2:Iceland there? The the flight that was going to and from Iceland was Mhmm. It the the chairs didn't were were like bench seats Mhmm. And like almost made of plastic. Okay.
Speaker 2:And it was like a really, really long flight.
Speaker 1:Like a bus.
Speaker 2:But I made it home. Nice. I made it home.
Speaker 1:I feel like the bull case for Icelandair is probably Greenland becoming a state or protectorate or something.
Speaker 2:Yeah.
Speaker 1:Many people go there. And then Icelandair probably is gonna be the one to get you there, at least in the short term.
Speaker 2:Totally.
Speaker 1:They're gonna have a direct flight from where will people be going to Green Greenland from? Probably Park City.
Speaker 2:Anyway Straight from
Speaker 1:Park goes, goes into OpenAI, and they're digging into this thesis that tokens are more important than, tariffs. And so they ask, what just happened at OpenAI? The number of monthly active users, MAUs, post launch. And so the the they're tracking the number of months post launch for all of these companies. You can see Twitter now x, over ninety six months.
Speaker 1:They grew to 288,000,000, active users monthly active users. Instagram's over a billion. Facebook's over a billion. TikTok's over a billion over that ninety six month launch period. And you can see that these these these social networks, they grow exponentially, but it it it it's it looks like a complete grind compared to what OpenAI is putting up.
Speaker 1:Yep. And, of course, that's that that's because OpenAI can travel so much faster because they can leverage the virality of the social Internet, and everyone already has phones and Whereas for something like Instagram, many people didn't even have iPhones yet. And and and and and, of course, Instagram launched exclusively on the iPhone and took them a while to launch an Android phone. And I imagine that thirty six month bump is probably them launching on Android or maybe desktop. Who knows?
Speaker 1:But OpenAI launched Deep Research and Operator just, twenty four ish months after they launched the original product, and they jumped from 404, million users to 800,000,000 users. And this, of course, is based on a quote from Sam Altman who says, the users doubled in just weeks. And so it's a little bit of, they're creating this graph somewhat speculatively. They're not exactly sure all the numbers. They're trying to work backwards.
Speaker 1:And and there are, of course, questions about who are those users? Where are they? How monetizable are they? But all of that stuff is is kind of something that investors will be just digging into down the road. Right now, it's very clear that OpenAI is breaking through in a massive way all over the globe, honestly.
Speaker 1:And so, Kotu also highlights the comments of Satya Nadella, from Microsoft, talking about a major AI inflection. Microsoft says we we processed over a hundred trillion tokens this quarter, up five e five x year over year, including a record 50,000,000,000,000 tokens last month alone. So that that that quote just really says, like, exponential growth in inference. And this is gonna be very, very important for our discussion on NVIDIA earnings because Jensen previously had revealed the ratio between inference and training loads, and he hasn't given as much guidance on that now. And so there's a big question about how fast is the shift actually happening, how much demand is there.
Speaker 1:If you can compress these models and deliver a great product with less GPUs, like, basically, you could see exponential growth in token generation. But if you see exponential savings in the in the amount of GPU cycles it takes to create a token, you see flat GPU adoption and rollout. No one's really expecting that. Everyone's building tons of these massive AI factories. And Jensen did actually go into unpacking the AI factory idea a little bit more, which I'm which I'm excited to talk about.
Speaker 1:But, Jensen continues. This is from the Microsoft earnings call on April 30. While we continue to bring data center capacity online as planned, demand is growing a bit faster. Therefore, we now expect to have some AI capacity constraints beyond June, which is interesting because he was saying, oh, like, maybe I'm gonna be a leaser. Maybe I'm not gonna be clearing order inbound.
Speaker 2:The market is definitely to be a leaser. Yeah. He said, you know, he said earlier this year, he was canceling some projects. Yep. But he said he's excited to be a leaser.
Speaker 1:And we saw and and and we saw actual capacity constraints at Google in their last earnings, remember? And so it'll be interesting
Speaker 2:to see We see capacity constraints every day with you and Vio. Know. I really Throwing your phone across the room, hitting getting rate limits.
Speaker 1:I need to, like, set a recurring reminder on my calendar for every Yeah. Because if I miss a day, it's like, oh, I can't get those back because I only get, like, three a day, and I'm paying the max. The actual the actual best practice is to, like, set myself a fifteen minute calendar hold where I, you know, use VO to the back, basically. Yeah. Although there's probably a better way to to interface with it over the API or something like that.
Speaker 1:But, anyway, Statute goes on to write. With deep reasoning and agent flows like Copilot Studio, customers can build agents that perform more complex tasks and also handle deterministic scenarios. Now there's this interesting debate going on. We I don't think we got to it in the timeline, but the the the founder of Zapier was Wade Foster, not Mike, who's been on the show. Wade was saying, like, we are doing a lot of stuff with agents at Zapier, and he kind of mapped out one of his agentic workflows.
Speaker 1:And somebody was kind of chirping at him being like, this is just a workflow. This isn't this isn't actually, like, fully this isn't AI because, like, you defined for example, like, you would have one agent that processes an inbound form and then another agent that so, like, let's say that we're doing inbound sales. You you have a you have a website and a landing page, then if somebody's interested, they fill out a form and say where they're from, what size company they work for, that type of stuff. You have a you have one form that processes that, and then that hands it off to an agent, hydrates, and says, hey. Go scrape their LinkedIn and see who they're who else they're associated with.
Speaker 1:Are we affiliated with them? Are we already selling to them? Kind of like factoring that. Then you might have a different agent that sits there and triggers, okay. Based on what we know about them, now that we've hydrated the the account, let's send them an email or let's send them a phone call or let's route it to Steve who's already been talking to somebody else at that company.
Speaker 1:Yeah. Right? And and then and then on and on and on. And so these are these are, like, workflows, but they're powered by LLMs at every phase. But there's this question of, like, are they agents or are they not?
Speaker 1:It's it it all it's just not all it care about is business value.
Speaker 2:People people wanna chirp at Zapier because they're an established large company that's been operating forever, but you would have to apply the same Yeah. Rigor and framework to every company that says they're an AI agent Yeah. Right now. So
Speaker 1:Yeah. I I I think people are maybe overly obsessed with the idea of of and and I've certainly fallen into the strap before, this idea of, like, end to end learning, one shotting. This idea that, like, it is, like, creating an ensemble approach of different models, different technologies, some business logic, some deterministic logic, some some nondeterministic AI generating tokens to and reasoning tokens to to get you the result. It's all semantics. I mean, it does have an impact on, like, the super long term future and kind of the way we design these systems.
Speaker 1:But at the end of the day, most businesses just care about resolution. Results. Right. Results. Yeah.
Speaker 1:And so we're seeing that at Microsoft. Their the Azure revenue, their cloud is accelerating. So Microsoft Azure's revenue growth on a percent year over year basis through, up in March of twenty twenty one. They were growing at 55%. That that went down to 25% in March of twenty twenty three, and then it grew to 35% in March of twenty twenty four.
Speaker 1:It was down at 31% in September, and now it's on an up and and now it's an upswing again.
Speaker 2:We're incredibly back is what Saj is saying. He also reported in that last earnings call that already 70% of the Fortune 500 is using Microsoft Copilot for a bunch of AI tasks.
Speaker 1:70%?
Speaker 2:Yeah. I mean, The last 30%.
Speaker 1:We know what they have
Speaker 2:to do. Is, again, it's kind of it's kind of like Google saying, we already have a billion people using AI overviews or whatever the metric is because they're just sort of slotting it in. Yep. Because, you know, I'm sure that 70% of the Fortune 500 already runs on Microsoft Yep. Teams or whatever infrastructure they have set up.
Speaker 1:Or they run on Linear. Linear is a purpose built tool for planning and building products. Meet the system for modern software development, streamline issues, projects, product roadmaps. Linear for agents.
Speaker 2:Checking out
Speaker 1:Speaking of
Speaker 2:If you're not on Agents. Linear yet, what are you Yeah. They got cursor, runway Wow. Complexity, retool
Speaker 1:Retools on
Speaker 2:OpenAI scale for sell.
Speaker 4:Arc.
Speaker 1:Absolute dogs. There are absolute dogs over there. That's
Speaker 2:They probably wouldn't describe themselves like that, but we do.
Speaker 1:Yeah. We do. So speaking of agents, the reasoning unlock, this is back in the code two deck. Agents thinking on their own, solving problems creatively. Quote from Sam Altman, we view this as the beginning of the next phase of AI where you can use these models to do increasingly complex tasks that require a lot of reasoning.
Speaker 1:And so chain of thought reasoning is multi step trajectory where the model thinks and iterates. It writes code. It searches the web. It creates the reports, build tables, and all of these. The model keeps asking, does this make sense?
Speaker 1:I should verify the source. Let me edit my work. And so all this this reasoning revolution, this agent these agentic workflows, it feels very much like this narrative of like, oh, we kind of capped out on the previous thing. We need a new buzzword, but it's actually showing up in the data, and we're seeing it in, upward revisions to cloud CapEx when you add up Amazon, Mike, Microsoft, Google, Meta, Oracle, and Tesla. Oh, we got the big six, and it's a different six.
Speaker 1:It's a different six. CapEx has gone from $213,000,000,000, to $310,000,000,000, a a a 70% jump. And today, the CapEx forecast is up at 365,000,000,000. It's pretty crazy.
Speaker 2:Again, Tesla's up here. Good work getting in. Yep. Not a huge contributor to this. Yeah.
Speaker 2:Their expected CapEx is gonna be around 10,000,000,000.
Speaker 1:Yeah. It would be interesting to see how Tesla and and XAI kind of partner on the CapEx side, build these build these, like, hyperscale data centers because you're already kind of seeing that take shape with Stargate, where it's a separate entity. And and within Stargate, there are also separate entities where who owns the land? Who owns the the the the enter the the power production? It doesn't necessarily make sense to always bundle all of those in the same company.
Speaker 1:And
Speaker 2:so So Oracle's projected CapEx for 2025 is 16. So between Oracle and Tesla
Speaker 1:Yeah.
Speaker 2:You still have over 300,000,000,000, you know, well over $300,000,000,000 Yeah. Just coming from the core four, Amazon, Microsoft, Google, and Meta.
Speaker 1:Yeah. I mean, this is why we refer to the core four as, like, the hyperscalers truly. Yeah. And and when you look at Amazon, Microsoft, Google, and Meta, you're seeing high double digits of CapEx in the in the billions. 60, 70, 80 billion dollars going into CapEx, and that's driving the majority of that 365,000,000,000 of overall CapEx.
Speaker 1:But if AI wasn't real, if there wasn't real demand, it would be extremely hard to justify this level of CapEx investment. And so this is all driven by actual demand for Google Cloud, actual demand for Azure, actual demand for reasoning tokens.
Speaker 2:Actual demand. Mean, Meta was in the news this week talking about how building they want to ultimately create the ads that they run.
Speaker 1:So Well, speaking of ads, let's run an ad for Numeral. Numeralhq.com. Sales tax on autopilot. Spend less than five minutes per month on sales tax compliance.
Speaker 2:There is a fantastic company Mhmm. That runs on numeral. Mhmm. Lucy.
Speaker 1:Lucy. Yeah. My company runs on loose on on numeral. Anyway, going back to Kotu, they say tokens are greater, greater, greater than tariffs, exclamation point, exclamation point. I love it.
Speaker 1:This deck is, you know, obviously built by a crossover fund, hedge fund, like, very successful, like, very serious on Wall Street. Bring a little personality. I, yeah, I see them as yes. They they are a major player in venture, but they're also a major player on Wall Street. I see them as, like, a respected institution, and yet they're having some fun with the deck.
Speaker 1:And most importantly, they're clear. It's very clear, digestible, not too much jargon. Yes. There are some very small bullet points or, footnotes that I haven't been reading, but in general, done a great job of summarizing these things. So they have three toe three takeaways.
Speaker 1:From a market perspective, we remain vigilant but have confidence in the AI trend. Completely agree. Remain remaining flexible, tracking bleeding edge data carefully. AI could be such a game changer. We need to capture this trend.
Speaker 1:I think that's spot on spot on. And so that's their conclusion.
Speaker 2:My only, I know they can't give, you know, investment advice here, but, I wish they took a slightly firmer stance and said AI will be a game changer. We need to capture this trend. They sort of leave some ambiguity there. But yeah, I think that's drawing it back to earlier stage venture that feels like people are doing rounds that they feel are overpriced. Yep.
Speaker 2:They're a little bit uncomfortable Yep. With valuations or the amount of investment that's being made at at oftentimes, you know, with just a a deck and a team. But at the same time, it, you know, they they, nobody can afford to miss AI. Yep. Like, if you come out of the next five years and you don't have, you know, multiple bangers, don't expect to to be a, you know, serious fund over the long run.
Speaker 1:Yeah. So the poly market on The US recession in 2025 is down at 30%. Still a little bit higher. Like, wouldn't be that crazy if it did wind up happening, but in general, that's that's looking pretty positive on, on Liberation Day. It was at 42% on April 1, the day before tariffs.
Speaker 1:So was already climbing. I think people were expecting something to happen. It was very low at the start of the year, February of twenty twenty five. This was down at 22%, spiked all the way up to 66% post trade war, was kind of hovering around 60%, more likely than not to happen recession, and it's since been dropping and dropping. And, basically, every day, for the past few weeks, it's dropped and is now around 30%.
Speaker 1:But we gotta get it to zero, folks. We gotta get it to zero. It's a team effort over here It really is. In the American economy. Let's make it happen.
Speaker 2:Don't You know, next time you're frustrated with the economy, don't be thinking, what what's the economy gonna do for me? Ask yourself what you can do to
Speaker 1:the economy. Don't take it don't take your frustration or your consumer sentiment out on the economy. Yeah. It's okay if somebody calls you up, hey. I'm from Pew Research.
Speaker 1:How are you feeling? You can you can tell them the truth. You can tell them you're not feeling But when it comes time to do some Christmas shopping, just go all out.
Speaker 2:Just go all out.
Speaker 1:Just get on Bezel. Just buy the most expensive watch you can possibly afford.
Speaker 2:Do it. You're contributing to Yeah. GDP.
Speaker 1:Yeah. I mean, your Bezel Concierge is available now to source you any watch on the planet. And what could help build the American economy more than fantastic luxury watches available on demand at getbezel.com. Anyway, the other side of this narrative going even yes. Going even broader is there's now questions about the the The US debt.
Speaker 1:And so Wall Street has been sounding the alarm on The US debt. This time, it's worth listening, says The Wall Street Journal. Jamie Dimon says you are going to see a crack in the bond market, and he has plenty of company here. So I wanted to give a little bit of a review of this because, even Elon Musk has been talking about the the struggles of the government and how some of his optimism around writing the budget and, and creating a a budget surplus, did not come to fruition like he was hoping for. So the the big question is, is The US going broke?
Speaker 1:It's not possible. Joe Weisenthal, we print dollars. We're good.
Speaker 2:We have a dollar machine.
Speaker 1:We have a dollar machine.
Speaker 2:Yeah. The the the other element, this this went out right as we were about to go live, but Elon posted at 10:31 Yeah. About an hour ago. I'm sorry, but I just can't stand it anymore. This massive, outrageous, pork filled congressional spending bill is a disgusting abomination.
Speaker 2:Shame on those who voted for it. You know you did wrong. You know it. Wow. So not mincing words.
Speaker 1:It's rough.
Speaker 2:And breaking breaking rank from Yeah. Well, he's not a he's not an employee not a
Speaker 1:government employee anymore. He's citizen. He
Speaker 2:can Yeah.
Speaker 1:He can voice his opinion however he wants. Yeah. I think the bigger question is like, this yes. Like, this this might be depressing to Elon. This might not be the outcome he wanted, but in many ways, this is business as usual.
Speaker 1:And and so how can The US economy steer its way through, and how can markets react, and how can companies build through what is continues to be a pork filled spending package, as it has been for decades. Right? And I think the answer we're going come back to again is just is just continue to dominate on the frontier of technology, continue to win in AI and space and all of the companies that Elon is already working on. So Elon is kind of refocusing on the thing that actually He'd shared
Speaker 2:something like a week ago that he said, I'm not convinced we can solve our problems politically Yes. Through the government. Yes. We need to just grow GDP.
Speaker 1:Exactly. And so if GDP does start growing at 10% because of all the technology that folks are working on building right now, well, then that probably actually does start solving the the budget deficit, unless we just find ways to spend more pork. Who knows? Pork. Hopefully hopefully Pork filled, spend, and bills.
Speaker 1:Hold it in. So, featuring an inner an illustrated uncle Sam with pockets turned inside out, that was the cover story of America's most influential news magazine in March of nineteen seventy two. Sounding the alarm about a debt crisis has been great for companies shilling gold coins and flashy financial products, but has made smart, sincere people look silly when nothing happened. Financial markets equivalent of y two k. So why are several people suddenly worried?
Speaker 1:Because the math is getting daunting with interest on the debt blowing past $1,000,000,000,000 annually and Washington acting recklessly. Even people who have issued past warnings deserve a second or third or fourth hearing, and they link to something which I'm sure is someone who has, warned many to many times. So hedge fund manager Ray Dalio does have something to sell. His book, How Countries Go Broke, out Tuesday.
Speaker 2:Yeah. So he launched this this morning.
Speaker 1:Oh, cool.
Speaker 2:It's available now.
Speaker 1:Let's let's invite him on the show. It'd be great to have him. Yeah. But the world's hundred and seventy second richest person is hardly staking his reputation on royalties, and his arguments are compelling. Again, Ray Dalio.
Speaker 1:I actually did a I made a YouTube video about, like like, when is a like, how how would you quantitatively define kind of a, like, a fake guru, someone who talks about business but doesn't actually What is the difference between an entrepreneur or an investor that just talks or writes a book versus media is their only thing? Dalio, you can kind of like, yes, he has he has incentives around his business, but, he does not make the majority of his money from his book. And so you could you could like, the optimistic case is that his book is is is less about just selling copies. Yep. It's more about actually, like, sharing his worldview or or or trying to influence, like, his broader business.
Speaker 1:Even even maybe, like, hiring at Bridgewater could be more of a more of a needle mover for him than just selling copies. So I think it's worth investigating. Dalio told Bloomberg he gives America America Three Years, give or take a year, to avert an economic heart attack. Peter Orzog, chief executive of investment bank Lazard and former budget director, wrote last week, those who bemoaned the the unsustainability of deficit spending and debt levels back during his time in government seemed to cry wolf a lot. Now he's worried too because the wolf is lurking much closer to our door.
