1 00:00:02,880 --> 00:00:05,920 Ejaaz: So there's this company called windsurf which in 2 00:00:05,920 --> 00:00:08,800 Ejaaz: the last 24 hours got stolen from open ai 3 00:00:08,800 --> 00:00:12,180 Ejaaz: and sold not once but twice for 4 00:00:12,180 --> 00:00:15,380 Ejaaz: over 3 billion dollars and then 5 00:00:15,380 --> 00:00:18,120 Ejaaz: everyone lost their minds completely when they realized that 6 00:00:18,120 --> 00:00:21,060 Ejaaz: two of the co-founders were taking almost all of that money 7 00:00:21,060 --> 00:00:23,700 Ejaaz: for themselves and leaving the rest of the 8 00:00:23,700 --> 00:00:26,460 Ejaaz: company 250 employees in the 9 00:00:26,460 --> 00:00:32,160 Ejaaz: dust and as you can imagine josh this sparked a lot of outrage online but it 10 00:00:32,160 --> 00:00:37,180 Ejaaz: did end up having a fairy tale ending when another company swooped in and bought 11 00:00:37,180 --> 00:00:42,900 Ejaaz: the rest of the company and the 250 employees got paid josh i'm exhausted can 12 00:00:42,900 --> 00:00:44,960 Ejaaz: you tell me what's happening well 13 00:00:44,960 --> 00:00:47,960 Josh: I'm actually not sure myself this feels like an episode out of like a sitcom 14 00:00:47,960 --> 00:00:52,180 Josh: or a silicon valley episode where there's so much drama so many twists and turns 15 00:00:52,180 --> 00:00:54,580 Josh: that seemingly don't make any sense i mean it was. 16 00:00:54,580 --> 00:00:58,980 Ejaaz: Acquired i have a fun anecdote for you josh actually the office that the windsurf 17 00:00:58,980 --> 00:01:02,400 Ejaaz: company was set up in guess no 18 00:01:02,400 --> 00:01:03,500 Josh: Not silicon valley, 19 00:01:06,480 --> 00:01:09,820 Josh: oh man it's so real silicon valley was such a testament at the. 20 00:01:09,820 --> 00:01:10,740 Ejaaz: Time so i swear they 21 00:01:10,740 --> 00:01:14,000 Josh: Were they were ahead of the curve but yeah i i'm actually i'm excited to record 22 00:01:14,000 --> 00:01:17,380 Josh: this episode because i need you to explain to me a lot of what's happening i 23 00:01:17,380 --> 00:01:21,980 Josh: don't know too much about the recent news i've been very much in in the grok 24 00:01:21,980 --> 00:01:26,300 Josh: rabbit hole i know a lot of the earlier topics maybe i could help set the stage before we get into it. 25 00:01:26,740 --> 00:01:29,480 Josh: So for people who aren't familiar, Windsurf was not always Windsurf. 26 00:01:29,640 --> 00:01:32,960 Josh: It was a company that was founded in 2021 called Exifunction. 27 00:01:33,040 --> 00:01:37,340 Josh: And it was founded by two MIT graduates initially focused on GPU optimization. 28 00:01:37,440 --> 00:01:39,660 Josh: So they were a GPU optimizer company. 29 00:01:39,860 --> 00:01:42,820 Josh: They were doing absolutely nothing relative to what they're doing today. 30 00:01:43,420 --> 00:01:46,740 Josh: Three years later, they raised a series C round at $150 million, 31 00:01:46,740 --> 00:01:50,020 Josh: which valued them unicorn status, one and a quarter billion dollars. 32 00:01:50,280 --> 00:01:55,000 Josh: And that was when they rebranded to Windsurf. And Windsurf was not a GPU optimization 33 00:01:55,000 --> 00:01:59,780 Josh: company. It was instead the company that we all know today, which is the AI 34 00:01:59,780 --> 00:02:04,180 Josh: coding companion, cursor competitor, vibe coding extraordinaire. 35 00:02:04,500 --> 00:02:07,500 Josh: Exactly. Yeah. So that's when they kind of came into their final form, 36 00:02:07,620 --> 00:02:08,880 Josh: which was only last year. 37 00:02:09,020 --> 00:02:14,020 Josh: So the first three years of operation, this like strange company trying to figure 38 00:02:14,020 --> 00:02:15,060 Josh: it out last year, it was huge. 39 00:02:15,180 --> 00:02:19,480 Josh: And then we get into 2025 where their annual revenue went from not a lot to 40 00:02:19,480 --> 00:02:22,620 Josh: a hundred million plus. And I think this is where I'm going to hand it off to 41 00:02:22,620 --> 00:02:23,720 Josh: you because things got crazy. 42 00:02:23,820 --> 00:02:26,800 Josh: They turned into a really big company. They started collecting valuable data. 43 00:02:26,960 --> 00:02:29,140 Josh: Their revenue went through the roof into the nine figures. 44 00:02:29,800 --> 00:02:31,860 Josh: And that's where this drama begins. 45 00:02:32,940 --> 00:02:38,440 Ejaaz: So Josh, do you remember around that time, it became a kind of trending narrative that AI... 46 00:02:39,010 --> 00:02:43,950 Ejaaz: Coding or coders was going to replace software engineers. So companies were 47 00:02:43,950 --> 00:02:46,590 Ejaaz: getting really nervous and software engineers were getting really nervous because 48 00:02:46,590 --> 00:02:51,330 Ejaaz: they were kind of like consistently held in as like the highest regard of employee, right? 49 00:02:51,430 --> 00:02:55,530 Ejaaz: You had like knowledge workers, product managers, and then you had like the 50 00:02:55,530 --> 00:02:58,390 Ejaaz: wizards at the top that could like create software with their fingers. 51 00:02:58,550 --> 00:03:01,790 Ejaaz: And then you had AI come along and be like, well, actually, we might be able 52 00:03:01,790 --> 00:03:02,990 Ejaaz: to replace you in about six months. 53 00:03:03,130 --> 00:03:06,950 Ejaaz: So all of these companies' valuations skyrocketed, Winsurf being one of them, right? 