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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 TVPN. It is Wednesday, 04/09/2025. We are live from the temple of technology, the fortress of finance, the capital of capital. And the fortress of finance has never been stronger. We're back.
Speaker 1:The market's ripping. We're back, baby. I I, for one, I never doubted for a second. I I I never doubted for a second.
Speaker 2:Yeah.
Speaker 1:I never said it was so over, but yet we are so back.
Speaker 2:Always knew we'd be back.
Speaker 1:I always knew. I always knew. Yes.
Speaker 2:It's a perpetual cycle.
Speaker 1:It is.
Speaker 2:It's so over. We're so back.
Speaker 1:If you if you haven't been tracking, the breaking news is that the market's way up on on, the announcement from president Donald Trump that there will be some of the tariffs will be put on hold, specifically for countries that
Speaker 2:Yep.
Speaker 1:Do not The main
Speaker 2:thing here is Walter Bloomberg wasn't wrong.
Speaker 1:Yes. He was just a little
Speaker 2:bit early. And this is a lesson that, you know, founders, investors often learn. Being early is often being too early can be equivalent to just being wrong. Yes. But we're gonna give Bloomberg Mister Bloomberg.
Speaker 2:We're gonna give mister Bloomberg
Speaker 1:a little bit of You're joking, but like maybe he did know something? No.
Speaker 2:No. He watched he watched an interview. They're like the Monday move was was He watched the live interview, of misinterpreted Yeah.
Speaker 1:What the
Speaker 2:person said, and then nobody could verify it.
Speaker 1:The front of the Wall Street Journal says stock surge as Trump authorizes a ninety day pause on some tariffs. Meanwhile, he is raising the China tariff to a 25%. So I think that that's probably what's being under discussed in the midst of this crazy
Speaker 3:10% jump in the Nasdaq.
Speaker 1:That is insane. Is that, like, this is turning into it it it originally was like, we are renegotiating the global order of tariffs. We're we're we're going back to Bretton Woods, baby. We're talking about, you know, the Nixon shock. We're talking about major geopolitical global world order who dollar reserve currency stories.
Speaker 1:And now I think we are going to be more in the era of, like, this is truly just a US China trade war, and that's where the pressure's gonna be. And, we have a lot to break down from that. There's this, I mean, Ben Thompson is back, baby. He's off of vacation, and he's been posting every single day, dropping some great analysis. We'll take you through that.
Speaker 1:We'll go through some OpenAI news about the device that they're potentially building and some other stuff before we jump over to the timeline on our guests. Let's kick it off with what Ben Thompson had to say about Apple because this Apple is, like, the company to watch.
Speaker 2:Wait. You didn't want us to kick it off with this other post that you're having there? Why don't we start
Speaker 1:there, John? Yeah. This is this is some really important news. Breaking news. This is from Landshark.
Speaker 1:Landshark writes, not sure if everyone already knows this already, but there is a guy on Instagram who behind the back deadlifts 30 kilograms more than the deadlift world record in his backyard. I just thought this was important to share because, like, obviously, you knew this. Obviously, I knew this. Obviously, most of the people in the show will know this. But if there's people that have been living under a rock and maybe, like, distant family members, people have been traveling for a long time, you know, maybe they're doing one of those, like, deadliest catch things and they just haven't had access to the Internet.
Speaker 1:Yeah. And that's know because this is important news.
Speaker 2:And the fact that this is not moving protein futures
Speaker 1:Yes. This really should move markets.
Speaker 2:Should be market moving.
Speaker 1:This should be right up there with the Trump tariff story. Bird. Yes. So there's a man on Instagram who is deadlifting £1,168, which puts him in the thousand pound club
Speaker 3:Wait.
Speaker 2:I have
Speaker 1:never on this one lift alone.
Speaker 2:Have you ever attempted a behind the back deadlift?
Speaker 1:I've never attempted a behind the back deadlift.
Speaker 2:Super curious.
Speaker 1:Yes. I do wonder if this is just innovation, and it's easier somehow, and no one
Speaker 2:ever realized human had ever said.
Speaker 1:Yeah. It's kind of like
Speaker 2:the we put it
Speaker 1:behind throwing the basketball, like, underhand granny style. People thought that might be easier, but it's, embarrassing, so no one would do it. And so but you actually could get a higher shot percentage, but it became, like, a meme thing. 530, that's so much weight.
Speaker 2:Wow. Think throughout history, there were probably just random dudes out there breaking strength records all the and just never they just were in their village just going through their regular workout routine, having a good day, breaking a world record
Speaker 1:You look at the bar and it's like so many plates. Like 10 plates or something. Yeah. It's crazy. Anyway, very important story.
Speaker 1:Anyways, well, we just wanted to make sure that
Speaker 2:you highlighted that to start the show. It's very important. Back to Back
Speaker 1:to Ben Thompson and what's going on with Apple in China. He starts the quote from the Wall Street Journal. Beijing lashed back at president Trump's threat of even higher tariffs on China raising the specter of an all out trade war between the world's two biggest economies. If The US insists on its own way, China will fight to the end, the country's commerce minister ministry said Tuesday. Trump had said he would slap an extra 50% tariff on China if Beijing didn't drop plans to retaliate against extra levies he announced last week.