Speaker 2:The package Yeah. So this is what Elon was alluding to. The package of tax and spending measures sent to the senate, now officially called the one big the one big beautiful bill act could act like budgetary wolf It would add around 3,000,000,000,000 to debt levels over the next decade compared with existing estimates and 5,000,000,000,000 if certain temporary features were made permanent according to the nonpartisan committee for responsible federal budget. Yeah. For perspective, the federal interest this fiscal year already will be more than the defense budget and more than Medicaid, disability insurance, and food stamps combined.
Speaker 2:That's Moreover, the congressional budget office estimates assume that the bond market will not only tolerate a surge in spending, but become more relaxed about it with lower yields. Consider if the yield on the ten year treasury note stayed at today's level around 4.4% for the coming decade, then the CRFB estimates it would add another 1,000,000,000,000 in interest costs over that period. Wow. And what if yields surge instead in a vicious cycle? JPMorgan chief and absolute Chad, Jamie Dimon, warned on Friday of the consequences You're going to see a crack in the bond market.
Speaker 2:Okay?
Speaker 5:Yeah. So
Speaker 1:Yeah. Yeah. It's interesting. I feel like
Speaker 2:I was broke. Should try to pull up Yeah. What he was saying exactly before
Speaker 1:Mhmm.
Speaker 2:And after that because I'm assuming that it adds some important context.
Speaker 1:Please. Yeah. Go pull it up. I'm just thinking about, like, throughout my life, there's been whole news cycles around this idea that the defense budget is so massive, and it's this massive part of the federal budget overall. Or Medicare and Medicaid and disability insurance.
Speaker 1:These are these are huge, huge costs, and they and they drive the majority of the, of the federal budget. And now we're at a point where people would always talk about the defense budget or Medicaid as being maybe wasteful or maybe unoptimized, but at least you're getting something for that. You know? Like like, with those budgets, even if it's even if it's 60% or 50% or 20% less efficient than it could be, at least you're getting something. With interest, you're literally getting nothing.
Speaker 1:You're just paying the debt. And that's it. It's like, it doesn't even have the opportunity to create any value or security or health care for someone. Like, it's pure just just paying back for something that
Speaker 3:Yep.
Speaker 2:That So bought
Speaker 1:a long time ago.
Speaker 2:After Jamie Dimon said you're gonna see a crack in the bond market, okay, he says, and this is why the journal didn't want to include it Mhmm.
Speaker 1:Because it's
Speaker 2:he says, after stating this quote, Diamond emphasized that this bond market fracture is inevitable, though he is uncertain whether it will happen in six months or six years. He warned regulators directly that you are going to panic, but he himself would not panic and expects JPMorgan Chase to manage through it. He also highlighted that current bank regulations restrict banks' ability to hold bonds, limiting their capacity to provide liquidity during market disruptions, which could exacerbate the crack in the bond market. So Yep. Anyways, he's he's seemingly, you know, frustrated with the new spending bill and spending broadly.
Speaker 1:Yep. The Wall Street Journal continues, yet the bond market isn't exactly collapsing even if thirty year yields recently hit a post crisis high. So who are you gonna believe? Millions of fairly relaxed investors or some wealthy pundits? Another hedge fund manager, Paul Tudor Jones, calls the paradox an economic k fabe, a term from professional wrestling.
Speaker 2:Let's give it up for professional wrestling.
Speaker 1:We love professional wrestling on
Speaker 2:this show. Round of applause.
Speaker 1:WWE, if you're listening, I'm ready to get in the ring. Let's do it.
Speaker 2:Let's do it.
Speaker 1:We we could be the absolute it's heel that everyone hates. Yeah. Like, these slick, like, tech bros, the like, that tech and then we just get destroyed by, like, the the
Speaker 2:Logan Paul.
Speaker 1:Yeah. Logan Paul. Great. So so he says, those who know that that the numbers aren't sustainable are happy to suspend belief when while the show continues. Treasury secretary Scott Besant reiterated this past weekend that The US will never default on its debt, but it doesn't have to.
Speaker 1:Rapid inflation would accomplish the same thing if the Fed had to ride to the rescue through a measure called fiscal dominance. What is the tipping point for the bond market to go for mild anxiety?
Speaker 2:Bad things, something so cool.
Speaker 1:I know. Sounds great. We do have fiscal dominance. Former IMF chief economist Kenneth Rogoff, an authority on debt crisis, explained in April that they are never a matter a matter of simple arithmetic. Almost every country default, either through outright default or high inflation, occurs long before debt calculus forces it to.
Speaker 1:Despite Dalia's guesstimate, knowing when doomsayers will be proven right is impossible. Consider Stein's law. If something cannot go on forever, it will stop. Contrary to urban legend, that line wasn't uttered by Ben Stein, who played the boring economics teacher in Ferris Bueller's Day Off Off, but by his father, Erb, an actual economist. Life comes at you fast.
Speaker 1:Very rough. Well, if you're losing sleep over the tumult in the public markets and the global economy, you gotta get an eight sleep. They have a Pod five Ultra, a five year warranty, thirty night risk free trial, free returns, fast shipping. Are you you about to choose what I'm going to I was going there. I mean, we can tell you.
Speaker 1:Riff it
Speaker 2:it out. Should don't know if rip it out. It John's had a good bit lately that Eight Sleeps are just so comfortable that they actually they should test them on animals.
Speaker 1:Well, recently, I've been doing some animal testing at home, actually.
Speaker 2:With
Speaker 1:your With my Eight Sleep.
Speaker 2:So With your own dog.
Speaker 1:Yes. So my dog, obviously, grumpy because there's now kids around the the house and he's getting less attention and also he's just a grumpy old 10 year old Newfoundland. But I come home and he's always sleeping on the bed, on my bed, on my sleep. And I and I and he's doing it more and I don't know if it's correlation or causation, but I think he loves the sleep. Yeah.
Speaker 1:But he sleeps right in the middle. So he's getting warm on one side, cold on the other side. He wants
Speaker 2:a one
Speaker 1:Yeah. Yeah. Yeah. So, know, proudly proudly animal You
Speaker 2:can change the temperature on either side. Yeah. It's perfectly adjusted.
Speaker 1:Once he learns to use the app, it's gonna be a game changer.
Speaker 2:You should get him an iPad by the bed, but
Speaker 1:he just Yeah. We just have his nose. Yeah. Just do you like that?
Speaker 2:I I got an 87. I'm not proud of it. But
Speaker 1:I was up a little bit late, but I kinda slept in a little bit. I bet I got crushed on the on the regulation.
Speaker 2:The consistency. The consistency. 82. 80 two.
Speaker 1:Okay. Which I
Speaker 2:just I got an 87. I just need to put up seven straight nights of
Speaker 1:Okay. Let's see.
Speaker 2:Of sleep dominance.
Speaker 1:Sleep dominance.
Speaker 2:We'll see you tomorrow.
Speaker 1:NVIDIA earnings. So from The Wall Street Journal, NVIDIA's business is booming despite being shut out of China. We've been covering this for a while. Jensen's been running around the globe, building AI factories everywhere on an absolute tear. And most recently, the, NVIDIA shares surged 5% after hours as quarterly revenue surged to a record 44,000,000,000.
Speaker 1:Let's hear it for Jensen. I think you should hit the Gong for Jensen. I mean, 44,000,000,000.
Speaker 2:Why don't you hit it, John? I wanna I wanna see you on the can we get the gong cam pulled up?
Speaker 1:Let's get the gong cam pulled up. Market clearing order inbound.
Speaker 2:There we go. There we go. It just keeps ringing too.
Speaker 1:Yeah. Yeah. Just keeps ringing.
Speaker 2:When we hit the soundboard, it's it's pretty crazy.
Speaker 1:Soundboard's in and out in, five seconds, but the gong the real gong remains. You can't you can't beat it. It's the best. And so NVIDIA's business still booming even with the company effectively shut out of one of the world's largest markets for advanced AI chips. The chip titan has been on a roller coaster over the past few months after the Trump administration moved to limit sales on chips to Chinese market.
Speaker 1:We're having Aaron Ginn come on later in the show, and he'll break down kind of the, what's happening most recently, with NVIDIA and chips. He's the GPU whisperer. You, of course, know him, if you've been watching the show. NVIDIA, which has emerged as one of the most valuable companies because its chips provide the computing power needed in a global AI arms race, posted another quarter of record breaking sales on Wednesday. Let's hear it for them.
Speaker 1:Revenue reached 44,000,000,000 for its first fiscal quarter, a 69% increase that was curtailed by Washington's new limit new limits on Chinese chip sales. The company was unable to ship 2,500,000,000.0 of its h 20 processors and projected 8,000,000,000 in lost revenue for the current quarter due to the policy.
Speaker 2:So you lose Just a flesh wound, John.
Speaker 1:You lose 8,000,000,000 in revenue, which is high margin revenue too. It's this is not we're not talking Amazon here. And and you still put up 44,000,000,000, and your stock goes up 5%. It's fantastic. NVIDIA's longer term outlook in China remains a major question mark.
Speaker 1:The company admitted on Wednesday that has limited
Speaker 2:significant thing here. NVIDIA surpassed meta in quarterly revenue.
Speaker 1:Yeah. Wow. That's insane.
Speaker 2:Insane.
Speaker 1:Yeah. Yeah. And, I mean, yeah, absolute dominance of the NVIDIA CUDA ecosystem. The number of developers on NVIDIA has been surging as we saw in Merry Maker's trends report. And the company seems very, very well run.
Speaker 1:At the same time, Dylan Patel, George Hotz putting the screws to ARM. ARM seems to be, or AMD seems to be catching up, seems to be taking that feedback and trying to solve some of the problems that have been keeping developers off of that platform. Even though the cost per flop has been quite good on AMD, the ecosystem has been quite there. But obviously, everyone there is is, you know, well aware of the opportunity of of of taking a little bit of of NVIDIA's market share. And so this is an interesting takeaway.
Speaker 1:NVIDIA credited its new Blackwell gaming processors, part of the same family as its current lineup of a n of AI chips that are seeing red hot demand. Blackwell for gaming is a home run, NVIDIA CFO Colette Kress said in an interview. For the current quarter, NVIDIA projected revenue of 45,000,000,000 plus or minus 2% compared with analyst view of 45,840,000,000.00. The company expects meaningful decrease in data center revenue from China as a result of the h twenty ban. And so this is the interesting takeaway from Ben Thompson's post earnings analysis.
Speaker 1:So he said he he is really focused on the difference between the the the transition from training build outs to inference. Because training, we've seen the scaling law there. We kind of know, you know Yeah. The the race to do get to build a 20 k cluster to a hundred k cluster, and that's pretty it's pretty easy to forecast because the CEO of a foundation model company comes out and says, we're gonna build a hundred k cluster, you know they're gonna buy that many GPUs. Right?
Speaker 1:But, the inference is much more consumer demand based. And and it's always unclear. These products seem great, but how are they actually gonna get installed? How many tokens are they actually gonna be, generating? And then and then what is the trade off within those tokens of reasoning and and heavy test time inference workloads versus more more, like, lower lower volume workloads?
Speaker 1:And so Ben Thompson says, last year, I expressed concern that inference workloads were not increasing as a proportion of NVIDIA sales. So he says, it's worth noting, that while the company reported that 40% of its chips were used for inference, that is the same percentage of last quarter. So keep that in mind. 40% of NVIDIA chips are used for inference. It's 60% training.
Speaker 1:I I I think that's the breakdown when when he's talking about AI specifically. Granted, that is a large increase in absolute terms, by and large matching NVIDIA's end and, revenue increase. And, of course, training large models requires ever more GPUs, but the arrival of meaningful AI workloads will be marked by an increasing percentage of chips being used for inference, assuming, of course, that inference workloads will be run on NVIDIA chips. And there was always a question of, like, maybe you train the model on a big NVIDIA cluster, and then you bake it down so small that it runs on the iPhone locally, or it runs on a CPU, or it runs I mean, unlikely that that would ever happen. But but people have been able to distill models down so far that you can inference them on other chips that might be more affordable.
Speaker 1:But that really hasn't happened because of the CUDA ecosystem. And it feels like, in general, most of the inference has stayed with NVIDIA, and we see that in their earnings.
Speaker 2:But Yeah. Now you have the TPU, then Meta's Artemis.
Speaker 1:Yep. And and so Amazon has has Tranium and Inferentia. So they have a training chip and an inferencing and an inference chip. There's different Inferentia. I think it's Inferentia.
Speaker 1:But but both of those are are are in house chips. But for most companies, they're training and inferencing on NVIDIA. And so, on the latest NVIDIA earnings call, Jensen Huang and Colette Kress, the CEO and CFO of NVIDIA, were adamant that workloads for inference were skyrocketing, and here are a couple quotes that Ben Thompson highlights. AI workloads have transitioned strongly to inference, and AI factory build outs are driving significant revenue. This is from CollectCress.
Speaker 1:And so I think we we were we were kind of asking the question of AI factories. Is that just some buzzword? Are we is there a distinction there? And what's and what I'm hearing there is the start of AI factory means more data center that's more that's more Reducing intelligence. Exactly.
Speaker 1:It's more inference focused Yeah. Data center design Yeah. Which I think there are specific trade offs that you would need because you don't necessarily need to run the same code over the entire data center. You can you can shard it up a little bit more because
Speaker 5:Yeah.
Speaker 1:One inference job can be done on the single rack. And so maybe linking all the racks together is not as important potentially. I don't know enough about how training breaks By
Speaker 2:the way, Amazon's in house AI chips are called AWS Trainium and AWS Inferentia.
Speaker 1:Let's go. Let's hear it from my memory. Yeah. Still got it.
Speaker 2:Golden retriever mode.
Speaker 1:Yeah. Colette Kress went on to say, we are witnessing a sharp jump in inference demand. OpenAI, Microsoft, and Google are seeing step function leap in token generation, which we saw from that Satya Nadella quote. Microsoft processed over 100,000,000,000,000 tokens in q one, a fivefold increase over on on a year over year basis. And so she's now quoting Satya talking about token token increases.
Speaker 1:Wang says reasoning is a is compute intensive, requires hundreds to thousands of times more tokens per task than previous one shot inference. Obviously, the difference between Oro one shotting something and deep research, which sits there generating tokens for twenty minutes, wildly different. Reasoning models are driving step function surge in inference demand. AI scaling laws remain firmly intact not only for training, but now inference too requires massive scale compute. Wang goes on and says, the first positive surprise is the step function demand in increasing reasoning AI.
Speaker 1:I think it's fairly clear now that AI is going through an exponential growth phase, and reasoning AI really busted through concerns about hallucination or its ability to result really solve problems, then I think that a lot of people are crossing that barrier and realizing how incredibly effective agentic AI is and reasoning AI is. So the number one so number one is inference reasoning and the exponential growth there, demand growth. And so Ben goes on to say that is this is all great news for NVIDIA specifically and AI generally. But what was missing was an update on that percentage of chips used number. It certainly sounds like it's more than 40%, but it would have been nice to receive concrete information that that that number has in fact increased.
Speaker 1:And so I don't know how we get that information. I we were talking to Dylan Patel on Friday. We can kind of see if he has a way or or a methodology to try and figure that out. But that does seem like a very, very interesting question to ask. Yeah.
Speaker 1:It might be it might just be too soon to really be shifting, but maybe the plan for the next data center and the order hasn't hit NVIDIA yet will be more inference focused, and we and we could see a boom in and we could see a shift in that number. And maybe it just hasn't shifted yet in in q one revenue, but it's totally possible that Jensen has visibility into q two, q '3, q '4 orders
Speaker 2:Yeah.
Speaker 1:And sees that demand is gonna go crazy for inference specifically. We're gonna be looking at 10 training, 90% inference. But he can't say that yet because the orders haven't actually been placed, he's only looking backwards. So he's trying to kind of, like, you know, message that inference is picking up. You can see a bunch of public data points from Sacha talking about this, but but nothing to report on the actual order side just yet.
Speaker 2:Yeah.
Speaker 1:And so he doesn't wanna send the message that it's not moving because then people will be like, oh, well, maybe it'll never move. So I I don't know. That that that's my that's my reading
Speaker 2:on that.
Speaker 1:Yeah. Anyway That's right. Let's go into NVIDIA's China argument. So the upside surprise for investors is that NVIDIA is growing just fine without selling to China. Although, again, although Ben Thompson says, I'm sure I'm not sure this is a surprise.
Speaker 1:NVIDIA sales have not been gated by demand, but by supply for a long time.
Speaker 2:Making this exact statement last year.
Speaker 1:I got it from Alex Wang.
Speaker 2:Yep. Why do we need to sell to China at all when there is effectively there there
Speaker 1:Larry Ellison and and Elon Musk are getting dinner with Jensen saying, we will buy as many GPUs as you can produce. Like, they are good for the deal. Like, you you you can just sell to them. But, of course, if you're a global company, like, there isn't there is a shareholder responsibility to have some diversity of revenue. And then there's also that interesting argument of, is there value to be
Speaker 2:dependent on Yes.
Speaker 1:American AI. Yeah.
Speaker 3:But
Speaker 1:Yeah. We I I mean, I mean, the the the the hypocritical thing here is that we you know, I I'm I'm sure we have said, hey. You know, it's not fair that TikTok operates here while Facebook operate while Facebook can't operate there. Well, now what what would we be talking about right now if Facebook was actually in China operating? Would we be like they shouldn't be?
Speaker 1:Like, it's it's a powerful tool. It's beneficial. Google is there. That's a beneficial tool. Why are we helping them?
Speaker 1:So, like, we're in this weird dynamic where where you can't you can't you can't say both. Right? You can't say it's wrong that it it it's wrong that that companies are banned in China. American companies are banned in China, but also the ones that aren't banned should, like, self ban. Yeah.
Speaker 1:When in fact, most most American companies for a long time have. But this is all part of, like, the shifting narrative and the shifting geopolitical equation. Yeah. So it it is unclear.
Speaker 2:Ben goes into the timeline. Yep. Somebody's quoting a post from Financial Times. Jensen saying, four years ago, Nvidia had 95% market share in China. Today, it is only 50%, the CEO said, criticizing the curbs for spurring rivals such as Huawei to develop their own AI products.
Speaker 2:Baldings World says this has been the story of every CEO that has gone to China. How do these I'm not gonna say that. How do these guys not get this story yet?
Speaker 1:I won't call. You won't even say.
Speaker 2:I won't call a big tech CEO an idiot.
Speaker 1:Yeah. You just won't. Yeah. Yeah. It's disrespectful.
Speaker 2:I can't do it. Anyway, so Ben says, what I believe Balding is referring to is the pattern in which a multinational moves manufacturing to China Mhmm. At the cost of a joint venture or technology transfer only to see their market share competed away by Chinese competitors benefiting from their technology. Mhmm. This is, of course, the exact opposite of what is happening to NVIDIA.