54 00:03:07,070 --> 00:03:11,870 Ejaaz: Cursor was another popular one. And there was this massive frenzy for all the 55 00:03:11,870 --> 00:03:17,650 Ejaaz: model creator companies like OpenAI, Claude, Meta, to try and acquire one of 56 00:03:17,650 --> 00:03:21,250 Ejaaz: these companies so that they can have that feature set within their own product suite. 57 00:03:21,570 --> 00:03:28,490 Ejaaz: And OpenAI kind of came in guns ablaze and said, Winsurf, we have tried to buy Cursor. 58 00:03:28,590 --> 00:03:32,470 Ejaaz: It's not working. We need you. And we are willing to pay big bucks. 59 00:03:32,470 --> 00:03:36,950 Ejaaz: So they offered basically $3 billion and it's written here in this Reuters article, 60 00:03:37,230 --> 00:03:42,650 Ejaaz: but that's basically the headline takeaway that they offered $3 billion to buy these guys out. 61 00:03:42,830 --> 00:03:47,110 Ejaaz: And that was a huge price tag at the time, but it was what a lot of individuals 62 00:03:47,110 --> 00:03:52,470 Ejaaz: thought, a lot of people thought that Winsurf and AI vibe coding companies was worth at the time. 63 00:03:52,470 --> 00:03:55,690 Ejaaz: And the reason why it was worth this much was because it was like this magical 64 00:03:55,690 --> 00:04:00,830 Ejaaz: tool where you could type words and turn words into fully fledged apps, 65 00:04:01,250 --> 00:04:03,150 Ejaaz: games, tools, services, 66 00:04:03,750 --> 00:04:08,210 Ejaaz: Therapy apps, gym logs, whatever you might, whatever your mind could potentially think of. 67 00:04:08,210 --> 00:04:11,190 Ejaaz: It's like turning chat gbt into like this like app 68 00:04:11,190 --> 00:04:16,170 Ejaaz: maker and that as you can imagine is a billion dollar multi-billion dollar industry 69 00:04:16,170 --> 00:04:19,750 Ejaaz: and you can kind of like see on my screen here like there's this like demo on 70 00:04:19,750 --> 00:04:24,970 Ejaaz: this website where you can effectively just type words in and say like hey i 71 00:04:24,970 --> 00:04:28,670 Ejaaz: want you to create like a folder or a website that like kind of displays my 72 00:04:28,670 --> 00:04:30,390 Ejaaz: profile picture and all these kinds of things and it just 73 00:04:30,720 --> 00:04:33,400 Ejaaz: You can see it coding in real time on the left here, Josh. 74 00:04:33,940 --> 00:04:36,140 Josh: Yeah, and the interface is the thing that's different, right? 75 00:04:36,200 --> 00:04:39,380 Josh: Because when you're using ChatGPT, it can code very well, but you only have 76 00:04:39,380 --> 00:04:42,580 Josh: a text box and it kind of spits out code, but then you have to put it into your 77 00:04:42,580 --> 00:04:45,240 Josh: compiler and it creates this like very messy workflow. 78 00:04:45,440 --> 00:04:48,340 Josh: What Windsurf did is they kind of took that whole workflow and compressed it 79 00:04:48,340 --> 00:04:49,840 Josh: down into one really powerful tool. 80 00:04:50,120 --> 00:04:52,960 Josh: And that's what we're seeing here, right? It's like, this is the developers 81 00:04:52,960 --> 00:04:58,720 Josh: come all in one, build your code, generate your code, debug your code all under one roof. Right. 82 00:04:59,320 --> 00:05:04,020 Ejaaz: So you can imagine that if you are a software engineer that learns how to use 83 00:05:04,020 --> 00:05:09,120 Ejaaz: this tool or gets access to a tool like this, you can suddenly work at 10x your 84 00:05:09,120 --> 00:05:10,640 Ejaaz: speed and output, right? 85 00:05:10,880 --> 00:05:14,680 Ejaaz: So there's this term that's often used in tech, which is called like 100x engineer, 86 00:05:14,680 --> 00:05:16,660 Ejaaz: and they're usually super rare. 87 00:05:16,900 --> 00:05:20,000 Ejaaz: This tool turns everyone into 100x engineer. 88 00:05:20,240 --> 00:05:24,060 Ejaaz: And that means that you could hire probably fewer engineers to get your thing 89 00:05:24,060 --> 00:05:27,960 Ejaaz: done, or you could scale your company 100x from where it is right now, 90 00:05:28,160 --> 00:05:31,760 Ejaaz: just using existing employees and access to this tool, which is insane, right? 91 00:05:31,820 --> 00:05:34,560 Ejaaz: So you can imagine something like this is worth a ton of money. 92 00:05:34,700 --> 00:05:39,100 Ejaaz: But if you remember on a previous episode, Josh, we actually mentioned that 93 00:05:39,100 --> 00:05:44,120 Ejaaz: OpenAI wasn't just, didn't just get to where they were on their own, right? 94 00:05:44,240 --> 00:05:48,040 Ejaaz: They had some pretty impressive backers behind them. And one of their backers 95 00:05:48,040 --> 00:05:50,780 Ejaaz: was this little known company called Microsoft. 96 00:05:51,160 --> 00:05:52,160 Josh: I remember that. 97 00:05:52,600 --> 00:05:55,420 Ejaaz: You remember Microsoft? You know, they've been around a while, 98 00:05:55,420 --> 00:06:00,280 Ejaaz: right and some of the terms that microsoft struck with open air when they invested 99 00:06:00,280 --> 00:06:05,060 Ejaaz: i think something to the tune of 16 billion dollars josh or is it like 24 i 100 00:06:05,060 --> 00:06:09,040 Ejaaz: feel like i'm off by like 10 billion which is just like tens of billions tens 101 00:06:09,040 --> 00:06:11,460 Ejaaz: of billions okay let's just go with casual tens of billions 102 00:06:12,170 --> 00:06:16,670 Ejaaz: Part of the terms that they struck with OpenAI was that they get full access 103 00:06:16,670 --> 00:06:20,570 Ejaaz: and IP control over OpenAI's models up until the year 2030. 104 00:06:20,930 --> 00:06:25,670 Ejaaz: And also they get a significant chunk of revenue that OpenAI generates. 