Speaker 2:The company's market share in China is falling because of the US government's export controls, not because of Chinese government policy. Is that What? Is that fully true?
Speaker 1:I think so.
Speaker 2:You don't think competition has a fact is is factoring in there at all?
Speaker 1:No. No. No. I mean, because if you look at the cost per flop, Huawei Ascend is more expensive on a per cycle basis. And so if it was a truly free market, you wouldn't see nearly as much demand for that.
Speaker 1:And also, in the same way that demand for jet use uncapped in America. Uncapped in China. Like, they wanna build a hundred thousand cluster right now. They would if they could. Yeah.
Speaker 1:They have the money.
Speaker 2:In a supply constrained market that would naturally help other upstarts get market share even if they're selling an inferior product. But if customers can't access but you'd rather have a Huawei GPU than no GPUs at all.
Speaker 1:Yeah. Right? Yeah. Yeah. Yeah.
Speaker 1:Totally. Moreover,
Speaker 2:unlike the vast majority of other product categories, one would in fact expect NVIDIA to maintain its market share if it were able to compete. The difference, of course, is software. NVIDIA chips are not just about GPUs, but about the CUDA software layer, which has network effects. NVIDIA not only has the best performing chips on the market, matched at times in pure performance by AMD, they also by far have the largest ecosystem of software and developers, which makes them the first choice for everyone if you can buy them. Mhmm.
Speaker 2:Wong's argument is that not only does NVIDIA want to sell to China, but The US should want him to sell to China too from the call.
Speaker 1:A tough argument to make, but, you know, let's hear him out. He says, China's AI moves on with or without US chips. It has to compete to train and deploy advanced models. The question is whether China will have AI. It already does.
Speaker 1:The question is not whether China or whether or not China will have AI. It already does. The question is whether one of the world's largest AI markets will run on American platforms. Shielding Chinese chipmakers from US competition only strengthens them abroad and weakens America's position. Export restrictions have spurred China's innovation and scale.
Speaker 1:The AI race is not just about chips. It's about which stack the world runs on. As that stack grows to include six g and quantum, US global infrastructure leadership is at stake. And, yeah, it's interesting. Like, is like, the the control over Facebook was so strong that because there's network effect, but also all of the data is run on Facebook servers that Facebook really has an insane amount of control.
Speaker 1:When you hand over GPU, obviously, there are there are some value to the ecosystem and the lock in, but you can kind of do whatever you want with it because it's hardware, and you're not maintaining the software and gating access. So there is something there there is something different there. But but I but I I do take his point. And so, Ben Thompson goes on to say, it's it seems clearly in America's interest for China to have a dependency on US software on a US software platform. Then again, it also seems to be in the in in the in America's interest to have China dependent on Taiwan for chips, but that argument is not winning the day either.
Speaker 1:This this article goes on. It's great, you should subscribe to to to get the full thing. Anyway, we we should go to this this Bloomberg piece that Ben highlights a little bit. NVIDIA's open ecosystem to rival chipmakers is in global push.
Speaker 2:Opening AI ecosystem to these chipmakers. Yeah.
Speaker 1:So NVIDIA Corp chief executive officer Jensen Huang outlined plans to let customers deploy rival chips and data centers built around its technology, a move that acknowledges the growth in house semiconductor deployment by major clients such as Microsoft and Amazon. On Monday, Huang kicked off Computex in Taiwan, Asia's biggest electronics forum, dedicating much of his nearly two hour presentation to celebrating the work of local supply chain partners.
Speaker 2:Gong for a two hour presentation. Oh, okay. Yeah. Sounds crazy. The fact that he's going and opening up this conference Yep.
Speaker 2:And giving a two hour presentation.
Speaker 1:It's pretty awesome.
Speaker 2:But then I remember we we come up here and do
Speaker 1:And do three hours a day.
Speaker 2:Every day. Well, he should come
Speaker 1:do the show with us sometime. Do the whole show.
Speaker 2:Let's do the whole show.
Speaker 1:I'd love
Speaker 2:do Imagine ripping some timeline with Be great. Jensen. We'll make it happen.
Speaker 1:It'd be electric. But his key announcement was the new NVLink fusion system that allows the building of more customized artificial intelligence infrastructure, combining NVIDIA's high speed links with semiconductors from other providers for the first time. And so this is a little bit of what we're seeing where there's now chip startups that are building chips for specific, for specific, you know, use cases. So an example would be like Etch. They're bake they're baking the transformer architecture down onto silicon, but you could even look at Apple silicon as something that might benefit from the NVLink fusion system potentially.
Speaker 2:I don't
Speaker 1:know if
Speaker 2:it's actually saying, hey. We know you hyperscalers are building your own chips. Yep. We still want you to be dependent on our software even if you're going
Speaker 1:to Ecosystem. Yep. And so to date, NVIDIA has only offered complete computer systems built with its own components. So you buy the all the chips and all the racks and everything wires together very nicely, and that is very important for data interchange and especially while you're training. This change gives data center customers more flexibility and allows a measure of competition while still keeping NVIDIA technology at the center.
Speaker 1:NVLink Fusion products will provide customers the option to use their own central processing units with NVIDIA's AI chips. Their CPUs now pair with NVIDIA's GPUs or pair NVIDIA silicon with another company's AI accelerator so you could kind of do the inverse and bring bring up a a specific accelerator for a specific use case. Santa Clara, California based NVIDIA, they love to throw in the location of these companies. It's very funny.
Speaker 2:Oh, yeah. Everybody associates NVIDIA with Santa Clara.
Speaker 1:I guess. They're trying to shore up its place at the heart of the AI boom and keep the surge going in the face of concern that spending on data centers isn't sustainable. The company relies heavily on a select group of giant cloud providers known as hyperscalers for much of the revenue, and all of those hyperscalers are, of course, thinking about building their own chips. Because if they're gonna be ordering so many, the margins are so high, why not just go to TSMC directly? And so this bit of news, this is back to Ben Thompson.
Speaker 1:This bit of news from Computex two weeks ago is a reminder that CUDA isn't NVIDIA's only moat. The company is also dominant in networking, particularly the link the ability to link multiple chips together so that they function as a single large chip. The key to this is so to the so called scale up capabilities NVLink. And so NVIDIA will license its chip to chip c to c technology to enable custom configurations. For example, Grace Hopper was an NVIDIA ARM CPU and an NVIDIA Hopper GPU.
Speaker 1:Oh, I didn't realize that. Grace Blackwell is an NVIDIA ARM CPU and two NVIDIA Blackwell GPUs. If you don't want that configuration, you're out of luck, or at least you were because now you can license NVIDIA's c to c technology, and license seems important there, to make any number of combinations. And it doesn't have to be NVIDIA chips that are being combined, although NVIDIA is obviously confident that you'll choose their GPUs because, yes, they are the best in the business. Fascinating.
Speaker 1:Anyway, we should move on to this Nike story in the information because there's a very, very interesting chart, again, from Ben Thompson that I thought everyone should be thinking about in any of their business. So the big news is, this is from the information in May 2020, May 21. So it's a little bit of an older article, but Nike announced that they are going to sell on Amazon for the first time since '2, since 02/2019. So it's been six years off. So, six years ago went
Speaker 2:all in on d two c. Yeah. They really got the d two c bug.
Speaker 1:They did.
Speaker 2:And they said they they read the thought pieces. Yep. They read the newsletters. Yep.
Speaker 1:Cut out the middleman.
Speaker 2:Yeah. They wanted they they were pissed at the middleman.
Speaker 4:Yep.
Speaker 2:They tried to cut him out.
Speaker 1:And It
Speaker 2:didn't they're making deal with the middleman.
Speaker 1:And so, six years after Nike stopped selling through Amazon in favor of going direct to customers through its own stores and websites, the two companies are getting back together. I'm sure it was super rough because tons of people probably went to Amazon every day, typed in Nike, and just got Nike knockoffs. Right? Yeah. Because they were just used to buying on Amazon.
Speaker 1:Amazon plans to start selling Nike products with supplies coming directly from the company. An Amazon spokesperson confirmed Wednesday, winning back one of the world's best known brands as a victory from Amazon, for Amazon, which has long tried to expand its fashion business by wooing skeptical brands. Nike's deal with Amazon, meanwhile, comes as the sneaker maker is trying to revive slumping sales. So Amazon is going to buy Nike for, buy from Nike for the first time since 2019, and this is, this is all an effort to revive slumping sales. Now Nike's revenue is down a ton.
Speaker 1:The in the most recent quarter, fell to 11,300,000,000.0, down 9% from the same period a year earlier, while wholesale revenue fell 7% to 6,200,000,000.0. And so Ben Thompson calls this Nike's disastrous pivot. He says there's a lot that has been written by Nike struggles over the last few years, including a LinkedIn post by former Nike's executive. And they're and and he he outlines three key mistakes here. The elimination of categories like running, basketball, etcetera, a massive deprioritization of wholesale in favor of direct to consumer sales, a shift away from brand marketing to direct response.
Speaker 2:Trying to avoid middlemen in business is rough. It's like, oh, we're gonna have owned we're gonna have we're gonna have our own retail stores. Yep. And it's like, okay. Well, you have a landlord.
Speaker 2:Yep. So he's your middleman now.
Speaker 3:Yep.
Speaker 1:And so, yeah, the middleman He's selling online.
Speaker 2:Yeah. Okay. Welcome. Meet Mark Zuckerberg. He's gonna be your new middleman.
Speaker 2:It's like trying to avoid the middleman is Yeah. Very difficult. Right?
Speaker 1:It's interesting because, the middleman analogy has actually worked just fine. And Ben Thompson has this cool chart of the CPG value chain and shows that Procter and Gamble literally does not cut out the middleman. In fact, they leverage the middleman, and they're and they're doing fine. So what does Procter and Gamble do? They do research and development, and they do manufacturing, but they don't handle the middleman.
Speaker 1:So they don't handle logistics or retail, but they do dominate shelf space and with trade marketing and then marketing Yeah. Like brand marketing. And so CPG companies like P and G harvested most of the value by integrating research and development, manufacturing, marketing, and shelf space. Raw materials, retail, and logistics were modularized and commoditized. D to C companies, meanwhile, saw research and development as increasingly unnecessary in over served markets, as I noted in the context of Dollar Shave Club.
Speaker 1:Razors are a particularly salient example of over serving, And shelf space on the Internet was effectively in infinite. Their goal was to integrate marketing, retail, and manufacturing. And so the theoretical, if you scroll down, the the theoretical d to c value chain is no r and d, just manufacturing, no logistics, but yes, retail. You don't have shelf space, but you do the marketing. And so Ben Thompson says, the the the problem, though, is that marketing on the Internet was inherent was entirely different than the analog marketing that previously dominated the CPG industry.
Speaker 1:They're they're being good at advertising, whether it be coupons in the Sunday paper or television ads during the evening news, was mostly a matter of the ability to spend, which was itself a matter of scale. Digital marketing, though, didn't really work at, at scale, at least relative to TV. In fact, it only made sense if you could target consumers with advertising and track how it performed. On the one hand, this was a critical factor for making d to c companies viable. The advantage of targeted advertising is that it takes a lot less money relative to d to TV to reach customers who are actually interested in your product.
Speaker 1:The problem, though, is that getting good at targeted advertising requires massive amounts of both research and development to build the capability and inventory across a sufficiently large customer base to make the whole effort worthwhile. In the end, no d two c company was actually good at marketing. They outsourced it to Google and Facebook, which both had the inventory and the capability to spend billions necessary to develop sophisticated targeted advertising. The problem is that in the process of depending on Google and Facebook for marketing, the d to c companies gave up their planned integration in the value chain and the associated profits to Facebook and Google. And so the actual d to c value chain is they're not a manufacturer.
Speaker 1:They don't do retail. They don't do logistics. They don't do marketing. Instead, they just do r and d and ad inventory, and and and so the actual customer is just completely owned by Facebook. And that's why you see a lot of d two c companies that have really, really struggled.
Speaker 1:So the actual integrated players, Google and Facebook, integrate customers and research and development to dominate marketing. D2C may have online retail operations, but that is a modularized and thus commoditized part of the value chain. And, oh, yeah. He he called that brand list, the the the the D2C kind of, like, roll up that had a whole bunch of products. And, and he said, here's the problem for d two c companies.
Speaker 1:Facebook is really better at finding them customers than anyone else. That means the best return on investment for acquiring customers is on Facebook, where d two c companies are competing against all the other d two c companies. And but the mobile avail oh, and the mobile game developers and the incumbent CPG companies and everyone else for user attention, that means the real winner is Facebook, while d two c companies are slowly choked by ever increasing customer acquisition costs. Facebook is the company that makes the space work, and so it's only natural that Facebook is harvesting most of
Speaker 2:the dynamic where Meta's incentivized to make customer acquisition, like, basically extract as much of the profit from the ecosystem as possible without putting the companies out of business. Yeah. Right? And so it's this infinite dance.
Speaker 1:Yeah. I mean, that that's actually a very simple equation. It's take all the net profits, but not any further. Yeah. So that the company can continue to go, but the equity value is effectively zero.
Speaker 2:This is why when when
Speaker 1:Sean Graham
Speaker 2:from Ridge was on the show one or two times ago, we were talking about how historically I've seen DTC brands benefit from net new platforms. A lot of brands exploded from cheap advertising on TikTok. Yep. Right? If, you know, it seems like LLMs are an interesting new acquisition channel, still relatively small channel for a lot of brands, but it's possible when ads hit LLMs that they're cheaper and that that could drive, you know, a a period of of where brands say, hey, let's, like, shift a bunch of spend over here because it's, you know, really efficient.
Speaker 2:But who knows? Facebook is still the best marketing channel in the history of
Speaker 1:It's the second best, in fact. Number one, obviously, AdQuick. Out of home advertising made easy and measurable. Saved good buy inbound. To the headaches of out of home advertising.
Speaker 1:Only AdQuick combines technology, out of home expertise, and data to enable efficient, seamless ad buying across the globe. But seriously, like, Nike is the king of billboards.
Speaker 2:Like Yeah. They really are. I mean, they used to be.
Speaker 1:They used to be. They used be. And the billboards were fantastic, and everyone remembers a Nike billboard. No one remembers a Nike direct response ad on Instagram. Yeah.
Speaker 1:Like, I'm sure people clicked on them, and I'm sure they drove some sales, but the economic equation just didn't quite work.
Speaker 2:Yeah. Well, we walked by some billboards today
Speaker 1:Yep.
Speaker 2:That are funny. There is a huge billboard campaign across LA called Just Blood.
Speaker 1:Oh, yeah.
Speaker 2:Oh, yeah. Yeah. Talking about basically, it's a campaign to prove that Elizabeth Holmes is innocent. So there are effectively I think there there's gotta be 20 billboards up around LA. So I'm interested to follow along with this campaign.
Speaker 2:If you go to justblood.com, it's quite a lot of AI generated assets. And it seem it's kind of an angry website, but I'm interested to dive deeper there. Going back to some of Nike's errors, they deprioritized wholesale, and then the big one was a shift away from brand marketing to direct response marketing. So when people think about why they love Nike, maybe sometimes it's about the product, but a big part of it is how the Nike brand has made them feel over time. Mhmm.
Speaker 2:And it's really hard to make people emotional through direct response advertising because direct response advertising is like problem, solution.
Speaker 1:Yep.
Speaker 2:It's not about the emotion.
Speaker 1:Yep.
Speaker 2:And when I think about the moments in my life where I've where I've paid attention to Nike and, you know, been made made to feel anything by Nike, it was these sort of bigger brand campaigns. Yep. And brand marketing does provide a halo effect that can reduce overall customer acquisition costs.
Speaker 1:For
Speaker 2:long
Speaker 1:Because
Speaker 2:you see some Nike campaign that inspires you or makes you emotional, and then you see a direct response ad later, you're more inclined to actually click through. And so big miss by John Donahoe to just sort of not realize that so much of Nike's dominance was around the brand. The other thing is like, you know, you look at these upstart players in apparel, things like Vori, Aloe, Lululemon, they're all, you know, and we talked about this on the show before, Nike missed wellness. Right? They missed this trend that a huge amount of the population, people, you know, consumers with a lot of discretionary income stopped seeing themselves as athletes and started seeing themselves as, you know, yogis, people that meditate, people that eat healthy, but don't necessarily see themselves as I'm an athlete.
Speaker 2:So big miss that I I believe they're still trying to actually get tapped into. But
Speaker 1:Yeah. Well, it seems like they're they're pivoting back to the more traditional strategy, and probably we'll see some refocusing on brand marketing because they'll just be everywhere, and they won't they won't try and cut out the middleman anymore. They'll just be everywhere and hopefully we'll see some amazing Nike ads coming up soon.
Speaker 2:Would love We
Speaker 1:have our first guest of the show, Doug Filipone from Snowpoint Ventures joining us.
Speaker 2:I'll let you take the intro. Perfect. I'll be right back.
Speaker 1:Doug, how are doing today? Let's bring him in here. I'll give a little bit of background on Doug in the meantime. He has a degree from West Point, spent seventeen years in the military, and then another seventeen years at Palantir, building the defense business from nothing into a global defense lead. So we're excited to talk to him about that.
Speaker 1:And, it'll be very interesting to cover the Ukraine drone attack, which we talked a little bit about yesterday, but, there's a lot more that we can dig into there. So, Doug, how are you doing today?
Speaker 5:Great. Thanks for having me.
Speaker 1:Thanks so much for joining. I'd love to kick it off with just a little bit of your background first, and then we can go into the the the the the latest news, in Ukraine.
Speaker 5:Yeah. No. That's great. Yeah. So what it well, I've been on a life journey.
Speaker 5:I'm I've done a lot. Everything has been hard. I think it's about everything that I've done in my life. People have told me I couldn't do it, and I sort of thrive in that world.
Speaker 1:That's awesome. That's always the case. Right?
Speaker 5:Yeah. Well, look, nothing nothing worth doing is, you know, is easy. That's true. Yeah. No.
Speaker 3:I think when
Speaker 5:I was a young man, I was just I went to college for just a minute and then I was like, this is stupid. I'm in the hamster wheel. And I said I wanted to join the army. I went into the Rangers as a list of guy, and then, you know, got into West Point a little bit later. While I was there, I studied math.
Speaker 5:All my friends made fun of me. They're like, what are you gonna do with math? And I definitely got the last laugh there.
Speaker 1:That's amazing. Were they just saying like like computer nerd type jokes or
Speaker 5:No. It was just like I mean, basically, you gotta remember, I'm a little bit older, but I in the nineties, it was, like, it was before the modern Internet era and so forth. And so, you know, computer science was, a hobby more than a real thing. You know, the Internet, you know, was just coming out while I was in school. And so it was, it was just like the idea of, like, you're gonna be high school math teacher, and that's, like, the that's the end of what math is useful for.