105 00:06:25,850 --> 00:06:30,450 Ejaaz: And the final point, which is what is about to cause the rift that I'm about 106 00:06:30,450 --> 00:06:36,770 Ejaaz: to describe, was access to any and all IP that they may acquire as well, Josh. 107 00:06:37,030 --> 00:06:41,590 Ejaaz: So as you can imagine, OpenAI is buying this massively valuable company, 108 00:06:41,770 --> 00:06:43,050 Ejaaz: Windsurf, for $3 billion. 109 00:06:43,450 --> 00:06:48,450 Ejaaz: And their plan presumably is to build an amazing product suite and earn tons of money from it. 110 00:06:48,550 --> 00:06:51,930 Ejaaz: But Microsoft would be eligible to owning the IP of Windsurf. 111 00:06:52,050 --> 00:06:54,330 Ejaaz: And Sam Altman, OpenAI didn't like this. 112 00:06:54,650 --> 00:07:00,170 Ejaaz: So the rumor behind the scene was that Sam Altman was negotiating with Microsoft, 113 00:07:00,430 --> 00:07:03,710 Ejaaz: basically trying to get them off the cap table with that respect and not give 114 00:07:03,710 --> 00:07:04,790 Ejaaz: them access to Windsurf. 115 00:07:05,010 --> 00:07:07,550 Ejaaz: There was a lot of back and forth, a lot of insider knowledge, 116 00:07:07,550 --> 00:07:11,530 Ejaaz: basically saying that Satya wasn't happy and that they couldn't come to an agreement. 117 00:07:11,530 --> 00:07:15,650 Ejaaz: So the rumor was Satya walked away from the negotiating table. 118 00:07:16,030 --> 00:07:20,170 Ejaaz: Now, typically, when an offer is made as big as this, $3 billion, 119 00:07:20,650 --> 00:07:22,250 Ejaaz: It comes with some terms and conditions. 120 00:07:22,310 --> 00:07:24,670 Ejaaz: And usually it comes with an expiry date. 121 00:07:24,830 --> 00:07:29,770 Ejaaz: So if, God forbid, anything goes wrong, the deal suddenly becomes off the table. 122 00:07:29,890 --> 00:07:32,370 Ejaaz: So, you know, typically anyone has kind of like an out. 123 00:07:32,770 --> 00:07:36,550 Ejaaz: And what happened after Microsoft walked away from the negotiating table was 124 00:07:36,550 --> 00:07:42,950 Ejaaz: that this $3 billion dollar offer josh expired on july 11th so literally a few 125 00:07:42,950 --> 00:07:45,950 Ejaaz: days ago and that's when all the drama started 126 00:07:45,950 --> 00:07:50,310 Josh: Unwinding expiration that is like a tremendous amount of money just to let, 127 00:07:51,310 --> 00:07:54,070 Josh: expire right i feel like if i was i mean put yourself 128 00:07:54,070 --> 00:07:58,030 Josh: in the the shoes of a windsurf employee where you own 129 00:07:58,030 --> 00:08:00,970 Josh: equity you are worth on paper now a tremendous amount 130 00:08:00,970 --> 00:08:04,250 Josh: of money and you're sitting there every day waking up looking at 131 00:08:04,250 --> 00:08:06,930 Josh: like the news like am i going to get this money or is this 132 00:08:06,930 --> 00:08:09,790 Josh: going to respond and then it expires it's like an option if you have a call 133 00:08:09,790 --> 00:08:14,050 Josh: option it just expired worthless you you're left with nothing so now the windsurf 134 00:08:14,050 --> 00:08:16,910 Josh: employee i guess i'll play that role because i'm pretty clueless in this whole 135 00:08:16,910 --> 00:08:21,510 Josh: thing i'm pretty sad but i know my company's still worth a lot so like what 136 00:08:21,510 --> 00:08:26,410 Josh: happens next to me as the windsurf employee after okay a ideal falls through i. 137 00:08:26,410 --> 00:08:32,170 Ejaaz: Want you to to envision this josh okay so you're a windsurf employee and you've 138 00:08:32,170 --> 00:08:34,730 Ejaaz: kind of been told that OpenAI is going to buy you for $3 billion. 139 00:08:35,370 --> 00:08:40,330 Ejaaz: You go to bed one day, you wake up the next, and you realize that the deal has expired, right? 140 00:08:40,970 --> 00:08:43,830 Ejaaz: And then a couple of hours, yeah, it's expired, it's done. 141 00:08:43,970 --> 00:08:49,690 Ejaaz: And then a couple of hours later, you open up your laptop and you see this tweet. 142 00:08:50,110 --> 00:08:51,390 Ejaaz: Josh, tell me about your reaction. 143 00:08:52,120 --> 00:08:56,580 Josh: Big welcome to Mohan Solo and others from the Windsurf team joining DeepMind. 144 00:08:56,740 --> 00:09:02,980 Josh: Now, if I remember correctly, the name of my CEO is the same handle that that was tagged in this post. 145 00:09:03,080 --> 00:09:03,560 Ejaaz: Exactly. 146 00:09:03,760 --> 00:09:08,160 Josh: Okay, you're good so far. I believe I've just learned that the CEO of my company, 147 00:09:08,420 --> 00:09:11,480 Josh: as well as other, I guess, higher executives. 148 00:09:11,540 --> 00:09:12,920 Ejaaz: You, the Windsurf team. 149 00:09:13,340 --> 00:09:16,600 Josh: Me. I'm joining Google. I'm going to Google today. You're joining Google. 150 00:09:16,720 --> 00:09:20,080 Ejaaz: You're joining Google, Josh. You're joining Google. Congrats. 151 00:09:20,600 --> 00:09:21,980 Ejaaz: Are they paying me $3 billion? 152 00:09:22,960 --> 00:09:25,620 Ejaaz: Exactly. And now your question is, are you paying $3 billion? 153 00:09:25,800 --> 00:09:29,480 Ejaaz: Well, what if I told you this, Josh? They're not paying you $3 billion. 154 00:09:30,260 --> 00:09:34,680 Ejaaz: They're paying you a little less. They're paying you $2.4 billion. 155 00:09:35,440 --> 00:09:38,080 Ejaaz: Okay. How does that sound? So far, so good? Yeah. 156 00:09:38,260 --> 00:09:39,380 Josh: I mean, at least better than nothing. 157 00:09:39,560 --> 00:09:41,060 Ejaaz: You'll take that. You'll take it, right? 158 00:09:41,720 --> 00:09:44,640 Josh: That'll make me multimillionaire for sure. That seems pretty chill. 159 00:09:45,340 --> 00:09:51,060 Ejaaz: Sounds good. Except that there's one clause, which is that $2.4 billion is actually 160 00:09:51,060 --> 00:09:55,280 Ejaaz: being used to buy your CEO that was just named in that tweet, 161 00:09:55,540 --> 00:10:02,680 Ejaaz: one of his other co-founders and about four researchers on the entire company team. 162 00:10:03,940 --> 00:10:04,980 Ejaaz: So this $2.4 163 00:10:04,980 --> 00:10:10,080 Josh: Billion is really just an acqui-hire for the talent. 164 00:10:10,340 --> 00:10:13,540 Josh: A hundred percent. And they're still not buying my company. 165 00:10:14,280 --> 00:10:20,460 Ejaaz: Yeah. So the long story short of this is Google announced that they struck a 166 00:10:20,460 --> 00:10:25,660 Ejaaz: deal with Winsurf, particularly the CEO, and agreed to pay $2.4 billion, 167 00:10:26,000 --> 00:10:32,400 Ejaaz: but primarily to hire Winsurf CEO and one other co-founder and a group of key researchers, 168 00:10:32,900 --> 00:10:39,360 Ejaaz: along with the non-exclusive rights, non-exclusive licensing rights to some 169 00:10:39,360 --> 00:10:40,740 Ejaaz: of Winsurf's technology. 170 00:10:41,040 --> 00:10:44,480 Ejaaz: So this is, as you said, yeah, you just got zapped. They just paid a couple 171 00:10:44,480 --> 00:10:47,700 Josh: Hundred million dollars, took the talent out of my company, and now I'm just 172 00:10:47,700 --> 00:10:49,840 Josh: left with the shell, which is devastating, right? 173 00:10:50,040 --> 00:10:54,240 Josh: I work so hard on building this. I am the reason this value exists because I 174 00:10:54,240 --> 00:10:59,040 Josh: have been working hardcore engineering on this for years, And that seems really upsetting. 175 00:10:59,700 --> 00:11:02,520 Ejaaz: Think about it. You are a founding engineer of this company. 176 00:11:02,720 --> 00:11:04,740 Ejaaz: You're a founding employee of this company. 177 00:11:04,940 --> 00:11:08,340 Ejaaz: Typically, you'd expect when you go from zero to $3 billion, 178 00:11:08,840 --> 00:11:10,960 Ejaaz: you're going to see at least some of that. 179 00:11:11,140 --> 00:11:16,620 Ejaaz: Surely, they're not going to concentrate over $1.25 billion for a single person. 180 00:11:17,060 --> 00:11:21,000 Ejaaz: Surely, that's ludicrous, right? But that's unfortunately exactly what happened. 181 00:11:21,000 --> 00:11:27,320 Ejaaz: So $2.4 billion for like five people and non-exclusive licensing rights for 182 00:11:27,320 --> 00:11:28,740 Ejaaz: like some of Windsurf's tech. 183 00:11:28,920 --> 00:11:33,300 Ejaaz: But the majority of the 250 people, its core business, the IP, 184 00:11:33,480 --> 00:11:37,920 Ejaaz: the product, the brand, and the remaining team just kind of got left to the wayside. 185 00:11:38,020 --> 00:11:40,600 Ejaaz: This was a pure play acquire. 186 00:11:41,280 --> 00:11:45,660 Josh: Yikes. And I guess we could kind of speculate on what led to this. 187 00:11:45,660 --> 00:11:49,420 Josh: Like if you remember, we actually spoke about this briefly on the show when 188 00:11:49,420 --> 00:11:53,900 Josh: OpenAI made the offer to acquire Windsurf, immediately Anthropic and a few others 189 00:11:53,900 --> 00:11:56,500 Josh: started pulling out their contracts with Windsurf. 190 00:11:56,660 --> 00:12:00,000 Josh: So they were making the product less valuable because they didn't want to give 191 00:12:00,000 --> 00:12:01,460 Josh: their data over to OpenAI. 192 00:12:02,340 --> 00:12:05,500 Josh: As a result, it lowered the valuation of the company. 193 00:12:05,660 --> 00:12:12,200 Josh: So when OpenAI then steps away and Winsurf still has to deal with the lost customers 194 00:12:12,200 --> 00:12:16,200 Josh: of Anthropic and whoever else stepped away, well, suddenly the company is worth a little bit less. 195 00:12:16,500 --> 00:12:19,940 Josh: And now Google steps in, they're like, okay, well, maybe we get a discount because 196 00:12:19,940 --> 00:12:24,740 Josh: now your average revenue or your recurring revenue is way lower than it was 197 00:12:24,740 --> 00:12:27,660 Josh: just a few months ago. So there's your 25% haircut. 198 00:12:27,940 --> 00:12:31,300 Josh: And then they're like, well, we don't actually want the business because the 199 00:12:31,300 --> 00:12:32,900 Josh: business is kind of failing. There's a lot of drama. 200 00:12:33,080 --> 00:12:36,820 Josh: There's a lot of, a lot of your larger clients aren't interested because they're direct competitors. 201 00:12:37,060 --> 00:12:42,160 Josh: So let's just take the talent. And that is such a sad thing to watch your baby 202 00:12:42,160 --> 00:12:46,700 Josh: just get pummeled over and over again by these high executives. 203 00:12:47,380 --> 00:12:50,340 Josh: But it's on, it's on brand, right? Like we've seen this happen before. 204 00:12:50,480 --> 00:12:54,540 Josh: Zuck is offering hundreds of millions to billions for employees. 205 00:12:54,680 --> 00:12:57,120 Josh: And now Google is doing the same exact thing. 206 00:12:57,420 --> 00:13:01,940 Ejaaz: I think you just highlighted a really important trend, which has just been confirmed. 207 00:13:01,940 --> 00:13:07,440 Ejaaz: By these events, Josh, which is the stars of the show for any AI company are 208 00:13:07,440 --> 00:13:10,100 Ejaaz: its researchers, are its model creators. 209 00:13:10,340 --> 00:13:17,820 Ejaaz: They're the ones that are selling for like multiples of a top NBA super sports star, right? 