Speaker 5:And so look. My focus was I'm gonna go be an army officer. I'm gonna go back in the rangers, and that's gonna be my career. But, you know, I did six tours in the war and got hurt.
Speaker 4:Wow.
Speaker 5:And so, you know, at that point, I went back to grad school and then found a job in the very early days of Palantir. And literally, like, the only reason I got hired was they were trying to start their defense business Mhmm. And they sort of thought that, like, a a terrorist hunter mathematician was a really cool thing. Yeah. I sort of found, like, the the perfect first job.
Speaker 1:Yeah. How do walk me through how you actually met the Palantir folks. What was the first day on the job like? Who was around the table? Was Sean Sankara there?
Speaker 1:Carb?
Speaker 5:Who else is involved? That was fascinating. So, so back in the day, it used to be Carb. You know, it's like maybe 50 people there. Yeah.
Speaker 5:You know, they they had a product. But the interesting thing so one of my very best childhood friends, Dan Cerveli, he was one of the best engineers at Palantir, period. Yeah. He was, like, a alternative student. I say alternative.
Speaker 5:He's, like, older getting his bachelor's when he's,
Speaker 3:like, 32 or something.
Speaker 1:Yeah.
Speaker 5:And he was he was interviewing at Facebook at Palantir. He's like, Doug, you gotta see this. You gotta come over. And and then he had just joined. And so when I saw, like, the first demo, even though it was all intel based Mhmm.
Speaker 5:It was very clear. I just went back to my time as a commander in the rangers. It was just I was just I was convinced that if I had this, I could have done everything better. And I and I really was you know, a lot of my friends were still going back to the war and getting wounded or killed. And so it was just for me, it was about purpose.
Speaker 5:You know, I think you probably you probably know a lot of Palantir people, but we're all, like, in this, you know, strange family that is Palantir. Everyone is uniquely driven for a sense of purpose. And for me, it was like I wanted to do something where I could give back. And if I, you know, if I'm honest, if I would have stayed in versus obviously, I was hurt, so it didn't matter. But, like, I have easily contributed a thousand times what I would have if I just stayed in towards the, you know, towards towards the mission.
Speaker 5:So I feel quite proud
Speaker 1:of that. So so while you while you're in the service and you see what Palantir can do, could you give us a more concrete example of, like, what you're thinking? I mean, I I often give there there's a little bit of a meme online, like, what does Palantir actually do? And the and the and the example that I often give is, like, think about if there's IEDs all over the place, some of those IEDs are gonna have c four. Some of them are gonna have nails.
Speaker 1:And if you put those all on a map, you can decide you you can start to see clusters of trends just on a map, and then you can decide, okay. There's a bomb maker in this town. We should go and investigate that. That's the most concrete example I've been able to come up with that I've read just from the literature. But as someone who was there, what what was
Speaker 5:the I mean, that's definitely like the that would be the 2010 version.
Speaker 1:Sure.
Speaker 5:You know, just sort of like you know, at the core, it's like they make a software architecture that helps combine a myriad of data systems. So, like, all these legacy systems. If you think of the defense world, all these different areas, whether it's commercial businesses or the military, the larger they are, the the more that they all look the same. The military might be the most, like, complex, but it's all similar in the sense that you have a myriad of legacy technology that's built and modeled around information and capabilities at a certain time. And then over the
Speaker 3:course of history, it's like hard to get
Speaker 5:rid of those old systems. So if you look at the IT infrastructure of the Department of Defense, it's like you have old mainframes on one end that's modeled certain things on the edge, and then you have, like, the most exquisite AI sensor Mhmm. That's doing real time data and computer vision on the other end. And as commander, what you're trying to do is assimilate the real world in real time. So it's like you're you're looking at a map, you're looking at all of your feeds from either videos or satellite footage to understand what's going on, what's changing.
Speaker 5:And then if you're ever gonna go, like, to understand what's going on in the real world. So you're understanding things and you're making decisions based off that data that you might have to go without Palantir. You have to go a hundred different places. Mhmm. So that was like the existing paradigm that we were replacing is how do you if if you an old school analyst or an operator would have to literally go individually search a hundred different systems and use an individual tool for each one of those systems that may or may not be good.
Speaker 5:Mhmm. And then they would put all that stuff in their mind, and they write it back on PowerPoint. And then that's how and you'd have no legacy search and discovery. You would be violating all of the, like, handling of the data. You'd lose all the the security of it, and it's just, like, on a flat file and your email went around.
Speaker 5:I can't tell you, like, how long that was the paradigm of the military and most corporations.
Speaker 2:Can you can you talk about the practical challenges of that? There's this concept of the fog of war and I imagine you experienced this on your different tours where you have a bunch of data but parsing through it and fully understanding and I can imagine Yeah. In many ways Palantir, if if you can more quickly and accurately process information from more sources, you can reduce that sense of of sort of unknowing that that seems to be historically, you know, common across every different type of battlefield.
Speaker 5:Yeah. No. I mean, the short answer is, like, it will save your life, and you can have a successful mission or not. I mean, the the historic vignettes that are, like, pretty powerful for regular people to understand is, like, as the military would plan a mission to go in and out like, forget about the real time stuff that is obviously very relevant. It's just, like, knowing what's going on and how strategic things are moving around and if someone's attacking you.
Speaker 5:Like, you have to have that side of it, which Palantir does a lot of. But, like, from a historic perspective, once you're planning a mission, to be able to understand the full history, if you're staring at a piece of dirt or you have, like, hey. We we think the bad guys are at this compound or there's a military a legitimate military target that you're gonna strike. To understand the whole corpus of data that you may know about that for the last ten years. So to give an example of, like, you know, the failures of the Afghan war or Iraq for that matter, just using the American experience, but you can do this just about any war, is that, you know, as units would go in and out of a region, you would have these, like, learning experiences that would last three to six to twelve months.
Speaker 5:And then they would at best, they would put all the information that they learned, whether it's like say so say I went on a mission, I interviewed somebody, and I I I took fingerprints, I took pictures, I would write a little note that say, here's the here's the human terrain of this area. This is what the people care about. Here are the projects.
Speaker 1:Yep.
Speaker 5:Here's where we did a mission. You know, they usually do an after action mission report about
Speaker 1:it. Yep.
Speaker 5:And you put on a hard drive, and then the new commander would come in and hand it them. And then they would probably look at it for two seconds. And then I mean, that's literally how it was done for twenty years. Yeah. And you're you're like, how can this with with all of our might and all of our superiority in every way and the money that we're throwing at this, why does it suck so bad?
Speaker 5:Anyway, that was you know, Palantir's mission was to, like, how do we change that paradigm so that you know, the interesting thing if I give a a one of the compelling things, so we did this with the British, you know, with with I don't even know if I'm allowed to say this, but think of their most sexy unit, the Brits. Yeah. And they were they were going into a specific area. And what they didn't realize over the past five years, they had every time they flew a helicopter into a region, you know, they have this host of analysts that are like they work with helicopter pilots, and they do menserated graphics so they understand the exact perfect helicopter landing zone for the mission. Mhmm.
Speaker 5:And what they didn't realize was that each new team would come in and they would always do their expert analysis, and they'd always pick the same exact place. And so then all of a sudden when we integrated all this data for them, they saw for the first time, holy cow, every single time for the last five years that we've gone into this valley, we always landed in the same place. So it ends up being like a very easy low tech thing for the enemy to put a bomb at the middle of the HLZ. They're like, anytime Americans come, blow up the bomb. But that's like they call that knowledge management, which is like that's a little bit old school, but it's like that was a very unsolved problem forever.
Speaker 5:And then now, if you get to like real time what we're doing now, it's like, okay. Well, now you're taking real time signals intelligence. You're taking real time video feeds where you're overlaying what the video of the surveillance aircraft will be looking at and then with the entire corpus of information you would know about the area. So as soon as you're looking at a piece of ground, you're like ten ten reports pop up of everything you know about it. So you immediately have situational awareness that'll help say help you stay alive.
Speaker 5:That's really important.
Speaker 1:Can you tell us the story of, DCIGS and the distributed common ground system? Like, how that played out and, like, the lawsuit. Like, are you any at any level of detail that you think is appropriate.
Speaker 5:Yeah. No. I don't know. I mean, look, that was my personal Vietnam except for I I won. So it's like, it's okay.
Speaker 5:It's not it's You know?
Speaker 1:Congratulations.
Speaker 5:Yeah. Think of a different longboard that's that somebody won and I'll and that'll be it. But it was like ten years of my life. Wow.
Speaker 2:Ten years.
Speaker 5:Yeah. No. It was it was wild. And I will tell you that there's a lot of times when I just didn't think or win. I literally flew up to New York one time and and rode in the car with doctor Karp, and I was like, sir, do you still want me to do this?
Speaker 5:You know, because it's like, I don't know if there's, like, any amount of hard work or that is gonna allow us to win. And he had this, like, great moment of leadership where it was like, if any soldiers are still asking this is maybe 02/2012. I forget exactly. But he was like, if any soldiers still want this, it's worth fighting for. It's too important.
Speaker 5:Mhmm. And, you know, it was just that moment of leadership that I needed. So I got out of the car and, you know, and then, like, just a, you know, a few maybe the next week, I had some massive win on Capitol Hill. But it was I mean, look, I credit that. I mean, the the reason I started Snowpoint and, like, the the modern defense tech landscape exists because Palantir was able to break that paradigm.
Speaker 5:Mhmm. And, you know, if you think of the new executive orders kind of like really focusing on acquisition reform. Yeah. So, you know, it was like an old nineties thing. The lawsuit was about this, but there's an old nineties it was called the Federal Acquisition Streamlining Act.
Speaker 5:I think it's '94. But it's during the Clinton days. I don't know how old you guys are. But it's it was basically, there were these scandals about the $400 toilet seat and the $200 hammers.
Speaker 1:That sounds cheap by modern standards. I feel like I every day I see
Speaker 2:a soap dispenser.
Speaker 1:There was a soap dispenser that was, like, 50,000 or something. No.
Speaker 5:But it's the same BS.
Speaker 1:Yeah. It's same
Speaker 5:So the interesting thing is so before 1994, I might be screwing this year up by a year or two,
Speaker 1:but Yeah.
Speaker 5:Before then, the there was this old term called mil spec. Yep. And the mil spec idea was that the preference of the US government was to buy custom things as the priority. And so all of those scandals turned it on its head and created this idea where you have a commercial item preference. Mhmm.
Speaker 5:And so, you know, this is sort of like the when I talk about the invention or say the, you know, the start of the modern defense tech era, it was the winning of the lawsuit, which I think was 2016 or so. It was the first time since a lot of been passed that it had actually been enforced. So our our lawsuit was like the precedent setting thing. And all we were finding out, they have like there's protests all the time. Like, almost every major contract gets protested.
Speaker 5:So that part of it wasn't unique. What was what part of that was unique about this was we weren't it was called a pre award protest. Mhmm. And so normally a protest is like somebody else wins and then Lockheed gets pissed at Raytheon and then they just argue about who's better, and then the court decides. Our protest was that we thought we were getting screwed by the army, which we were, where they specifically wrote the contract, where I had put so much pressure on the army to expose all the flaws of d six.
Speaker 5:Like, d six was, like, simultaneously failing while they spent billions of dollars on it, while over half of the army's brigade commanders were requesting urgently Palantir. So there's this huge battle where, you know, it was like units would request Palantir. The army would block it. I would go to congress, expose it, and then they were just this back and forth. And and I was, like, enemy number one for years.
Speaker 5:And this is where all my warfighting skills came into play. It was, in many ways, fighting bureaucrats was just as hard as fighting terrorists. And so I had that, like
Speaker 2:It was good that had boardroom general. Right?
Speaker 3:Yeah.
Speaker 5:I was on the front line. So but, anyway, so yeah. So so in this particular case so the lawsuit, it was interesting because this is another experience of, like, you know, between Peter Thiel and and Carve, it was, like, they trusted me. Mhmm. And I couldn't have done it.
Speaker 5:Like, it's very unique in the Palantir world that, like, they would that everyone said we're gonna lose, period. And I think, like, statistically, they weren't wrong. I think the the the chances of winning these cases are, like, 3%. Mhmm. So it was, like, clear.
Speaker 5:And then if we won it so, basically, this is so everybody's like, you guys are crazy. And you're like, Doug, just do this. And but it was like, we were uniquely driven in the sense that we had the moral high ground. We had all the evidence. It was it was the perfect setup.
Speaker 5:But but anyway, long story short is, we did end up winning, and then we won the appeal three to zero. And so it sort of set up this thing where, you know, at the end of the day, we when we won it, we didn't get any money. It was like, basically, we just burned 3,000,000 3 to $5,000,000 in the hallway on legal bills. Wow. But then we had to go compete for the original d 600.
Speaker 5:So I wasn't sure. Like, I was halfway terrified with all this trouble and then the army would blackball us, which could have happened. But long story short is that was sort of the the real legitimate beginning where it was no longer a guerilla campaign for Palantir where we're just winning enterprise contracts
Speaker 1:Yeah.
Speaker 5:You know, on run and then on merits. And it's just, you know, the software is 10 times bet I mean, it's just it's so impressive, to watch. I mean, obviously, I'm officially retired, but it's like I'm in I'm in the mafia for life.
Speaker 1:Yeah. Yeah. So can you can you talk about, like, the the long term build out of the defense business at Palantir, where it is now, and then where you're seeing opportunities in defense tech, whether on top of Palantir with their AIP program or just generally outside of the it just seems like the army is modernizing and the DOD is modernizing generally. So companies won't need to go through the same seventeen year journey necessarily.
Speaker 5:No. I mean, look, that's the whole reason I started Snowpoint, was the idea was, like, during my journey, say I did a hundred things right and a thousand things wrong. It's like, how can I help other companies accelerate through that cycle and and, you know, ultimately help help our whole society? It's like having everyone succeed including for the services. It's it's a win for everybody, long story short.
Speaker 5:But
Speaker 1:Yeah.
Speaker 5:You know, I think it's like it's interesting, you know, because during, like, early years, I was I got the seed corn in across, like, SOCOM and JSOC and then a few initial army units, and then that was kind of growing. But we were still searching for the elusive program record. And then we went to, you know, across there's, like, 17 different countries that we kinda got started in the military business. I was flying on airplanes everywhere. And we got the c corp done, and then there's, like, NATO is, like it was kinda the inside joke of, that's never going anywhere.
Speaker 5:And then now, you know, of course, this is eighteen years later. It's, we finally, you know, won this huge contract with NATO. I'm like, you know, it's taken forever, but it's it's it's been fascinating to watch. And I think that, like, what I what I determined, you know, again, this is rewinding a little bit, was like we have to win in The US. And then once we won in The US, it was sort of like this the dominoes started falling where and this is a deep history with Palantir, and I tell a lot of my portfolio companies the same thing, is this idea of like exiting crises.
Speaker 5:Is that, you know, many different companies with a lot of different technology, will they all look similar on paper. And so it's like, how do you prove it? And one of the, like, defining things that I believe about Palantir, in particular, but a lot of my I hold my portfolio companies the same standard is this idea that when there is a moment, an exigent moment where it really matters. And so in the military context, that means that, like, a commander is doing something, people are dying. Mhmm.
Speaker 5:You have to win. Then at that point, all the bullshit goes away. Mhmm. And you have to have something that actually works that's that's real. And that is something unique in the sense that, like, Palantir has never screwed that up.
Speaker 5:And and it was just sort of like knowing that, it's like you gotta obviously, it took us forever, but it's like we're past that we're way past that, you know, say by a couple years. But past that momentum point where, you know, you were always fighting. Like, the biggest barrier to entry was, like, some loser CIO or CTO inside a corporation or the government saying, don't worry about this. I have this PowerPoint slide, and I can build this cheaper, faster, better. And then all the incentives are wrong, and then they would slow roll you, and and you wouldn't make any more.
Speaker 5:And and so the the challenge where we would always say is that the open door was around who cares? Mhmm. And are you actually talking to the profit loss owner, like, where it actually matters, where the bottom line matters? And in the military, that was, like, the operational commander. Mhmm.
Speaker 5:Like, if you got buried in the Pentagon where they're talking about programs, you can't walk four feet without running into, like, a $300,000,000 disaster.
Speaker 3:They're all in they're all in
Speaker 5:denial about it. And it's like because it, like, either tests out on paper or they're like Yeah. It's coming. It's gonna be here. It's gonna be so awesome.
Speaker 5:Just don't buy Palantir. It's too expensive. We're gonna do something. You know, I I mean, dude, don't even get me started.
Speaker 2:We're getting you started.
Speaker 1:We're getting you started. Let let let's flip to something much more concrete and and timely. What's going on in Ukraine? What's been your reaction, and what is the solution or impact with to the defense tech ecosystem?
Speaker 5:Yeah. You know, it's interesting. I traveled to Ukraine in the very early when when Poundshare was just getting started there
Speaker 1:Mhmm.
Speaker 5:In the very early times of the war. I went to Kyiv just to see what what was true and what wasn't true as we got kinda started. And, you know, it's fascinating to think there's, like, a there's a deeper political thing and then there's obviously a military and technology thing about this. And but it also applies to NATO and, like, what's you know, the the defense tech market in Europe versus The United States and what the hell is Europe gonna do now that, like, they have to, you know, do something real and stand up their own capabilities. I think this is, a fascinating time of, like, accountability, and and I think it's good I think it's good for the world.
Speaker 5:I do believe that the world is better when The US is the hegemon. I believe that deeply. It's like we can argue about whether or not we can afford it. But I'm, like, a firm believer in terms of, like, what I'm doing in the defense tech market, but it's also good for for Palantir. All the companies, it's like with less budgets I mean, I suppose it's it's always good with more budgets, but it's like with less budgets or trimmed budgets, it's like if you need something real and you have, like, a short timeline that's the perfect environment.
Speaker 5:There's no free chicken. Like, the the entrepreneurs still have to actually deliver on what they said they're gonna do. They have to deliver. But that's the time when you can really succeed. Because when it's like you're kinda doing nothing and you're just like talking about these like five year programs, you you the tendency is just to waste money.
Speaker 5:So going back to the Ukraine example, you know, in many ways, like Zelensky single handedly saved NATO. You know, because it's like Biden's plan was to get him on a helicopter and get out of there. Like, it was just on the heels of the failures in Afghanistan, and then it was like it was clear, like, enemies of The United States, this is your time. Screw with America as much do whatever you want. Biden's not gonna do anything.
Speaker 5:So it was a very so it was a very tricky time. The fact that he decided to stay and fight, you know, was super impressive. It definitely saved NATO. And you have to think also initially and this kinda goes to, like, the deeper problem of, like, what's how are the what's the resolution of this and what can we learn from it? And I'll try to go faster.
Speaker 5:But think of this initially as Ukraine stopped Russia by themselves in the beginning. Yeah. That's something to, like, really pay attention to. And and there was there was a few scenes early on because I used to model this of, China versus Russia. It's like the Russia was the real military and China is like this paper tiger.
Speaker 5:And I just kinda, like, flip flopped all that in my head down. But it's like Russia could not have screwed it up more than they did.
Speaker 3:Mhmm.
Speaker 5:And, you know, there were those those scenes of like and I was like, god, if we only had a squadron of a tens on board, we could have like but you know, I don't know. He had this like trail of tears of like it was literally just like the first Iraq war where it was like a, you know, a 10 or 20 mile convoy of, like, every military vehicle and Russia was stuck on one road. I was like, please, baby Jesus, where is an a 10? That's all we need right now. But, look, there's there's a a very deep asymmetry with Russia versus, Ukraine.
Speaker 5:I think the truth is you know, I don't have a good filter here, but it's like the truth is that both armies suck. Both military suck, and they've devolved into some sort of World War one BS thing. If you look at the numbers, it's like, you know, in terms of
Speaker 1:people pushing back there. This drone attack seemed extremely sophisticated. This did not seem like it's involved.
Speaker 5:You're you're not wrong. You're not wrong. But but but that is that is, it's a brilliant move. Will it have any impact on the course of the outcome of the war? Untold.
Speaker 5:It it does it also mess up the the peace Oh, the peace process? Stocks? Yeah. Yeah.
Speaker 3:It's sort of
Speaker 1:like hate. Deep in in Russian territory. It could be seen as aggression.
Speaker 5:Look. You could you can talk about this like there it is a it is a massive and incredibly laudable tactical victory. Mhmm. It's impressive in every possible way. I I love it.
Speaker 5:You know, in a lot of way. You know, because you sort of think of the you know, again, this is a very asymmetric fight. If you look at, like, you know, people, it's, like, 1,300,000 on the Russian side for active duty, 200,000 on the on the Ukraine side. But they've just kinda devolved into this, like, frontline thing. And so, like Mhmm.
Speaker 5:Is is the deep attack gonna actually change the front lines or the course of the war? I'm not convinced of that at all. It definitely the the challenge here is, like, how do you degrade the ability of of Russia? Because they they have a huge, like, production problem. Like, they have they they outnumber if you look at tanks and armor.
Speaker 5:It's, like, you know, 17,000. But so it's, like, you know, it's, like, one of the interesting statistics here is that Russia has, like, 17,000 tanks, but they've lost during the war, they've lost 8,000 tanks. Mhmm. The US only has 4,600 tanks.
Speaker 3:Mhmm. Just to
Speaker 5:put it in perspective. Wow. Wow. But but it hasn't made Ukraine win. You know, like, they're still stuck with this sort of, like, hey.
Speaker 5:How do we do so this is incredible, like
Speaker 2:But tactically tactically, is this return to World War one style, almost trench warfare that we're seeing? Is that a byproduct of new technology coming onto the battlefield that is asymmetric and, you know, generally both armies don't fully understand how to deal with yet?
Speaker 5:Yeah. The interesting thing is, like, you know, if I say to my, you know, military colleagues, it's like, there's a lot to learn from what's going on, but don't learn too much. Because this is a very unique thing in the sense that Russia in particular, but Ukraine as well, have have completely failed to be able to execute a joint combined arms fight. Mhmm. And so this is this is the thing that The United States is uniquely the best in the world at.
Speaker 5:Mhmm. In a sense where, like, what does that mean? It means that you integrate space, air, land, sea, artillery all into one like, you have a decisive point of the battle. You have a bunch of shaping efforts to the battle, and then you can succeed and you can pour troops into and accomplish something. The US this is the most complicated thing you can do, and it's super expensive.
Speaker 5:That's why we have a 800 plus billion dollar budget. And that's what The US is like a thousand times better at than anyone else in the world. And what I can tell you is the Russians, the reason that they lost against the Ukrainians by themselves is because they don't know how to do that. They were treating air force as like artillery. None of it was combined.
Speaker 5:They totally failed like in terms of communications, the ability to communicate and command control, like all of that stuff, total disaster. And here we are four years into it or whatever. It's like, what what's the outcome?
Speaker 4:I'm curious how
Speaker 2:I'm I'm curious what Russia's early stage defense tech market even looks like. I imagine it's a lot of it is government directed, but how are they adapting? Are there Yeah.
Speaker 5:Private companies? Yeah. Like, the thing about Russia is, like, again, they've been very good at advertising specifically, like, very low production or one production type things where they're like
Speaker 1:Exquisite systems.
Speaker 5:Right. Exquisite systems. And then they have two of them. Yeah. And then the the the the majority of their stockpiles are Soviet era bullshit that's horrible.
Speaker 5:And if you think about it like this, think of the Soviet Union back in the day. It's like and they're still not good at this. Is that or even you go all the way back to World War two. It's like they've never been good at manufacturing. Like, think of how many cars are made in The Soviet Union or Russia.
Speaker 5:Right? How many real planes do they make? Right? And so, like, all that stuff is like, they can build one or two off, but they're fully reliant on the West for all this stuff. They've never been good at it.
Speaker 5:What they've been good at is like, can we stamp out thousands of really cheap, attritable systems? And
Speaker 2:And do tanks fit into that category? Are they
Speaker 3:Yeah.
Speaker 5:But but but they're not fighting with them because then you could argue that, like, because of the tactics, how relevant are they on the modern battlefield? You know? And I think Ukraine with, like, a ridiculous, underdog approach has been able to use cheap drone warfare. And, like, to be clear here, I think that Ukraine is probably the best in the world at drones. Mhmm.
Speaker 5:And they have really at a tactical level Yeah. Again, it's not changing the outcome, but they're at least holding the status quo.
Speaker 1:And they're making millions of them. Like, they they figure
Speaker 5:out Oh, and it's and they're and they're legitimately good. Yeah. I mean, it's that part is fascinating to watch. I just don't know that, like
Speaker 1:Yeah.
Speaker 5:The way that we fight, if you were to put The US if you take away the nuclear component of this, which always makes it tricky, the reason we have nukes is to make it tricky. Right? So you don't do these things. But I'm just not convinced that we would do it this way at all, and and how quickly would we would we win? That part's fascinating.
Speaker 5:How do you
Speaker 1:think about counter UAS technology right now? You have to imagine that Russia's thinking about every and any and every response to make sure this never happens again.
Speaker 5:I would see any Yeah. And, look, I was I was I apologize for being, like, too bearish about, like No. How much does this matter. The the attack is, like, stunning. It's it's almost it's not quite as good as the Hezbollah beepers, but it's pretty close.
Speaker 1:Is that fair? Okay.
Speaker 5:The Hezbollah beepers I did my master's thesis on Hezbollah, so it gave me, like, you know, specific joy. But Okay. I you know, the the idea that, like, the uncertainty and kind of a step back that it would take within Russia. So, basically, now they're searching every single truck. You know, they're, like, super high in security.
Speaker 5:This has caused mass chaos across Russia. Now they can't mask those those jets together anymore, so you have to space them out. So this has, like, serious consequences to their, like, strategic capability Mhmm. Let alone their ability to just go bomb Ukraine.
Speaker 2:Do you think that, do you think that going forward, various militaries, Russia in particular, will seek to place, strategic bombers and aircraft like that in hangars and provide some type of defensive mechanism? Because the fact that they were just sitting out in the open, we had
Speaker 5:to No. I I I actually think that there's like there's I don't know specifically this. I'll have to look it up. But there's like there is like it's part of like the there's a part of a nuclear treaty is
Speaker 3:that Yeah. So so it
Speaker 2:it mostly got rolled back. Russia rolled it back at the beginning of the war from what I've seen.
Speaker 3:But you
Speaker 2:can but you can imagine they would say, hey. We're not gonna participate anymore, but they wouldn't necessarily build all the structures necessary to actually adapt.
Speaker 5:Yeah. No. I mean, look, all this stuff takes time too. I mean, that's the the biggest thing is like, you know, for the a lot of those play I mean, first of all, they're gonna have to do that. Whether there's a tree that says they have to be in plain sight or not, they're gonna have to do that.
Speaker 5:I mean, so this is like this this attack has caused a strategic impact. Whether that gets Russia to the to the table faster or better or it gets land concessions for Ukraine or it gets some I'm not convinced of that. Mhmm. But it definitely is, like, a very successful thing. And we also don't know the ramifications.
Speaker 1:Like Yeah.
Speaker 5:You know, does this up the ante? Does this get us towards World War three? I don't know. That part scares me. I do want the war to end, and it definitely gets in in into the like, Trump administration is trying to end the war, and neither Putin or Zelensky are, like, playing ball.
Speaker 5:It's like that's kind of the disappointing part of this.
Speaker 1:Well, I I mean, we have to have you back on. I feel like we could go all over the world and talk about geopolitics for four hours. So, expect to get another calendar invite because this is a fantastic conversation.
Speaker 2:Yeah. Thank you for jumping on.
Speaker 1:I really appreciate it.
Speaker 5:Thank you both.
Speaker 1:Appreciate it. We'll talk to you soon, Doug. Cheers. Thanks so much. Bye.
Speaker 1:And we have our next guest already in the studio, so we'll bring him in. We're gonna talk we're we're gonna recap some of The Middle East AI deals, talk about geopolitics in AI, some of the chip stuff. I still have yet to figure out what the horse means. Why I
Speaker 2:just love horses, John.
Speaker 1:You just love horses?
Speaker 2:I grew up, I wasn't a horse guy. I have I have an extreme admiration.
Speaker 1:My mom texted me after the show last night. She said she was watching the show and because you were playing the horse sound, her dog was running around looking for a horse. So give give the dog some horse. For all the dogs that are listening,
Speaker 2:you're now on the hunt for For all the dogs.
Speaker 1:Anyway, welcome to the stream. How are you doing?
Speaker 4:Doing good. How are you?
Speaker 1:Great. Welcome. Thank you so much for joining. Would you mind, kicking us off with a little bit of introduction on yourself for for everyone who's listening?
Speaker 4:Yeah. So, Tavneash Kaushik, I am at Beacon Global Strategies for a national security adviser firm. So, basically, what I do is, you know, work with US industry on how to be better national security partners to The United States.
Speaker 1:Great. And I I I wanted to have you on to to kind of look at a retrospective on what happened in The Middle East. We saw Jensen Huang go over there. I think Elon and Sam and Alex Wang and all the big tech CEOs went over. What what is your read now that we have a little bit more distance from how those relationships are changing, what we should expect, what the actual trade deal came, how everything netted out, basically?
Speaker 4:Yeah. I think it's a it's a very interesting thing that happened over there because you look at what the Biden administration did in January. They they tried to approach AI diffusion, with, like, three key strategic objectives. They were like, we want to prevent offshoring to The Gulf. Mhmm.
Speaker 4:We want to prevent these trips being smuggled into China through which is mostly a Southeast Asia problem.
Speaker 3:Mhmm.
Speaker 4:And the third one, like, we wanna prevent remote access where Chinese entities are just using
Speaker 2:Yep.
Speaker 4:These chips through the cloud. Like, there are hyperscalers trying to build big data centers for Chinese companies and Malaysia and all. Yep. Using this technology as a tool of economic statecraft, I think, was a secondary objective, not primary. Whereas, I feel like what has happened, what we've seen with the Gulf trip is more often upside down, where we're using this technology as a tool of economic statecraft.
Speaker 4:We're trying to get concessions. Like, we're going to give you these chips, but we want reciprocal investment in The United States. Yeah. We want one to one investment. Yep.
Speaker 4:And we want certain security conditions. Now a lot of that is yet to be cleared up. Right? We haven't finalized, it seems, per media reporting on what the security conditions are, whether they apply to specific entities or whether they apply to the UAE government or the Saudi government as a whole. Do they get to host Huawei chips or Huawei infrastructure in the same data centers where they're hosting US chips?
Speaker 4:Right. Like, there are reasonable concerns that some people have raised, and those are things, obviously, I think, the security details will will probably be figuring out. Because, if you remember, Microsoft and g forty two did a similar deal at a company level last year in April. That was accompanied by an intergovernmental assurance agreement, which required g forty two to do certain things like not have Chinese hardware in certain number of years, just, you know, restrict access for military or intelligence purposes. Like, that deal was really well drafted.
Speaker 4:There were a lot of things that people pointed out that could be done on top. So I think we'll see how this shapes out in the next coming few weeks, how we see the security guarantees coming together. But overall, I think this is in line with what the president has said that we'll give you our technology, but what will you give us in return? Mhmm. So that's the theme that I expect to, continue see.
Speaker 4:Deal.
Speaker 1:Heard of the deal. How how important is LAMA in this, emerging geopolitical narrative around AI? We're hearing that, these I I've been calling them, like, kinda jump ball countries. They're countries that aren't full allies, and they kinda could do business with China, and that's kind of the geopolitical backdrop for all this. If they don't do a deal with NVIDIA, they're probably gonna run Huawei Ascend and DeepSeek and Manus on top of that.
Speaker 1:Is an open source stack important to some of these countries?
Speaker 4:Yeah. No. I think there are two questions in there. First, whether China can even export Mhmm. Which there are actually, the the data suggests, you know, China has enough dies that TSMC shipped to China.
Speaker 4:Mhmm. TSMC shipped to Huawei in violation of US export controls, like about Mhmm. 2,900,000 dies enough to produce a million nine ten c's
Speaker 3:Mhmm.
Speaker 4:Or nine hundred nine ten b's. Now, you know, that's that's a lot of GPUs, but they also have a lot of domestic demand. Mhmm. So the question becomes, like, will they be able to meet their domestic demand, let alone export? Mhmm.
Speaker 4:I don't think that they have the capacity to produce a domestically at scale to export. There was this announcement from Malaysia recently, which the minister walked back afterwards where which made for a splashy headline that Ascend data center is coming online in Malaysia. But if you look at the details, it was 3,000 Ascents by 2026.
Speaker 1:Yeah. It's nothing. So
Speaker 2:they can't
Speaker 4:meet that. That's
Speaker 3:that's one
Speaker 5:thing. Abstract.
Speaker 4:Yeah. The second thing to your point
Speaker 1:Yeah.
Speaker 4:Right, because some of these countries have worked with China
Speaker 3:a lot.
Speaker 1:Yeah. Of course.
Speaker 4:And but one of the things of bringing countries into our fold is that we have to work with countries that are in China's fold right now.
Speaker 1:Yeah.
Speaker 4:That is a precursor of bringing them into our fold.
Speaker 1:Yeah.
Speaker 4:But you have to be realistic what the risks are and how do we mitigate them. Some of these countries have been doing joint military exercises in Shenzhen of all places or hosting military bases. And Saudi Arabia, I believe, like, a month or two months ago, their national telecom champion did a strategic, announcement with Huawei. And so you have to be realistic and put put in place those mitigation agreements. But separately, to your point on open source, I think we should be flooding the zone with American open source Mhmm.
Speaker 4:Stack at the expense of Chinese models.
Speaker 2:Mhmm.
Speaker 4:I I think we are not paying enough attention to what can happen when a state controlled company to some extent. You know, there are a lot of PLA ties that DeepSeek has have been scrubbed from the Internet. Now if the state wanted to, there was a great entropic paper last year. I'm not sure if people remember, but on sleeper agents that can be added into models.
Speaker 1:Yep.
Speaker 4:The Chinese state really wanted to, you know, cripple US infrastructure or get into your phones. Why won't they just put in sleeper agents that would activate in a year or two years?
Speaker 1:Yeah. If it runs into critical infrastructure, it changes the way it reasons.
Speaker 4:Exactly. And so we should be bearing ICPS action. Right? Like, we're doing a lot of export controls on American tech not going to China. Mhmm.
Speaker 4:But where's the import actions on preventing this Chinese tech from coming into The United States or helping other countries deploy American tech? Like, look. Come on. Let's be real. Nobody in Kenya is gonna pay $200 a month to access advanced AI models.
Speaker 4:We should be deploying American open source stack there.
Speaker 1:Yep.
Speaker 4:We should be incentivizing companies with, like, loan programs from the Development Finance Corporation, Exit Bank, whatnot.
Speaker 1:Yeah. Kind of a new AI Belt and Road strategy, something like that. Exactly. Makes a ton of sense. Yeah.
Speaker 2:Do you do you think we'll see something to the to the effect of a Stuxnet within AI in the next ten years, fifteen years?
Speaker 4:I'd be surprised if there are not zero day attacks that have already been exploited.
Speaker 2:Yeah.
Speaker 4:That we don't know yet.
Speaker 2:Yeah. That makes sense.
Speaker 1:Might, there's been a lot of talk around NVIDIA's earnings around the shift from training to inference, and we saw with DeepSeek some really, really creative engineering around distilling models and switching to, I think, FP eight and floating point, and just a whole bunch of optimizations to to get a really great result out of less significant hardware. And so I wonder if there's is there any risk that the as pretraining plateaus, we wind up with a scenario where the distillation process continues and inference shifts onto lagging edge semiconductors and all of a sudden, the the the gap between TSMC's leading edge three nanometer and China's ability to produce in mass at seven nanometer, even beyond 10 nanometer beyond, that that actually changed the dynamic.
Speaker 4:Yeah. And I think, you know, right now, we have the lead there. It's it's possible
Speaker 1:Yep.
Speaker 4:That that happens. And the answer I would tell you that many people in the US government would give you is we should not be complacent about it. Mhmm. Right? We should not be providing components to Chinese companies to build semiconductor manufacturing equipment there Yeah.
Speaker 4:To produce these semiconductors. Right.
Speaker 1:Yeah. We so so what is your take on on, the the chip ban and this idea that, like, you kind of either need to be all in or all out? Like, it's either con don't just worry about the chips, but also worry about the entire supply chain. Or is there is there a creative argument that you could potentially make where there is value to the American semiconductor and and, I guess, Western semiconductor stack, ASML, TSMC, actually having an benefit in China. It it it feels very counterintuitive, but I was just remembering a decade ago, everyone in technology was making the argument that Facebook and Google should be allowed to operate in China, and now we're making the argument that the other tech company should not be allowed to operate in China.
Speaker 1:And I I I kind of agreed with both of those, but they do seem at odds. Walk me through that argument.
Speaker 4:Yeah. I think, look, there are two point technologies, right, where we do not want the PRC to gain access. Like, look, there are multiple arguments for why you should not get them, but the effectiveness really depends on whether it's a choke point technology or not. Mhmm. ASML's machines, when we export controlled, extremes for violet lithography Yeah.