210 00:13:18,100 --> 00:13:23,180 Ejaaz: Hundreds and hundreds of millions, potentially billions for a single person. 211 00:13:23,460 --> 00:13:27,520 Ejaaz: That is just an absurd amount of money and has probably never been seen the 212 00:13:27,520 --> 00:13:29,680 Ejaaz: like from any kind of industry before, right? 213 00:13:29,840 --> 00:13:31,180 Josh: They're like professional sports athletes. 214 00:13:31,360 --> 00:13:35,020 Ejaaz: Yeah. Yeah, they're not worth their weight in gold. They're worth a hundred 215 00:13:35,020 --> 00:13:36,900 Ejaaz: times their weight in gold, apparently, right? 216 00:13:37,680 --> 00:13:40,060 Ejaaz: And then the second thing I think that's happening here, Josh, 217 00:13:40,240 --> 00:13:48,200 Ejaaz: is Google got a bit antsy when they saw that Zuck aggressively poached OpenAI's staff. 218 00:13:48,440 --> 00:13:53,000 Ejaaz: I think they hired like, what, 10 people? So that's probably somewhere around 219 00:13:53,000 --> 00:13:58,380 Ejaaz: $2.5 billion spent, if we want to believe the rumors of like hundreds of millions 220 00:13:58,380 --> 00:14:00,020 Ejaaz: being spent for certain researchers. 221 00:14:00,500 --> 00:14:03,640 Ejaaz: So Google's probably watched this happen over the last two weeks, 222 00:14:03,720 --> 00:14:05,320 Ejaaz: which is an insane thing to say, by the way. 223 00:14:05,400 --> 00:14:09,980 Ejaaz: This has happened over the last two weeks and thought, oh shit, we're next in line. 224 00:14:10,480 --> 00:14:13,520 Ejaaz: We're the next best model provider for many a reason. 225 00:14:13,740 --> 00:14:18,580 Ejaaz: They have access to all our AI papers so they can see who the best researchers that we have are. 226 00:14:18,940 --> 00:14:22,660 Ejaaz: And Zuck's probably reaching out to all of these. So they saw this opportunity 227 00:14:22,660 --> 00:14:27,260 Ejaaz: and jumped on it and decided to do the opposite and say, well, screw you, Zuck. 228 00:14:27,340 --> 00:14:30,340 Ejaaz: I know what you're coming for, but I'm going to jump ahead of the curve and 229 00:14:30,340 --> 00:14:34,240 Ejaaz: actually poach these guys before you do so that we keep bolstering confidence 230 00:14:34,240 --> 00:14:39,040 Ejaaz: in our team and our ability to build up the team? What do you think of that? Is that fair? 231 00:14:39,060 --> 00:14:42,260 Josh: Yeah, well, one of the biggest things I've been wondering is like, 232 00:14:42,380 --> 00:14:46,580 Josh: how are they actually worth $100 million? How are they worth a billion dollars for a single person? 233 00:14:47,040 --> 00:14:52,580 Josh: And I posted this publicly and I like did some digging and the answer is really, 234 00:14:52,760 --> 00:14:56,660 Josh: it's still a fuzzy answer, but basically they're a series of difficult problems, 235 00:14:56,820 --> 00:15:01,000 Josh: most of which are unknown that are required to be solved in order to reach this goal. 236 00:15:01,000 --> 00:15:05,940 Josh: So in the case of training improvements, I mean, we spoke about Kimi K2 yesterday. 237 00:15:06,140 --> 00:15:09,920 Josh: The reason that model performed so well is was because a novel breakthrough 238 00:15:09,920 --> 00:15:12,660 Josh: that a researcher discovered and then deployed into the code base. 239 00:15:12,740 --> 00:15:16,120 Josh: And now they have a model that competes with Claude, but it's open source and free to use. 240 00:15:16,240 --> 00:15:20,760 Josh: So that's a huge advantage. And that is a multi-billion dollar advantage at scale. 241 00:15:20,920 --> 00:15:24,340 Josh: So if you can pay one researcher to come up with a novel breakthrough like this 242 00:15:24,340 --> 00:15:28,360 Josh: and then deploy it to your code base, then suddenly you have gained billions 243 00:15:28,360 --> 00:15:31,380 Josh: of dollars of market cap. and it compounds because the scale is so large. 244 00:15:32,080 --> 00:15:34,360 Josh: And this exists all the way down the stack because when you're doing a training 245 00:15:34,360 --> 00:15:38,860 Josh: run, I mean, a lot of these companies have 100,000, 200,000 GPUs that are all 246 00:15:38,860 --> 00:15:40,860 Josh: focused on one single training run. 247 00:15:41,100 --> 00:15:44,780 Josh: And that means they can't be serving customers. They can't be serving queries 248 00:15:44,780 --> 00:15:45,760 Josh: to make the company money. 249 00:15:45,900 --> 00:15:49,560 Josh: It is a net spend that they're incurring to train this model. 250 00:15:49,740 --> 00:15:54,180 Josh: And in the case that an engineer didn't make the right decision or went down 251 00:15:54,180 --> 00:15:59,120 Josh: the wrong decision tree, that could cost them many, many billions of dollars, 252 00:15:59,540 --> 00:16:03,100 Josh: days, weeks of time. and in this world, those weeks cost a lot of money. 253 00:16:03,260 --> 00:16:06,900 Josh: So basically what I realized, what I came to consensus on is they're just giving 254 00:16:06,900 --> 00:16:11,400 Josh: themselves the best probability by having the most intelligent people on the 255 00:16:11,400 --> 00:16:15,720 Josh: specific topic of making the correct decision trees required to get to where they want to go. 256 00:16:15,940 --> 00:16:19,180 Josh: And that is why the stakes are so high. And that's why they're being paid billions 257 00:16:19,180 --> 00:16:22,820 Josh: of dollars because someone like Ilya, who has been around for a decade plus, 258 00:16:23,000 --> 00:16:26,920 Josh: is probably most likely to make the right decisions, even though it's no guarantee. 