Speaker 4:Then, well, China has not been able to produce anything domestically. They are still stuck on seven nanometer dual node patterning multiparterning. Right? And I think that set them back by seven to ten years at least.
Speaker 5:Mhmm.
Speaker 4:But so export controls are not about the point that they will never develop that technology.
Speaker 1:Yeah.
Speaker 5:It's about
Speaker 4:buying time and space so that we can extend our lead. Sure. And that is what matters. So if we say tomorrow decide, you know, further tools should not go to China or Mhmm. Other semiconductor is not should not go or as a tap and EDA software should not be sold.
Speaker 4:We also need, like, some promote agenda to really extend our lead.
Speaker 1:Yes. So Huawei Ascend versus NVIDIA, is this a quality or quantity battle? How, like, what is the shape of that differentiation?
Speaker 4:I think it's both. Quality first yields. You know, they're at about 20% or so when producing the dies for Ascents.
Speaker 1:So just cost.
Speaker 4:Yeah. It's extremely cost and, you know, inefficient. And so without state subsidies, the latest Huawei server that came out, it is using technology that NVIDIA was using seven years ago.
Speaker 5:Wow.
Speaker 4:Right? It's putting more GPUs on the same server
Speaker 1:Yeah.
Speaker 4:To come up at the same amount of memory and interconnect bandwidth and whatnot. Yeah. Now yeah. Can they they have a state controlled economy. They can do a lot of this.
Speaker 1:Mhmm.
Speaker 4:It's not sustainable at the end of it.
Speaker 2:Mhmm.
Speaker 4:So that's one thing. I I think there are a couple other things with regards to should we be okay, for instance, if it turns out that some many of these technologies like, look, to be real, China is a an economy that hasn't or it is a system of government with an explicit civil military fusion strategy.
Speaker 1:Mhmm.
Speaker 4:Every research and development project that happens for civilian purposes is and will be used for military purposes. Mhmm. The vice president of research for Shingua said that explicitly. Like, so are we okay with them developing technology that may be used to kill American soldiers or threaten America's allies in the South China Sea or, you know, take over the Taiwan Strait? So those are questions that are you know, they're very nuanced questions and hard to answer, but the normally.
Speaker 4:But in this scenario, I would say perhaps not. Perhaps it's not okay for us to benefit PLA's modernization. Mhmm. So Huawei can do what it is doing right now. I don't think it can scale.
Speaker 4:I think The US export controls to much extent are working. Question is how do we extend our lead further?
Speaker 1:So reviewing this year so far, do you think we're in a better position than we were last year, or are we trending in the correct direction, I guess?
Speaker 4:Yeah. I think, overall, we would get depends on how do you define the strategy here. Right? And the strategy is to win.
Speaker 1:Mean, yeah. The the goal is strategy
Speaker 4:is to stop their development of the technology altogether. That's not going to happen. Right? Technology races never stay won. There are so we have to learn that.
Speaker 1:Yep.
Speaker 4:So Chinese have learned that too. But if the the idea is to maintain a lead, that they come second, We come first.
Speaker 5:Mhmm.
Speaker 4:But, yeah, I think we're good. We're headed in the right direction so far.
Speaker 3:Now That's good to hear. And I
Speaker 4:have tried to weaponize like, to try to mimic what BIS does with export controls Mhmm. Through their own export controls. But, yeah, their export control system is just, like, five years old. Their law passed in 2020. The nuts and bolts rules for dual use items, they did not arrive until December of last year.
Speaker 4:So they're very much in an amateur state over there, with regards to this. So The US does have a leader on that as well.
Speaker 1:Very cool. Well, thank you so much for joining. This was fantastic. Super insightful. We'll have to have you back and talk talk more soon.
Speaker 4:Awesome. Take care. Thank you very much.
Speaker 1:Great rest of your day. We'll talk to you soon. And next up, have Aaron Ginn, the GPU Whisperer himself, to take us further into the the discussion around AI chip controls, geopolitics, and all of the fun things that go along with that. Jordy, I'll let you take the intro and I will be right back. Perfect.
Speaker 1:Aaron, welcome to the studio. Play some sound or debriefing.
Speaker 2:Let's go. Let's go. The GPU Whisperer is back. It's great to have you. What's happening?
Speaker 3:When I come visit you, I'm gonna bring you this.
Speaker 2:Wow. Is that a new is that for the gong?
Speaker 3:No. It's not a gong. No. It's also not a sexual toy. So so it's called a talking stick.
Speaker 3:In culture I got this in Kenya. The the basically, the person that would represent the tribe would carry this around.
Speaker 2:Okay.
Speaker 3:And whenever you'd show about a tribe, you would you would show them this, and they're like so they're like, hey. Like, I'm I'm coming to the the the TBPN tribe. Who should I talk to? Right? And then you find the guy with the docking station.
Speaker 3:Gotta find that. Yeah. You find the guy. Right? And and so, yeah, the Vikimia, if you represent your sort of head of your tribe or head of your family, you carry that around.
Speaker 3:And then and the great thing is, like, you can, when you're in tribal meetings, if you're like, you know, someone's arguing, you hold the fucking stick. Right? And you're like, hey.
Speaker 2:Yeah. Hey.
Speaker 3:What's up? Right? Yeah. Reliable. So it's like you know, so we can span two different continents.
Speaker 3:You have Gong to represent my Chinese heritage, and now you have, you know, something from the African continent. So you see, I find something from Europe.
Speaker 2:I like that. Maybe maybe we could make it the Sam Lesson from Slow was was on the show talking about the potential of the eCain, you know, sort of a smart cane device. Maybe that could be the American equivalent of a of a of of a talking stick is a is a smart cane that that the leader of an organization carries. Definitely something What's on your mind this week? I know you've been busy publishing, also scaling HydroHost.
Speaker 2:What's what's going on in your world?
Speaker 3:I so NVIDIA released its numbers. I frankly was surprised they still beat expectations despite having a lot of regulatory headwinds for at least a quarter. And, of course, like, as you all have covered, those rules changed. Yep. And now we're back to sort of October 2023 rules, which still had restrictions, but it was a little bit more friendly to some of the countries that we're trying to form deeper relationships with, aka Europe.
Speaker 3:So, like, previously, half of Europe was on you're on the crap list. You're a bad boy.
Speaker 2:Basically Switzerland. Yeah.
Speaker 3:Yeah. Switzerland was bad. Austria was bad. Greenland was bad. We can buy the country if we can't sell them GPUs.
Speaker 3:And Mexico as well, which assembles 90% of all of our GPUs. So that's all gone. So a new era has or did say returned to the old era, which is 2023. And we have this kind of new thing, which I've talked about previously on the show, which is the sovereign AI with America being deployed into regions. The biggest one was the g 42 slash Saudi Arabia
Speaker 2:Mhmm.
Speaker 3:To build out GPU capacity within regions. And and this will I think in the next coming years, Americans will see gradually over the course of time how important both this infrastructure is to the world, but also how we ourselves will most likely become a default exporter like like Boeing, like a default exporter of this technology, not necessarily like we're always using it, but the rest of the world is using it, and they deeply rely on our infrastructure. That's the trajectory this the this this is is heading. And and and what what was surprising from the NVIDIA numbers, which I I know that John mentioned, was that they Jensen has jumped more headfirst into politics. Mhmm.
Speaker 3:Under Biden, he was very, you know, hands off. He's just like, I don't support this stuff. But now he was meeting Trump at Mar A Lago. He's, basically proactively advocating both at conferences and in earnings calls a actual posture about how the world should work and how the world should operate according to, you know, NVIDIA preferences. But but Americans then Americans then accept that.
Speaker 3:Like, NVIDIA is our champion. They are a national champion. If they lose, we lose. Like, we're tied together at the hip. And if they go down, we go down with them.
Speaker 3:There's not, like, AMD's
Speaker 2:Well, it makes sense that he's getting involved with politics when in, you know or geopolitics when NVIDIA is valued at the GDP of The United Kingdom.
Speaker 1:Yeah. I was thinking about that. It is Just your basic many ways just a function of the size and scale of that company because you don't see the same, yeah. You you're not seeing the same behavior from, like, the other pieces of the stack, like the the the DRAM supplier or the transformer supplier or the energy provider. I mean, to some degree, but, you know, certainly not getting as much FaceTime because it's, like, just a less critical piece of the economy.
Speaker 3:Mhmm. And and the and the on some important things he said in the in the earnings call was that NVIDIA lost 50% of its market share in China Mhmm. Over the last four years. And he mentioned the acceleration of Huawei from seven nanometer to five nanometer processes. So when we as Americans think about GPUs and export controls, we're we're we're kind of battling two different metaphysical complexes that we don't fully accept or understand.
Speaker 3:We have one, which is generally was part of the Trump train back in 2016. China hawk, they're a threat. They're taking our stuff. You know, they're they're breaking into Geordie's house, stealing his watches. You know, they're they're following John trying to take a couple inches off his high.
Speaker 3:Right now, like, Chinese are everywhere. They're in universities. They're taking our research. That was, like, Trump. Trump one point o, Trump forty five.
Speaker 3:We gotta be aggressive. And he changed America's view on China. Mhmm. He him alone. Like, he was the lone Republican on stage.
Speaker 3:Right. And in fact, Rubio and Rand were saying that he's saber rattling, and and the whole stage was like, no. They gotta engage them. But then there's this new version, which has co opted itself into, which is part of the accelerated altruist people mixed with anti trade, mixed with protectionism, who took that, laundered it, and are using it as justification to be China hawk. And this is goes to my most recent piece, which which we mostly journal, which is that America has to be an AI exporter.
Speaker 3:Mhmm. Under I'm like, OG China hawk. I'm like, we gotta win with commerce, the dollar Mhmm. Free trade, sell to many people as possible, like Boeing. As many Boeing aircraft in the world, because it's a point of leverage, it's a point of us being able to spread human rights, freedom, western values, and not have to have bombs attached to it on the airplane.
Speaker 3:Right? It could be passengers rather than bombs. Mhmm. And this other wing, which is small, but very loud, they've they've they've co opted themselves into the altruistic, you know, basically, these deceleration people kind of, like, protectionism, anti trade unions, and China hawk people. They're the, like, abandon Taiwan Mhmm.
Speaker 3:Don't sell to anybody. We if giving it to the Gulf Region means giving it to China, which is bizarre, it's a twelve hour flight away. I don't I don't understand that. And and it's also insulting to the Saudis. They're, like like, they they actually will use it.
Speaker 3:It's them saying the Jerusalem arm of China. It's it's like it's all this complex kind of vagaries around patriotism. Like, after that earnings call, people called Jensen unpatriotic, where you got book profits, you know, above patriotism. Right? And it's it's this really bizarre, like, world that these people live in, where they think that, like, well, if we just don't sell them in, there's no harm.
Speaker 3:Right? They they can just wait. They can just wait for us. When Huawei is like, please do. And and, like, the the customers in China that they were part of the information, they they had this info on the the publication.
Speaker 3:The the customers of GPUs in China, they said that, like, by the export controls, they created the market for Huawei. Mhmm. So we we only have two options as as a country. We either win or we lose. Like, that's it.
Speaker 3:There's no way between. There's none of this. Like, we'll we'll just choke you off. Right? It'll just it'll just hold you on the inside.
Speaker 3:You you can you can see this is just using a non technology example is when we've done this with Food Aid, when we've done this with other semiconductors, like, the first semiconductors came out, we structured it to India and China and China. All of them produced their own industry. And in fact, there's a famous there's a famous episode between I think it was Johnson and Gandhi whenever she was prime minister when when Johnson was like, hey, India. You gotta back us on Vietnam. Otherwise, we're gonna gradually send this food aid.
Speaker 3:And there's massive famine going on. And and Gandhi, she said publicly, I will never depend on America ever again. And after that, she spent all of her money invested in agricultural improvements to become self sovereign. So this is not a weird abstraction of, well, well, this is only unique to this situation. When they have the engineering horsepower, they cover 90% of all rare earth mineral production, not ownership, but just production.
Speaker 3:They build their own foundry program. It's already active. We don't have one. Yeah. And it's the focal point of all the accessory parts of a of a server, like fans, cables, things like that.
Speaker 3:And we're like, well, we'll shut you off and just wait whenever we wanna give it to you. It's like, no. Like, why would they ever do that? They they just build their own, and they show that they can. So in that world, the Gulf stargates, we should have a South America stargate, have a European stargate, can do one in Africa.
Speaker 3:We have to own footprint. Otherwise, Huawei will just go out, sell its cheap gear, own the footprint, own this rare like, you know, data center space is not full of prolific anymore. Own that, and then all the government data in those regions will be running on Huawei stuff, which is which is which would which will hurt our natural security interest.
Speaker 1:Yeah. What about actually selling to the Chinese directly? Like, should we be building a Chinese Stargate? There's this, like, weird, like, thread we've been pulling on.
Speaker 2:China gate doesn't have a great ring to it. But I mean, I I
Speaker 1:I know it is different, but I wanna kinda unpack all the different ways it's different. Because for years, tech was beating the drum of Google should be able to operate in China. Mhmm. Facebook should be able to operate in China. This would be a net win for The United States if we could operate there.
Speaker 1:GPUs are different because it's more in the supply chain, and there's different things you can do with it. We may be powering adversarial dual use technology. But, is there is there a world where these two situations are more similar than they are different?
Speaker 3:Yeah. The the dual use argument is an argument of backing. It's an argument from ignorance. We don't have any example of what this dual use could be. And and there was a response to Jensen in some article I read somewhere where, like, they could use AI for missile targeting.
Speaker 3:They're like, they don't need AI to do missile taking. They have perfectly fine missile techno technology to to target. What about
Speaker 1:Wait. Wait. What about just the the idea that, like, you know, large language models, chat models, they increase productivity. And so, you know, if you give a if you give a soldier on a base ChatGPT, they will be able to inventory the rations faster, and that will increase productivity.
Speaker 3:Oh, heavens. Right? Like, it it so so, like, one is that by us not entering any Chinese market, we created a TikTok problem.
Speaker 1:Yeah.
Speaker 3:We created an Alibaba rep. We created a like like, and maybe it's because I am.
Speaker 1:Unpack that because I feel like we we definitely tried to enter the social media market in China. We were blocked, then I I don't understand how we created that problem.
Speaker 3:Well, it's it's because, like, we wanted to enter on our own terms. Oh, sure. So so, like, yeah, like, I'm not saying we have to do business with them always. Like, that's that's not what I'm saying.
Speaker 2:I don't
Speaker 3:I don't wanna sell at 30 fives. I don't wanna sell at 20 twos. I like, logical, like, things. When we sell at triple 7, it should logically have our GPS technology removed, anything that's aligned with, like, kind of our connectivity. Sure.
Speaker 3:Like, we were doing that today. That's fine. They they but when you when it comes to actual, like, core platforms, GPUs is not just the card. Because just because, you know, you own a a a g 63 Mercedes Mhmm. Doesn't mean I can build one.
Speaker 3:Mhmm. They, like, like, there's just, like, misunderstanding of, like, Jensen is pursuing a three nanometer, two nanometer sort of direction of this company.
Speaker 1:Mhmm.
Speaker 3:They don't have the ability to do that. Just because I own a tube wagon doesn't mean I know how to build one. Doesn't mean I can't build one. And and there's a disconnect between that. So one is that we should restrict anything that is on the supply chain level.
Speaker 3:I'm totally cool with that. If we wanna target foundry equipment, if we wanna target data center equipment, totally cool with that. Problem with that, we don't build any of that stuff. Other countries do.
Speaker 1:Yeah. But we we have American IP, so we actually do have a point of leverage over ASML equipment, if I'm if I remember that correctly.
Speaker 3:Yeah. Yeah. Foreign direct role. Right? Yeah.
Speaker 3:So so so yeah. So it it's a stretch because Mhmm. Like, Japan can still do what it wants. Right? Like, it doesn't it doesn't have America has limit limit like, the the regulatory framework with the regulatory framework of commerce is limited to its ability to to basically tax authority.
Speaker 3:Yep.
Speaker 5:So if
Speaker 3:you have money in America, then they could do something. But if you don't have money in America, and you say foreign direct rule in Japan, it it does, like, well,
Speaker 1:like Yeah.
Speaker 3:They're gonna be like, okay. That's nice. Thank thank you for your memo. Like Mhmm. It so I I but but, again, it it goes to, like, how we treat GPUs, that if we wanna create a a point of leverage between the Dutch and Japanese over over foundry equipment, we should probably not cut half of the Dutch economy off from GPUs, which is what we did.
Speaker 3:Mhmm. So so if we wanna be allied with them, we should realize what's important, what's not important. To me, supply chain production is important, not consumption. Consumption is not very important mainly because there's another risk factor, which is significantly more important, which is like, is it worse for the world if Huawei is everywhere, or is it better for the world that NVIDIA's everywhere? Mhmm.
Speaker 3:And and and when you when we're talking about the dual use question, it's like they don't even think about that. Well, if we if we don't actually engage them on our own platforms, we finance their current platforms. Mhmm. And we encourage them to do that. They will still do it.
Speaker 3:Like, I I I think we have to understand that it's a both and framework in China. If we if we sell them a fighter jet, they'll buy the fighter jet and make their own fighter jet. But but the point is that they is to starve and to use like, just to starve the local economy as much as possible and to create dependency on us. The more dependency on us, like, it's less likely to war. Also, we can maybe gain leverage on, like, other trade issues like, you know, cheap goods, fentanyl, Taiwan.
Speaker 3:Mhmm. There's a whole other layer of additional things. And just saying dual use Mhmm. Which which which, again, we don't know what that means. We'll just say it, and they do like, we don't I I know what it means.
Speaker 3:And as well, you can still do it with Huawei. So, like, like, what does it matter? Like, it it's this kind of vague vagaries around it without understanding the clear differentiation between production, consumption, title ownership, cloud consumption, and building the LLM. All those are commingled around NVIDIA when each of those are distinct different things, that shouldn't be commingled. Because then you can use a one Can
Speaker 2:you give us an update on on, the Biden administration in January was focused on remote access? Is that a wide scale problem today? You can imagine it's a lot easier to access GPUs remotely in another country if you wanna train a model than it is to smuggle them in across different borders and and things like that.
Speaker 3:Yeah. The the January controls assume two things and ended up being a % wrong. One, how close was Huawei? They assumed, like, five years. Totally wrong.
Speaker 3:It was, like, basically twelve months. The other one is that LMs are remote, and they're not. So, like, what does it matter? Like like, if DeepSeek is the number four right? Because mainly because it's open source.
Speaker 3:That that's the main reason. And it and it became a brand name, so people know it. But there's lots of alternatives to to DeepSeek. There's lots of different reasoning models. There's lots of foundational models and multimodal models.