259 00:16:28,340 --> 00:16:31,220 Ejaaz: What you've just described is the wild west and 260 00:16:31,220 --> 00:16:34,300 Ejaaz: i love how you described it as kind of like an ai model 261 00:16:34,300 --> 00:16:37,260 Ejaaz: josh you were like it's probabilistic we don't 262 00:16:37,260 --> 00:16:39,740 Ejaaz: really know which path it's going to take but they're running it through this 263 00:16:39,740 --> 00:16:43,440 Ejaaz: model and they're estimating that the output would be like this so they're spending 264 00:16:43,440 --> 00:16:47,580 Ejaaz: hundreds of millions of dollars i thought it was beautifully done but josh if 265 00:16:47,580 --> 00:16:52,800 Ejaaz: you remember at the start of this episode i said that it ended like a fairy 266 00:16:52,800 --> 00:16:56,040 Ejaaz: tale So right now, we're at devastation point, right? 267 00:16:56,200 --> 00:16:59,440 Josh: I'm deep in my nightmare right now. I'm living it. I've just seen my entire 268 00:16:59,440 --> 00:17:02,240 Josh: C-suite get poached for two and a half billion dollars. I got nothing. 269 00:17:02,520 --> 00:17:07,480 Ejaaz: You just hustled for five to 10 years and you have nothing to show for it. 270 00:17:07,700 --> 00:17:11,500 Ejaaz: You have a family of kids to feed and you promised them you're going to get 271 00:17:11,500 --> 00:17:13,660 Ejaaz: them millions and nothing's happened, right? 272 00:17:14,040 --> 00:17:19,040 Ejaaz: So here's what happens next. Do you remember way back when, and I think this 273 00:17:19,040 --> 00:17:25,180 Ejaaz: is like a year ago, when the first AI engineer agent was released. 274 00:17:25,180 --> 00:17:28,760 Ejaaz: It was this thing called Devin, D-E-V-I-N. Do you remember that? 275 00:17:28,880 --> 00:17:29,380 Josh: I do, yeah. Yeah. 276 00:17:30,050 --> 00:17:34,110 Ejaaz: Yeah. Do you remember the hype that was caused because of it? 277 00:17:34,190 --> 00:17:39,150 Ejaaz: I think they released like this 30 second demo of this really slick AI agent. 278 00:17:39,310 --> 00:17:43,030 Ejaaz: It's kind of like ChatGPT, but it was just doing all the coding and engineers 279 00:17:43,030 --> 00:17:46,610 Ejaaz: lost their mind. They were like, oh my God, I would. There were two camps. 280 00:17:46,890 --> 00:17:51,450 Ejaaz: One, I would love using a tool like this and it'll enhance me 10x or whatever. 281 00:17:51,750 --> 00:17:55,990 Ejaaz: And then a vast swathe of people online that hated it and said, 282 00:17:56,130 --> 00:18:00,270 Ejaaz: there's no way it's as good as it is. and then, you know, A16Z jumped in. 283 00:18:00,370 --> 00:18:03,470 Ejaaz: I think they threw them like a $200 million check, classic A16Z. 284 00:18:03,690 --> 00:18:07,190 Ejaaz: And there was a lot of hype around this. That was like one of the clearest signals 285 00:18:07,190 --> 00:18:10,010 Ejaaz: early on that Vibe coding was going to become a thing. Do you remember that? 286 00:18:10,490 --> 00:18:15,070 Ejaaz: I do. So this company that created Devin is called Cognition. 287 00:18:16,030 --> 00:18:21,030 Ejaaz: And we saw this post come up literally the day after Google's acquisition. 288 00:18:21,190 --> 00:18:25,910 Ejaaz: So imagine you wake up one day, you realize you've lost the OpenAI deal. You're like, damn. 289 00:18:26,230 --> 00:18:30,330 Ejaaz: And then a few hours later, So you see the tweet from Logan Kilpatrick from 290 00:18:30,330 --> 00:18:32,750 Ejaaz: Google saying, hey, we bought you for $2.4 billion. 291 00:18:33,150 --> 00:18:37,550 Ejaaz: You're elated until you realize that you're not getting paid any of that stuff. 292 00:18:37,650 --> 00:18:39,130 Ejaaz: So you go into like peak depression. 293 00:18:39,310 --> 00:18:42,910 Ejaaz: And then the next day, you see an announcement from Cognition. 294 00:18:43,050 --> 00:18:45,430 Ejaaz: And this is the official announcement on Cognition's website. 295 00:18:45,750 --> 00:18:47,930 Ejaaz: Cognition acquires Winsurf. 296 00:18:48,310 --> 00:18:55,430 Ejaaz: And it's this joint announcement from the CEO of Cognition, which is Scott Wu. 297 00:18:55,430 --> 00:18:59,950 Ejaaz: And one of the co-founders and by the way this is the co-founder that didn't 298 00:18:59,950 --> 00:19:04,390 Ejaaz: get included in the $2.4 billion win self deal Man, that's got to sting Yeah, 299 00:19:04,450 --> 00:19:08,210 Ejaaz: yeah, yeah Well, calling him a co-founder is kind of like a bit of a 300 00:19:08,850 --> 00:19:12,610 Ejaaz: kind of like graceful title to give him. But his name is Jeff Wang. 301 00:19:12,770 --> 00:19:17,990 Ejaaz: And he was the recently appointed CEO after the two co-founders just ditched him, basically. 302 00:19:18,650 --> 00:19:22,850 Ejaaz: And they were like, okay, Jeff, you're head of BD, but we need you to step up 303 00:19:22,850 --> 00:19:25,650 Ejaaz: as CEO because we're going to bounce and take this billion dollar check. 304 00:19:25,890 --> 00:19:33,210 Ejaaz: But you're the new CEO. So this guy, Jeff Wang, and this CEO, Scott Wu of Cognition, 305 00:19:33,730 --> 00:19:37,990 Ejaaz: struck a deal to basically take over the remaining IP, product, 306 00:19:38,290 --> 00:19:43,410 Ejaaz: brand, And remaining team, most importantly, 250 individuals all have families, 307 00:19:43,550 --> 00:19:47,890 Ejaaz: mouths to feed, whatever lives to live and include them in this package deal. 308 00:19:48,050 --> 00:19:52,830 Ejaaz: So this was the major announcement that like kind of like swept the social media 309 00:19:52,830 --> 00:19:56,470 Ejaaz: realms and made everyone super happy and elated by this and, 310 00:19:56,470 --> 00:19:58,050 Ejaaz: you know, gave them their happy ending. 