Speaker 3:So it's not a mode, so what does it matter? They so if they make their model, okay. We make another model. Like, it's not an innate just use a different model. So so they're we're not gonna prevent them from making models.
Speaker 3:They they're gonna do what they're gonna do. The question is we're not we're gonna be better. So it's a technically if you're, like, racing a car, I'm going to an f one race in Canada the next week.
Speaker 1:Nice.
Speaker 3:If the f one driver is staring at the guardrail, is he gonna win? Mhmm. And that's what we're doing. We're, like, looking at it. We're, oh my god.
Speaker 3:Right? Like, are are we looking at the finish line? Are we looking to win? Because if we win, it doesn't matter. Be because we choke off the local industry, we we become the global dominant player, and then they become Comac, which is the Chinese version of the airline, the the the alternative to Boeing and Airbus.
Speaker 3:It's gonna be decades before they get anywhere with that airline. Mhmm. And and it's because Airbus won, Boeing won. And market penetration is a moat, and we we we we not everything that happens in China is just because they copied us or they stole or they stole something. Like like, they're legitimately good at engineering.
Speaker 3:And this is what the point that Jinxin's been making is that when half of all AI researchers are Chinese
Speaker 1:Yep.
Speaker 3:We can't just be like, you know, can't see it. Can't see it. Like, like, we gotta engage with it because because at least it's better that it's on our platforms. And if the federal government wants to spy on that, like, why not? Like, I I it's it's like we can't even appreciate the asymmetric style of that of, like, imagine we sold them the video stuff, and we just spied on it.
Speaker 3:Like, it's like, let's do what they do to us. But instead, we're like, no. Right? Like, dual use. Like, oh, military.
Speaker 3:Right? It's a it it's it's bizarre to me.
Speaker 1:What's been your reaction to the Russia Ukraine development? I've always been struck by the fact that Russia has produced so many incredible mathematicians and yet seems so irrelevant in the AI conversation. Any chance that that changes? You know, you talk about dual use. Seems like they can barely, you know, deal with any technology over there.
Speaker 1:Yeah. They make a few drones, but, like, they're they're years behind the AI race. Yeah. We're certainly not testing the limits of artificial intelligence in the battlefield over
Speaker 3:The let me tell you this, that so with our con with our company being international, we come across all sorts of characters. Mhmm. So in Riyadh, I met a Russian who Russian actually, broader caucuses. So he he speaks Russian, not really Russian. He runs data centers in the region, and he was telling me that about, like, what Russia's doing.
Speaker 3:And he said that, like, don't underestimate them being quiet. It doesn't mean they're not doing Mhmm. And and and this goes to the the the Stargate thing and proliferation is, like, when somebody does something bad with this, which is gonna happen, it's without a doubt it's gonna happen. Mhmm. The the Ukrainian attack on Russian planes wasn't AI.
Speaker 3:It's just fancy remotes and Yep. There's no evidence that it had a model that was I don't even know why you would need a model. You can look at the plane and just look like Yeah.
Speaker 1:Yeah. Yeah.
Speaker 3:Yeah. Like, the the it was a it was a very bizarre way of kind of reading that situation. It was very clearly, like, remote controlled. But the the if when someone does something bad with this technology, which is inevitable, the world will be very woken up to how, one, the powerful this technology is, but, two, how lazy they've been on some of these things that we're we're talking about, where it matters if we're everywhere. Because if if we're everywhere, unless they sell something someone does something bad with us, what does that mean?
Speaker 3:That means that we have the ability to project influence now across the hundred countries that are have our infrastructure. That that could be everything from utilizing infrastructure in a way to bring along allies to counter something, but as well as creates a new type of NATO, a new type of framework, which is the defense of the next century. There there is China will pursue it's almost like a known quantity. China's been China. There's very little things we can actually can do to impact the directory of 1,300,000 people outside of the natural inter entropy of China itself.
Speaker 3:China has imploded seven times in its whole, basically, 6,000 of history. So, yeah. Exactly. Sure. Please.
Speaker 3:Right? So so communism is just a next iteration of whatever revolution, the Qing dynasty, the Shan dynasty, the Shang dynasty, the Mongols. Right? All those were different iterations of the same millions of people die, build a new regime. Billions of people die, build a new regime.
Speaker 3:The ability of us externally being able to influence it is is very limited, unless we do what we did to Japan and South Korea, which is we totally obliterated the entire society. We built spaces there. We gave them democracy, and we gave them markets. Then you can influence, and they could be part of the order. But it they don't wanna do that.
Speaker 3:So China's gonna China. What what we have to do is we do best, which is win, trade, commerce, be the best, make give us invest as much money as possible into NVIDIA products. With with their with their recent announcement,
Speaker 5:I mean, I don't know if
Speaker 3:it's all in copy text, but they're at this, basically, NVLink as a platform. It's the best way to understand it.
Speaker 2:Yeah. Break that down for us.
Speaker 3:So yeah. So because all of these new GPUs are coming out, like the Rockpods drones, Huawei, the one the most valuable parts of NVIDIA's infrastructure is its interconnect. And interconnect is both software defined and hardware defined. Mhmm. NVIDIA is the king.
Speaker 3:Like, on the GPU level, Huawei is getting closer and closer, as is AMD. But from an interconnect level, Jensen's in the stratosphere. The key is so far beyond. So it's an effort to keep them in the CUDA system, which is this most significant software mode. He's releasing the link of the platform to where you can plug in other GPUs Mhmm.
Speaker 3:And you can work through NVIDIA fabric. As John just said, the commerce was gonna foreign direct rule that thing. So it's probably not gonna make it into China. I mean, that actually has a legitimate claim. Like, you know, we make this software, reproduce it
Speaker 1:Yeah.
Speaker 3:And it goes, versus Japan is a little much looser claim. And so I don't think it's gonna make it in China, but that's the premise is that he's trying to protect the CUDA mode. The CUDA mode is the mode of NVIDIA. And if Huawei continues to accelerate, open source frameworks accelerates, NVIDIA's mode declines, which means more white web product, basically gets released into the wild. More models are defined by the YY.
Speaker 1:Is that NVLink licensing more relevant to international companies that want to combine different CPUs and GPUs together, or is it more relevant to just maintaining dominance in the American market?
Speaker 2:Yeah. With hyperscalers that are developing their own chips, things like that.
Speaker 1:Yeah.
Speaker 3:Yeah. The pitch is to hyperscalers, but the actual target is is China. They I I'd say that that is the that's
Speaker 5:the goal.
Speaker 1:But I mean but you I mean, you're predicting that it won't make it to China. So why why even, like, pitch that if it's you know, has a very low shot of actually getting through?
Speaker 3:I mean, they they have 75% margins, so they could do lots of things that don't go anywhere. And and and and and also they they view that there's two risks to Jensen just as putting on Jensen hat. I'm not an investor. I'm not talking my own book. I'm not I'm not from off.
Speaker 3:I'm not talking my own book. So they they is public cloud with their GPUs, which goes to this NVLink platform in Huawei. Those are the two risks. So he's targeting to both, but the issue with the, what public cloud's doing is that they are trying to deleverage from them as much as possible, which is why most of the future deployments, I suspect, in public arguing with CoreWeave. Core is like a third party just reseller into to cloud.
Speaker 3:Mhmm. Like, his real angle is to Huawei gear where they do not have the ability to build this interconnect via the Huawei products. Cloud makes it just closest, and it's still pretty far behind. Mhmm. As well as you look at the networking expense, like, in terms of the margins in their in the on the public reporting, did they're it's still growing in revenue, like, significantly on networking side, but they're not making very much money.
Speaker 3:It's because they view networking as the moat. Mhmm. So they're really just trying to push something in to the Chinese market so they can retain that CUDA advantage. Mhmm. Because they they do think that China is accelerating on the most important models, which are the open source models.
Speaker 3:That that if NVIDIA sees the more and more open source accelerates, the farther and farther it gets ahead, the more that it's gonna basic cannibalize NVIDIA's footprint. Because if NVIDIA's only selling to closed source models, that, again, limits their ability to sell widely and to keep our platforms. And and and America has to realize, that I'm not just talking about the that's our national champion. So so it it it it's like Lockheed. It is like a Boeing.
Speaker 3:It's like it is our expression into the world of what the future should be and the ability to or or have, like, or have our values built into technology, technology, which is privacy, security, western values, freedom of freedom of thought, freedom of information on the Internet. And so I I'm I'm fine with the the product idea. I don't I don't think it's a risk really much to anything. But most likely, commerce will restrict it. Because if they're already restricting down their equipment, which I which I generally agree with, because it's down their equipment cost a hundred million dollars into the side of the house, like, you can regulate that.
Speaker 3:We we export control airplanes. Well, yes, because you you have to either put on a ship or you fly it over there. You that's not somebody you can go buy at Best Buy and put in your backpack. Like, I
Speaker 2:mean, Nathan Nathan Fielder was able to buy an airplane recently for a show. For a show. I wanna switch switch gears for a second. There were some news this morning that Meta is partnering with nuclear energy company Constellation Energy to power, some of its AI, I guess, AI factories, data centers for the next twenty years. Post these new executive orders on nuclear energy, do you expect to see a lot more deals between hyperscalers or foundation model companies and various nuclear players?
Speaker 3:Fortunately, not. I I I'm a big fan of fusion. I'm a realist when it comes to politics. I'm conservative through and through. Adam Smith, you know, Milton Friedman, Thomas Sowell, like, they're my heroes.
Speaker 3:But I'm a realist when it comes to DC, because DC is is ideology is an excuse for decisions that are self serving. That's the way DC works. Nuclear, I I love the technology. I think it's immensely safe. I don't believe in this irrational phobia related to it.
Speaker 3:Say, it has you know, they they the third party or the existential causes of the, you know, pollution or whatever of the energy is put in a barrel, put it underground. It's, like, so amazing. But and even that, the recycle making recycle, like, 98% of it now. But power generation is very different than energy. America's really good at energy.
Speaker 3:It's really bad at power because power is a federalized decision. And I just don't see a significant amount of willingness to change about that. I hear lots of talk, but the talk is also a little bit like Doge, which is the operational mandate of Doge is discretionary. And even that, it has to get the deference of the secretary. It doesn't have a lot of power.
Speaker 3:You have to have mandatory spending. You have to have congress do something because that's the way it works. Same with power. It's like, Department of Energy can't just say, do it. Right?
Speaker 3:Like, it like, the state because it's federalized. That that's whole point of freedom is that if the state says no, they're gonna say no. They said it's not gonna happen. So maybe on federal lands, maybe on Indian lands, that stuff makes sense. But but it's it's, I think, extremely unlikely.
Speaker 3:I think it's more likely the like, Stargate is essentially a sovereign power infrastructure where they're buying natural gas turbines, which is we have significant amount of natural gas. They build it in deregulated energy environments, and they attach it the data center. I think that that's more likely because that doesn't require ten years of approval and, you know, people who have degrees who never done anything in the world showing up and telling you how to do business. Like, it doesn't require any of those things. It's it's natural gas.
Speaker 3:It's it's fine. And and their pipes are everywhere. So what we hear on the data center level is much more of a stretcher towards natural gas and that nuclear, while there's entertaining, there's not want this stuff to happen. I'm just so realistic. I I think it's it's you shouldn't bet on it.
Speaker 3:And and and many of those contracts you see, they're more like LOIs if you, like, dig into it because the Amazon, Microsofts, the Facebooks of the world, they know the regulatory hurdles of doing this stuff is years. And so they're basically using the announcement as a means of trying to press through the regulatory cycle, and to get stuff done.
Speaker 2:Well, just to give some more insight, this deal in particular is for, a a power plant called the Clinton Clean Energy Center. So it's from a different era. Right? It's not a it's not a it's it's taking an asset that we've already had and then doing a net new deal. It's not as exciting as, hey.
Speaker 2:Some, you know, new nuclear company just signed a twenty year deal with with Meta. So Yeah.
Speaker 3:But at very least approval of putting servers in the building or putting it around the building. Like, that's not something that's gonna be is there yes. Exactly. Like, the it's a the fear around nuclear is is unfounded. Yeah.
Speaker 1:But it's still real.
Speaker 3:It's it's real. And and and this is democracy. Like, you don't get everything you want. And and if people don't want it in their backyard, they don't. Yeah.
Speaker 3:And it is what it is. So, like but yeah. But I'm pro of those things. I'm pro clean fusion, like low heat, like coal nuclear reactors. I think all those are super cool technologies that we should embrace.
Speaker 2:Yeah. This thing is is interesting because the the reactor at this site was going through a decommissioning process. So they're effectively bringing it back online. Oh, great. Similar one Sure.
Speaker 2:To the deal that Constellation did with Microsoft in Pennsylvania with the 3 Mile Island plant last year. So Mhmm. Mhmm. So, yeah. At least at the very least, it's great to see plants that are clean and functioning, staying online Yeah.
Speaker 2:And serving a purpose.
Speaker 1:Anyway, so much for stopping by. This was fantastic. We'll talk to
Speaker 3:you soon. It was
Speaker 2:a pleasure.
Speaker 3:Yeah. See you, man. Cheers.
Speaker 1:Bye. We'll talk to you soon. Let's close it out with some timeline. There's I've been waiting for this. About Perplexity.
Speaker 1:Apple is reportedly planning to adopt Perplexity as an alternative alternative to Google search on the iPhone as well as a replacement for ChatGPT integration with Siri. This is kind of rumor mill at this point, but apparently, Perplexity is also in talks with Samsung. Could become default installed search provider on Samsung Galaxy phones and Android phones.
Speaker 2:Arvin's cooking.
Speaker 1:Arvin's cooking. Yeah. It's interesting. It's like the obviously, the product is not, like
Speaker 2:Do you think this is completely broken through, but an f one team?
Speaker 1:Maybe. Maybe it's not didn't they do a Super Bowl ad? Or no, they just did a really cinematic ad. But, they've definitely been been out there sponsoring stuff
Speaker 2:and Complexly sponsored Yeah. Ferrari. Ferrari? Really?
Speaker 1:No way.
Speaker 2:They just fully sent it.
Speaker 1:That's amazing.
Speaker 2:Tim Cook saw that. He goes, okay.
Speaker 1:Let's talk. Let's talk. It's time
Speaker 2:to talk.
Speaker 1:Yeah. I mean, certainly smart to break through. And I mean, a lot of these a lot of these companies like win on these default installs. It's always tough when there's another company that's like going viral and just growing like crazy like Chatuchiputti, but you gotta get creative and figure out where the value is and who's hurting. And Apple and Samsung seem like they're at the top of the list for needing a partner to really keep up with ChatGPT in some ways.
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Speaker 1:We also have some cool probably AI images from if Tesla was made in the nineteen eighties. I don't know how I found this. It only has five likes and 220 views, but I really like this. I thought it was cool design. Looks kinda like an Aston Martin bulldog or, there's a lot of Aston Martin in there.
Speaker 1:But, yeah, I hope I hope with Elon spending more time at Tesla, we get some crazier designs. I wanna see a convertible. I wanna see something that competes with a Jeep, a full size SUV, the Cyberban, the Cybertruck converted into an SUV.
Speaker 2:Mean, we've talked about this. Have a a sedan with the aesthetics of the Cybertruck
Speaker 1:with Super cool. Rip. The Cybercon, the the the the Huracan version of the Cybertruck, like the new Roadster with the Cybertruck aesthetic. I mean, I still think the Cybertruck the Cybertruck aesthetics are really cool. But it's just it's just like not everyone needs a full size truck.
Speaker 2:You never see somebody with a Cybertruck using it as a truck.
Speaker 1:I've never seen anything in the bed ever. Never seen Also, we're in LA, so most of the Cybertruck are influencer based. Semi analysis breaking down Tesla's Optimus, speaking of Tesla. Ever wondered how those humanoids are dancing in the videos? Check out Tesla optimists here hitting a smooth shuffle.
Speaker 1:Let's dive into one of the methods they may have used. In the paper, ASAP, aligning simulation in real world physics for learning agile humanoid whole body skills. The researchers did train the humanoid to perform these actions in simulated environments, but there's more to this. So we've been talking a lot about, simulation in the context of robotics. It seems to make a lot of sense that you could model all of those joints in a physics engine, run that in Unreal Engine or something.
Speaker 1:I mean, it does look remarkable. I don't know if you can see that, Jordy, but the Yeah. I mean, the dance is definitely not the Biden walk. Right? So the the problem
Speaker 2:Play it. Let's see it.
Speaker 1:Yeah. Yeah. Here. There you
Speaker 2:go. Okay.
Speaker 1:What? What are you thinking? Conspiracy time?
Speaker 2:No. No. No.
Speaker 1:It's pretty good. Right?
Speaker 2:I mean
Speaker 1:It's definitely a unitary level.
Speaker 2:Yeah. I mean
Speaker 1:I don't see why they'd be any farther behind unitary. But, obviously, there's a lot of
Speaker 2:Gen z would say the robot low key has aura.
Speaker 1:Aura. Yeah. The problem, the robot policies like guidebooks for performing an action trained in simulations often stumble when transferred into a physical robot. This is called the sim to real gap. We'll have to talk to more folks in robotics about that.
Speaker 1:Many complex interactions can occur in real life that are difficult to model. ASAP decides to train their policy in simulation by using retargeted human motion, like Ronaldo's SUI celebrations motions, but mapped onto a humanoid so they can produce the same motions in its own body. However, to mitigate the issues upon transferring to real life, they then just deploy the policy onto the Unitree Robotics g one humanoid. This is from a from a researcher and train a delta action model. The model watches and learns what the differences are between the desired simulated motion and the real world.
Speaker 1:This
Speaker 2:delta correction particular Yeah. This jumping motion It's wild.
Speaker 1:Is wild. Wild. The the jumping because you
Speaker 2:you Is that using the same effectively the same physics Yeah. As a human Yeah. To do that. Yeah. And it just feels
Speaker 1:feels a lot more So they do a bunch of simulation. They transfer it to the robot. Then the robot does it and messes it up because there's all these, like, fine details that that that that emerge when you're crossing that sim to real gap. That delta correction is then fed back into the simulator, effectively aligning the virtual simulated world and robot with reality. The result is significantly improved agility and coordination and now fluid reproduction of famous celebrations.
Speaker 1:ASAP is a major leap forward for humanoid robots, but there still remains some challenges in simulations and seminalysis says, what do you think? And so it's interesting because it's basically creating a a a a real life feedback loop for humanoid robotics based on simulated data. So you go and simulate the robot to get it, like, 80 or 90% of the way there, then you run those simulations on the real robot and let it make a bunch of mistakes and then feed all of that data back in so you're generating a lot of robotics data, and you can actually have, like, a learning loop to improve this. So, still unclear how close we are to, like, fully re fully utilizable, fully useful humanoid robotics, but it does seem like more and more algorithmic progress is being made more and more, like, AI training strategies are being made, to really make this stuff valuable.
Speaker 2:And then, of course, care about getting manufactured stuff. To the the robot games where they're gonna have these robots do surfing at Jaws, cliff diving Yeah. Things like that. Can't wait. Getting closer.
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Speaker 2:So it's trying to
Speaker 1:make money, trying to smooth.
Speaker 2:If you're doing deals, get on out
Speaker 1:of you. We also have some, news. There's a new company launching, Amy, from Joe Perkins, the AI agent for private market investors. Stop wasting 30% of your week on busy work. Amy handles sourcing, diligence, ops, admin, and research twenty four seven, remembers every interaction, and sharpens over time.
Speaker 2:Yeah. That's interesting. I I have the website pulled up. Yeah. They do deep diligence.
Speaker 2:So you can imagine some type of deep research product, watch list monitoring, anti portfolio analysis, which is fun. Basically track track your passes, memo drafting, exit planning, customer diligence, auto sourcing, market mapping, team evals, meeting prepper. Pretty extensive.
Speaker 1:It's cool. Well, the timeline was in turmoil as Megan Nyvold kind of sort of anonymously called out Alex Lieberman for co founding too many companies.
Speaker 2:Oh, wow. That was I I saw Megan's post. Post. Yep. I had no idea.
Speaker 1:I had no idea who it was either. And Alex kinda self doxed himself here. And he says, someone called me out publicly for cofounding five businesses. What? A man can't cofound five businesses?
Speaker 1:Come on. I think I've actually cofounded maybe four businesses at this time, although I kinda moved on.
Speaker 2:Well I
Speaker 1:wasn't doing them all at time. One at a time. It was one at a time. Yeah. But, I love the reaction, and it makes total sense.
Speaker 1:So I thought I'd explain, says Alex Lieberman, the business barista. Says, I very much don't recommend people do what I do. History has proven time and time again that relentless focus on one thing for decades is how you build anything of consequence. I didn't set out to build a startup studio and cofound five companies. It was a result of trying to optimize for my two highest order goals post exit.
Speaker 1:Be an a plus entrepreneur and an a plus family man, read high have full control over my schedule and time. Spend 90% of my time in the the negative one to one of business. Early stage businesses make me feel like a kid in a candy store. I I do not work a hundred and twenty hours a week. I work about fifty hours a week.
Speaker 1:Most mornings, I start drinking coffee, walking the dog with my wife. Most days, I finish eating dinner and walking the dog with my wife. Those moments are sacred for me. I have an amazing cofounder and CEO for each one each of my business. So so he's not the CEO of these businesses.
Speaker 1:That would be very, very difficult Yeah. Who I trust deeply and gives me space to focus time. I view myself as a media company that creates surface area for an array of opportunities. So, yeah, a little bit of an uncommon decision, but he's certainly enjoying it. And so, you know, hats off to him.
Speaker 2:Yeah. I mean, I think the thing that matters is ultimately having a CEO that is Yeah. Regular founder as incentivized Yep. As a as a traditional founder Yeah. Or over time, you'll get cooked by
Speaker 1:Totally. A
Speaker 2:founder a truly founder led company. True.
Speaker 1:To to to totally. Totally. So so, yeah, there's there's a big question about, like, you can be a small angel that owns point 1% of a business. You can be a VC who owns 20% of a business and uses the word we when describing the company. Then you can be, you know, an an incubator or a silent cofounder, or you can be the cofounder CEO, the founder CEO.
Speaker 1:And and these are kind of a spectrum and everyone kind of plays in different roles. But, you know, historically, it's it's the served to to work at kind of the fringes of those, but there's different models that work for different folks. This is an interesting trend that I wanna dig into, kind of the future of Hollywood. We've been joking about this, but there is something interesting with what Tony Lashley Lashley says. Sequoia investing in Essence and Moobie and Thrive investing in a 24 in the past four years.
Speaker 2:Pronouncing Essence properly, John.
Speaker 1:Yes. So just sense. And Thrive investing in a 24 in the past four years is quite fascinating. And so, apparently, the Essence investment maybe didn't do so well. Definitely, they're pretty clearly struggling, but the model works.
Speaker 1:And so Sequoia is getting into the independent movie business. Thrive is already in with a 24. And so, very, very interesting to discuss, like, the impact of AI on Hollywood and independent movie making as these movies it feels harder and harder to get the the power law outcome in movies, the Avengers moment, the Avatar moment, the Top Gun moment. But a '20 four's clearly made a different strategy work, and they're breaking through all the time. And so it's justifying increased investment.
Speaker 1:Yeah. Another perplexity news, they they they did the thing that we've been talking about. Like, you can now travel, search, book on Right. On Perplexity. No scrolling meme.
Speaker 1:847 hotels and photos trying to spot a decent gym. I asked, find me a hotel in Amsterdam with a serious gym, walkable to conference venue use under 300 per night. Result, perfect recommendation, the exact hotel I actually used. Could you actually click book I think so.
Speaker 2:In the app?
Speaker 1:I think so. And so they're definitely working on it. And this is like an like an obvious agentic workflow. But, Simon Taylor, let us know. Were you act did you actually book, and did you go through with the booking?
Speaker 1:And was it easier than just going to the website, or was it merely better search? Because I think people won't be fully until it's an entirely chat based workflow and they don't need to do anything and they never get routed to another another website. Yeah. David Sachs has a little review of Mountainhead. He says Mountainhead costume designer Susan Lyall on the all in pod.
Speaker 1:It was very good source. It was a very good source for research for me. One of the hosts, Chamath Palihapitiya, went to the inauguration of president Donald Trump, and he showed pictures of all the things he wore. I couldn't believe it. He had a Laurel Piano jacket here and a Brunello Cucinelli there.
Speaker 1:He obviously really knew his stuff. So
Speaker 2:I mean
Speaker 1:hats off to
Speaker 2:very very cool. That said True. It shouldn't take too much research to understand that capital allocators enjoy Loro Piano and
Speaker 1:And, yeah. It's good stuff. This is an interesting post by Ashay Sanvi. So Anthropic just went from 1,000,000,000 in annualized revenue to 3,000,000,000 in annualized revenue in five months. Crazy growth of the scale.
Speaker 1:And Ashes says, I remember the days when Snowflake doubled at 500,000,000 ARR in a year, and people lost their minds. And, yeah, the numbers have gotten so big in the AI race that going from one to 3,000,000,000 is like, what have you done for me lately? Claude, step it up. But, obviously, congrats to everyone at Anthropic. Having some Anthropic folks on the show this this week.
Speaker 1:Fantastic.
Speaker 2:Extremely impressive, but I don't know why that is super surprising. It's impressive, but shouldn't be surprising if you're paying
Speaker 1:attention. Given the actual technology? Yeah. You mean that? Just that how useful these tools are?
Speaker 2:Yeah. If you just look at You know, a little bit of trailing trailing OpenAI. Yep. They have less of a they have less significant of a consumer business Yep. But it's still very big in enterprise.
Speaker 2:Yep.
Speaker 1:It's loved by developers.
Speaker 2:Yeah. Yeah. So
Speaker 1:What else do we wanna go through? Yashuo Bengio has a new nonprofit research lab called LawZero. Sharon Gaffery has the story in Bloomberg. She's coming on the show soon. And I thought it was interesting because I was I was wondering if, like, has anyone in AI safety actually just tried to use Isaac Asimov's three three laws of robotics to design a safer AI system.
Speaker 1:Like, it would be very ironic and hilarious if that was the the solution all along. It was just hard code in, don't hurt humans, which is basically what the what the Isaac Asimov three laws of robotics are. But, of course, the the premise of
Speaker 2:Yeah.
Speaker 1:The Asimov movies is and and books is that even though they try to encode that, it still goes wrong. So there's still a little bit of AI doom scenario. But he raised $30,000,000 of it on it. So congrats to Joshua, and hopefully, there's some good AI research that comes out of it. And as we've seen, even if you don't believe in the AI doom scenario, the paper clipping, there's still a ton of other ways that AI can go wrong and have negative effects even if it's just creating overly addictive products or dual use technology.
Speaker 1:There's a bunch of interesting the Manchurian candidates and the and the sleeper agents that Anthropic discovered or or hypothesized. AI stuxnet. Yeah. And so, I think this is worth funding. I think this is worth worth researching, but you have to take it with a grain of salt and you have to realize the the full picture and the full dynamics of of geopolitics in the AI race before you actually go and execute against what one of these nonprofits is is saying.
Speaker 1:Yep. I thought this post from Justin Moore was hilarious.
Speaker 2:Have you seen the new Google AI feature? It's on Gemini. It's literally on AI Studio. You can probably find it on Google Ultra One. Dude, it's on Flow.
Speaker 2:It's a search labs labs original. You can find it in Google Docs. It will appear as a pop up when you least expect it.
Speaker 1:So ridiculous and so true. Just put it in the Google search bar if you care so much.
Speaker 2:They just wanna test their product market fit. They wanna see how hard they can make people work for it and still get adoption. Yeah. You know, they're both different.
Speaker 1:Yeah.
Speaker 2:We have some some news separately. Bravo
Speaker 1:Oh, yeah.
Speaker 2:Has announced this morning the completion of fundraising for new buyout funds totaling more than 34,000,000,000.
Speaker 1:That's got
Speaker 2:a good for that. Yeah. Hit the can we get the Gong view, please? Can we get the Gong view? There we go.
Speaker 2:Nice hit, John. Nice hit. And and notably, they soft circled 1,800,000,000.0 out of the 34,000,000,000 for Europe. Oh, interesting. So There we go.
Speaker 2:You know,
Speaker 1:not Get ready if you're a if you're a software company over in Europe,
Speaker 2:might have a buyout offer on your SaaS, but not great.
Speaker 1:Yeah. Get ready. Transformation and on optimization. Get ready.
Speaker 2:Yeah.
Speaker 1:Good to see private equity finally finally raising some real money. Yeah. You love to
Speaker 2:see it. Getting some real size.
Speaker 1:In other news, open evidence, the Sequoia backed AI medical assistant is reportedly raising a hundred million dollars with $3,000,000,000 valuation just months after its $75,000,000 series a at 1,000,000,000. GB and Kleiner Perkins are in talks to lead the round, though details are still being finalized. Soon as it's finalized, gotta have the CEO on the show.
Speaker 2:Let's do
Speaker 1:Some of the investors would be interesting. I I I am very interested in this, like, the the the the vertical it's like vertical SaaS. Right? The niche verticalization of the platform layer. Everyone's agreeing with, like, value accrual at the application layer.
Speaker 1:The question is, like, how many applications will there be? Right? Will there be five or 10 or 50 or a hundred? There seem to be a lot of companies getting into the unicorn territory. How many will make it through and win?
Speaker 2:Yeah.
Speaker 1:But it's all exciting. Also, Chime has just launched their IPO roadshow. Dan Primak has the story in Axios. A A $9,100,000,000 market cap if it prices in the middle versus the 25,000,000,000 market cap valuation. VC backed unicorns are maybe are finally done clinging to their ZERP era valuation, seeing this more and more and we cover They're
Speaker 2:taking their medicine. Yeah. They're taking their medicine. Hari calls out, I think they bid it up to 12,000,000,000 or so during the roadshow and pops up to 15,000,000,000 on IPO day. Fair value is in the high teens
Speaker 1:Yeah.
Speaker 2:Is his point of view.
Speaker 1:Yeah. But we saw this in the information. A lot of private companies are, you know, done with their their their venture journeys. They're ready to go out into the market as soon as the IPO window is open just enough to get through. And so they might take their medicine.
Speaker 1:They might take a slight down round going when they're going out. But then, historically, that's that hasn't been that bad in letting them actually perform once they get into the market and go public.
Speaker 3:Yep.
Speaker 1:So good luck to them.
Speaker 2:We should have lesson on Yeah. Just to discuss. This next one to discuss. This next post from Bucksatte, very exotic sounding. He says, clearly intern son or VC scout daughter, which is
Speaker 1:I love that Roy is in the comments immediately. Let me get both. In the comments.
Speaker 2:He wants We gotta have Roy we gotta have Roy back on to get the update because he and the team seem to just be wilding out right
Speaker 1:It's insane.
Speaker 2:It's actually insane. I I see again I I'm starting to feel like a bit of a boomer because I see some of their exchanges.
Speaker 1:And I'm like, this has to be
Speaker 2:got I'm like, there's no way this is real. Yeah. There's no way. Yeah. There's no, you know, it can't possibly be real.
Speaker 2:But I don't think they ended up hiring 50 interns.
Speaker 1:Yeah.
Speaker 2:But it seems like they have a lot. Gotta have him back on Yeah. To break it all down.
Speaker 1:We should have all the interns on. We should have him with all the interns standing behind him and they can shout answers over each other. Loudest intern wins.
Speaker 2:He had an interesting so he he had a post that went fairly viral yesterday. He was quoting somebody who said, what genuinely pisses me off about younger founders are just new people getting into startups is how obsessed they are with raising. It goes on and on. Roy said that? No.
Speaker 2:No. No. Roy quotes that and says, hot take. Founders need to focus more on hype chasing.
Speaker 1:Okay.
Speaker 2:Startups don't live and die by a product being 5% better. They die because of lack of money or delusion. Hype chasing helps with both. I don't know how hype hype chasing helps
Speaker 1:with Yeah. You still gotta build a product, but distribution's really important. And so like you
Speaker 2:can He said inflated revenue is still user is still revenue. Users you pay out of curiosity are still users, and good engineers who are down to interview after a cool launch video are still good engineers. Interesting. Viral moments are not so easy to come by, the potential upside of making the most of them is higher than you think.
Speaker 1:I like this because, like, it it's it's it's a it's a debatable point. Roy, you know, his story is clearly gonna break one way or the other. Yep. It'll either be a breakout success or kind of a a learning calling Scott.
Speaker 2:He he had another post that I saw where he said he's paying founding engineers like hundreds of thousands of dollars in cash because he said that he can just raise infinite amount of equity, which is Bill different. He's just Bill different. He's Bill different. And, yeah. I'm I'm just interested to follow on.
Speaker 2:I'm rooting for him despite him being controversial. Yeah. I want to see him succeed. I think he is
Speaker 1:He's very good at causing controversy. Like that, even just that, the idea of like, we're not giving equity, we're giving all cash. Like, that's a controversial approach and
Speaker 2:Some equity. But it's just like I value I value equity way more. I'm just gonna pay, you know.
Speaker 1:Yeah. But he's selling the equity at high value. It's like, you could do that with the shares. It's it's very odd. But it's like good bait.
Speaker 2:No. I mean, if he says my if he believes that his equity is worth a multiple of what
Speaker 1:You'd be selling it to pay the cash. He's he's not making money.
Speaker 2:He has cash in his bank account today.
Speaker 5:Okay. Yeah. Yeah. Sure.
Speaker 2:I'm I'm in a four x
Speaker 1:Sure. Sure. Sure.
Speaker 2:Couple months.
Speaker 1:Yeah. Makes sense. Anyway, interesting post Epirus. We haven't had them on the show yet, but we have to at some point. So quoting, defense index, unstoppable China can produce 500,000 FPV drones every month and scale up to 700 in wartime, which actually feels like roughly the same scale as as Ukraine, maybe within an order of magnitude, which is shot.
Speaker 1:It is actually kind of lower than I expected, but it's obviously a lot. And Epirus says, this is not unstoppable.
Speaker 2:Yeah. So Ukraine is doing just under 400,000 a month Mhmm. Right now at their current rate. Okay. So they're doing that basically in a cave They have
Speaker 1:to. Scrapped.
Speaker 2:Yeah. Yeah. Like, China has all of the Yeah. Know. So I imagine I imagine China could actually do well beyond this.
Speaker 1:Yeah. It's also a weird narrative because, like, in what scenario like, are these FPGB drones, can they get over the Taiwan Strait? Because, like, I believe they're pretty short range, and so it's it's more for, like, the like, what is the trench war scenario that would happen over there where these would be super relevant?
Speaker 2:Yeah. It's interesting to think about they could have basically a bunch of floating docks that the
Speaker 1:ATV I guess that's it.
Speaker 2:Yeah. Just boats
Speaker 1:that take closer mean, especially can put them into a shipping container and then move the shipping container. So it's like Yeah. Instead of an aircraft carrier, you just have a a shipping like a cargo ship. So the
Speaker 2:So with Epirus, I'm interested to see Yeah. How Epirus is actually doing against these FPV drones. Soren yesterday said Yeah. He hadn't seen an American electronic warfare
Speaker 1:They could really reliably
Speaker 2:take down FPV drones. Yeah. I'm sure I'm sure Epirus can
Speaker 3:But it
Speaker 1:has
Speaker 2:a different conditions and it should be a part of a broader system.
Speaker 1:Yeah. So they say that their their mission is to overcome the asymmetry asymmetric challenges inherent in the future of national security. And so good luck to them. You know, we want we we want we want everyone to win here who's working for America.
Speaker 2:And we should note earlier today, Chamath was sharing an image of a of a I forget what the machine. This is not a scale. You I think you hold these devices that
Speaker 1:Like an in body.
Speaker 2:Yeah. That that sort of track your body fat. He says hot girl summer bring it. She's putting up 11 and a half percent body fat
Speaker 1:Pretty good.
Speaker 2:At allegedly six two. And Delian responded and saying, are you trying to get your body fat percentage as low as the IRR of anyone that invested in your 2021 specs? Fortunately, that would be I don't think it's possible to go negative
Speaker 1:Mhmm.
Speaker 2:On the body fat front. But then Chamath made a very lewd comment.
Speaker 3:Mhmm.
Speaker 2:Delian fires back. They're chugging at each And I said, brothers, this conversation is unbecoming of the high technology industry. I propose we shift the conversation to what really matters, capital. Would you both like to join TVPN today? And Chamath unfortunately, turned it down.
Speaker 2:Mhmm. So we didn't get here. Maybe in the future. But he's got a he's
Speaker 1:allocators are fighting everyone working together to maximize returns at all times.
Speaker 2:Yeah. I I think we need to work on our pay per view format, get the boxing ring set up. Imagine hitting this imagine smashing the soundboard as two allocators just duked it out. I mean
Speaker 4:Yeah.
Speaker 2:Yeah. No better entertainment.
Speaker 1:It'd be spicy, but that'll have to be for another day. Anyway, thanks for watching.
Speaker 3:This has
Speaker 1:been a fantastic show. We will see you tomorrow.
Speaker 2:Looking forward to it. Talk Have a great afternoon. Bye. Cheers.