311 00:19:58,810 --> 00:20:01,470 Josh: What was the total cost that they paid? Did they announce that? 312 00:20:01,810 --> 00:20:06,690 Ejaaz: That's a great question. Let me pull up this tweet of this guy called Harry. 313 00:20:06,690 --> 00:20:09,390 Ejaaz: Oh, here we are. His title is Harry Digresses. 314 00:20:09,730 --> 00:20:13,250 Ejaaz: It wasn't official how much they got paid for, but there were some really amazing 315 00:20:13,250 --> 00:20:14,290 Ejaaz: deal terms in this, Josh. 316 00:20:14,430 --> 00:20:17,910 Ejaaz: So I'll highlight a few things here. The first one is this. 317 00:20:18,610 --> 00:20:24,190 Ejaaz: So not only were all 250 employees that were left behind going to get paid, 318 00:20:24,330 --> 00:20:29,730 Ejaaz: but they were going to have all their cliffs removed and have accelerated vesting on all their equity. 319 00:20:30,630 --> 00:20:33,790 Josh: Amazing. Okay. So they're making things right, or at least as best they can. 320 00:20:33,930 --> 00:20:36,550 Josh: It's not the $3 billion dollar offer initially but like they're doing the best 321 00:20:36,550 --> 00:20:41,450 Josh: they can and i mean as an employee of windsurf that feels really good feels. 322 00:20:41,450 --> 00:20:44,250 Ejaaz: Really good but then you're you're wondering you're wondering well how much 323 00:20:44,250 --> 00:20:47,650 Ejaaz: am i am i getting paid like like how much are we getting acquired 324 00:20:47,650 --> 00:20:51,250 Josh: For yeah let's say i had one percent i mean that's 30 million dollars i was 325 00:20:51,250 --> 00:20:55,010 Josh: about to bag and now so where are we at now it. 326 00:20:55,010 --> 00:20:57,990 Ejaaz: Might be it might be a little less but he basically does this 327 00:20:57,990 --> 00:21:04,030 Ejaaz: rundown and estimates it to be around 300 to 400 million dollars which is a 328 00:21:04,030 --> 00:21:09,130 Ejaaz: significant drop from what you are going to get paid but it's also not nothing 329 00:21:09,130 --> 00:21:13,230 Ejaaz: the other way i was thinking about it is it's probably all in cognition stock 330 00:21:13,230 --> 00:21:15,770 Ejaaz: josh there's no way they had that much 331 00:21:15,770 --> 00:21:20,650 Josh: Cash yeah just cash sitting on hand okay so my my 30 million dollars is now 332 00:21:20,650 --> 00:21:27,110 Josh: three million dollars in stock for cognition which is a private company not 333 00:21:27,110 --> 00:21:30,330 Josh: even liquid oh yeah lots of tax implications, 334 00:21:31,550 --> 00:21:37,590 Josh: okay so i mean at least i have a job i guess is where i'll end up on this is like cool. 335 00:21:38,300 --> 00:21:42,360 Ejaaz: I mean, now that I recounted to you, Josh, you're still screwed. 336 00:21:43,020 --> 00:21:45,580 Josh: You're still screwed, dude. At this point, I'm just happy to be employed. 337 00:21:45,800 --> 00:21:50,220 Josh: I'm just glad that I still have some sort of a job. I'm hopefully collecting some sort of paycheck. 338 00:21:50,820 --> 00:21:54,440 Josh: One day, it is hopeful that the stock will be worth money, and then I'll be 339 00:21:54,440 --> 00:21:57,240 Josh: able to sell it and cash out. But man, yeah, what a roller coaster. 340 00:21:57,460 --> 00:21:59,980 Josh: And it kind of sets this new paradigm, right? Where you can cut, 341 00:22:00,520 --> 00:22:05,580 Josh: you could kind of rip the value out of a company and then just kind of throw the rest to the side. 342 00:22:05,580 --> 00:22:10,860 Josh: But it's this really interesting ideological debate you could have as a founder 343 00:22:10,860 --> 00:22:14,600 Josh: of a company whose fiduciary duty is to serve right by the shareholders. 344 00:22:14,760 --> 00:22:19,340 Josh: And in this case, your shareholders are the employees that you've given stock options to. 345 00:22:19,640 --> 00:22:24,380 Josh: And in the case that they're just going away and they've destroyed the value 346 00:22:24,380 --> 00:22:28,180 Josh: of the company, they've extracted the value of the acquisition. 347 00:22:28,180 --> 00:22:32,740 Josh: They have kind of just left the shell of a company and left the people who are 348 00:22:32,740 --> 00:22:36,580 Josh: responsible for putting them in that place on the side of the road and like 349 00:22:36,580 --> 00:22:40,960 Josh: that doesn't feel very good but there's really nothing legally preventing them 350 00:22:40,960 --> 00:22:43,840 Josh: from stopping that it's really just an ideological, 351 00:22:44,580 --> 00:22:48,960 Josh: debate in this case it doesn't i mean i'd be pretty i'd be pretty upset sure 352 00:22:48,960 --> 00:22:51,440 Josh: if i'm one of the founders i just made a billion i'm now a billionaire like 353 00:22:51,440 --> 00:22:55,100 Josh: that's cool but for everyone else. It kind of leaves a bed for the. 354 00:22:55,100 --> 00:22:59,760 Ejaaz: Majority of people. Yeah, you're screwed. I don't know whether it's because 355 00:23:00,700 --> 00:23:05,300 Ejaaz: of all the time I've spent in web three, Josh, but I've kind of grown numb to 356 00:23:05,300 --> 00:23:09,440 Ejaaz: all this like terrible, appalling behavior, unequitable behavior. 357 00:23:09,720 --> 00:23:12,840 Ejaaz: And so I kind of look at a story like this and I'm like, oh yeah, 358 00:23:12,920 --> 00:23:17,860 Ejaaz: he got paid billions and left the entire company and team to dry. 359 00:23:18,440 --> 00:23:22,600 Ejaaz: Yeah. Happens all the time, I guess. But like, I'm just, I'm noticing this trend, 360 00:23:22,820 --> 00:23:25,800 Ejaaz: particularly within AI that there's this more wild 361 00:23:25,800 --> 00:23:30,020 Ejaaz: west kind of degenerate behavior when it comes to acquisitions like people are 362 00:23:30,020 --> 00:23:33,660 Ejaaz: ruthless and i don't know whether this is maybe it's my naivety when it comes 363 00:23:33,660 --> 00:23:37,720 Ejaaz: to like vc deals and acquisitions and mergers maybe i just i just don't know 364 00:23:37,720 --> 00:23:44,160 Ejaaz: maybe this happens all the time but this seems like the most extremely skewed version of this and 365 00:23:44,160 --> 00:23:47,020 Josh: We often refer to it on the show as like the game of thrones and 366 00:23:47,020 --> 00:23:50,040 Josh: i don't think there's a much better description than that where it really is 367 00:23:50,040 --> 00:23:53,560 Josh: cutthroat and this happens a lot in traditional venture and acquisitions but 368 00:23:53,560 --> 00:23:58,120 Josh: this scale i think has never been greater and that's probably what stands out 369 00:23:58,120 --> 00:24:02,440 Josh: among all of these headlines is just how much money is being made lost and thrown 370 00:24:02,440 --> 00:24:07,920 Josh: around to position yourself better to get to this point of agi but you have 371 00:24:07,920 --> 00:24:09,820 Josh: a tweet you had a post here it looks. 372 00:24:09,820 --> 00:24:15,960 Ejaaz: Funny just to round us out josh just to like put a bit of cherry on this cake 373 00:24:15,960 --> 00:24:22,480 Ejaaz: well the tldr is like everyone hates varoon mohan the former ceo who took the 374 00:24:22,480 --> 00:24:25,560 Ejaaz: 1.5 billion dollar check or however much it was. 375 00:24:25,760 --> 00:24:29,480 Ejaaz: And everyone loves Scott Wu, the CEO of Cognition Lambs, who stepped up, 376 00:24:29,940 --> 00:24:35,240 Ejaaz: gave the 250 employees a salary and a lifeline and accelerated vesting. 377 00:24:35,460 --> 00:24:39,560 Ejaaz: So no matter the size of the money, shout out to Scott Wu. He didn't need to do that. 378 00:24:39,720 --> 00:24:44,320 Ejaaz: And then, you know, Varun, I wonder, you know, whether his reputation survives this. 379 00:24:44,520 --> 00:24:49,320 Ejaaz: I can see the reasoning why you would take the big check, but also like leaving 380 00:24:49,320 --> 00:24:51,660 Ejaaz: all your employees out like that to drive without even giving them, 381 00:24:51,740 --> 00:24:55,640 Ejaaz: I don't know, a couple mil is kind of insane. But here we are. 382 00:24:56,290 --> 00:24:57,630 Ejaaz: So what's the price on your reputation? 383 00:24:58,010 --> 00:25:02,910 Josh: Like, would you take a couple billion dollars to just go work on AGI and let the. 384 00:25:02,910 --> 00:25:04,590 Ejaaz: Media do a thing for a couple of weeks? I know a lot of people that would do 385 00:25:04,590 --> 00:25:07,870 Ejaaz: it. I know a lot of people. I mean, I'm one of them. 386 00:25:07,950 --> 00:25:10,830 Josh: I'd probably do that, right? Like, a couple billion dollars? I don't know. 387 00:25:11,170 --> 00:25:13,870 Josh: But also, yeah, it's tough. Well, it's funny because at this graphic, 388 00:25:14,130 --> 00:25:15,590 Josh: it's a win-win for both of them. 389 00:25:15,770 --> 00:25:19,170 Josh: Like, Varun is, or I'm not sure how you pronounce his name, but he's hated. 390 00:25:20,590 --> 00:25:25,490 Josh: The CEO of Winsurf is not liked, but he's rich. and Scott Wu is loved. 391 00:25:25,750 --> 00:25:29,750 Josh: And now he has a bunch of employees that really want to work hard to make this 392 00:25:29,750 --> 00:25:33,230 Josh: work for him and really want to add value to his company and can go to sleep 393 00:25:33,230 --> 00:25:37,210 Josh: with a good conscience knowing he's done well and he's done right by these people. 394 00:25:37,470 --> 00:25:41,390 Josh: Whereas our windsurf buddy cannot do that. So maybe he will just be, 395 00:25:41,530 --> 00:25:45,490 Josh: one of them will be crying in their $100 million mansion while the other will 396 00:25:45,490 --> 00:25:48,270 Josh: be surrounded by people who love him dearly. 397 00:25:48,410 --> 00:25:51,830 Ejaaz: Yeah, I think that's pretty much it. An absolutely outrageous, 398 00:25:51,830 --> 00:25:55,870 Ejaaz: but weirdly normal day in the world of AI, Josh. 399 00:25:56,070 --> 00:25:59,970 Ejaaz: We thank you guys for listening. We are trying out this new format. 400 00:26:00,230 --> 00:26:05,410 Ejaaz: We've said this before, where we kind of talk about trending topics and be or 401 00:26:05,410 --> 00:26:09,430 Ejaaz: try and be the first guys to talk about it and put it in front of your feeds. 402 00:26:09,730 --> 00:26:13,890 Ejaaz: We are welcoming any and all feedback. So, you know, any kind of comments or 403 00:26:13,890 --> 00:26:15,710 Ejaaz: DMs, it's all open, go for it. 404 00:26:16,150 --> 00:26:18,970 Ejaaz: And if you could like, subscribe and share it with all your friends or anyone 405 00:26:18,970 --> 00:26:22,690 Ejaaz: who you think would be interested in this kind of thing, we would be eternally 406 00:26:22,690 --> 00:26:25,530 Ejaaz: grateful and we'll see you on the next episode see you 407 00:26:25,530 --> 00:26:27,050 Josh: On the next one peace guys. 408 00:26:27,600 --> 00:26:35,660 Music: Music