Speaker 1:In a sign Beijing is digging in for a protracted battle, the government threw its weight behind the stock market and devalued the yuan against the dollar, pulling a reference rate below a key threshold for the first time since the fall of twenty twenty three. In spite of the spiraling tensions, global markets broadly rose Tuesday, pairing some losses after a bruising three day sell off. US stock futures pointed higher after market whiplash Monday, ultimately left major indexes largely unchanged, Giving investors some hope, the Trump administration signaled that it was open to discussing lower tariffs with Japan, Israel, and some other countries. Japanese stock stocks jumped after Tokyo claimed named chief tariff negotiator, and treasury secretary Scott Besson said this said the country would be prioritized in trade talks. And so that we are now in the we're not quite at the Mar A Lago Accords, but we are certainly seeing Yep.
Speaker 1:Some differential pressure. And the blanket tariffs, they did seem aggressive. And and, because, of course, like, there are lots of companies that I think have been taking taking, you know, tariffs with China seriously. Like, the first Chinese tariffs, came into effect during the Trump won. And I was thinking about that that that discussion, with Keith Raboy.
Speaker 1:And Keith, there was this question about, like, you know, you're obviously aligned with the administration, and you're a good enough, you know, conversationalist or you you're good enough at arguing this stuff that potentially no matter what happens to any economic indicator, you can say it's good. You can say, oh, like, you know, interest rates went down. It's easier to buy a house. Interest rates went up. Well, you're earning more money when you give the government money.
Speaker 1:That's great. Oh, the stock market went down. Yeah. We're just the stocks are cheaper. It's more encouragement to grind harder.
Speaker 1:Oh, the stocks go up? We're all richer. You know? It's like, if if you could just justify anything, it's like, how do we know if it's actually working? And my my takeaway from the Trump won Chinese tariffs and the re the the reevaluation of The US China relationship was that the changes that Trump made to The US China relationship, they stuck around during the Biden admin.
Speaker 1:And so I would call this like, to coin a phrase, Coogan's law, I would call this eventually bipartisan. So when Trump does something, there is this natural reaction from the left wing to say it's bad even if they don't know or they haven't really dug into it or we or no one could know. And the same thing happens on the other side where the Democrats do something and the Republicans, oh, this is the worst thing ever. Right? Yep.
Speaker 1:The real test is when the next administration comes in and is from the opposite side, if they're like, you know what? Now that we've, you know, seen what happened with the China tariffs, like, we're good with them. And that's exactly what the Biden administration did, and they eventually went further with the chip bans and and and the CHIPS Act. And so, when I think about, like like, whatever you think about the first Trump administration, there were probably lots of things that everyone agrees with and some things that people disagree with. Yeah.
Speaker 1:The the reevaluation of the China relationship, that did just technically, regardless of what you think about it, it it did technically become eventually bipartisan. Yeah. And so my question is is will he tariffs?
Speaker 2:To give Obama some credit, he was one of the first people to really start bringing up China Totally. As being a problem.
Speaker 1:Totally.
Speaker 2:Yeah. So it it it it's not like, you know, Democrats historically China is a perfect sort of benevolent actor.
Speaker 1:Yeah. Yeah. Yeah. Yeah. There was this book, Hundred Year Marathon Marathon by Michael Pillsbury.
Speaker 1:And he wrote he kind of wrote the defining book on, like, China's strategy to become a global hegemon that they're not moving quickly. They're thinking very slowly. They're they they think about warfare not in the purely kinetic terms, and there's economic warfare. They're willing to invest in these industries like we've talked about with DJI and and robotics for a very long time, lose a lot of money, but eventually be, be the be the winner. And I think this woke a lot of people up in Washington, and this eventually became kind of the backbone of China policy on both the left and the right, which is interesting.
Speaker 1:And I'm and I'm and I do wonder, you know, with with with time, a lot of these like the Nixon the Nixon shock, for example, like like the the partisanship kind of evaporates over the years, and everyone kind of comes to a more, like, cohesive understanding of history because you have more economic indicators because you
Speaker 2:can see, oh, well, like,
Speaker 1:what did the economy do over the next ten years? Was that a good idea or not? And, of course, there's debate, but in general, you can tell. And so it'll be very interesting to see how this evolves. Obviously, things are changing very quickly, but that's why it's fun to do a daily show.
Speaker 1:And that's why I'm happy that we've positioned this, this show the way we have. Anyway, let's dig into Apple's China problem, from Ben Thompson's trajectory. He published this yesterday, Tuesday, April 8. And he says it's obviously time to talk about Apple. This is not as I highlighted.
Speaker 1:The worst case scenario, that would be war in Taiwan, which would not, only abruptly end Apple's China supply chain, but also its Taiwanese one and potentially Japan and South Korean ones as well. That is an existential risk to
Speaker 2:the I wonder how, you know, there's this concept of 20 it's 2028. Right? The the sort of year that that our military leadership generally predict it's 2027 or 2028. I believe it's 2028. Yep.
Speaker 2:I wonder what Apple's internal forecast is for a conflict in Taiwan because they are the single entity with the most riding on that conflict. So Polymarket has it
Speaker 1:at 16%. Will China invade Taiwan in 2025? I hope that that goes to zero. Like, it would be very bad for everyone. But there's a lot of cutting your nose to spite your face going on in the global economy these days, so anything is possible.
Speaker 1:But hope fortunately, you know, that's not at 80%, which is great. A trade war with China is somewhat more manageable, although still very bad. He's, Ben Thompson then goes through a report in the Wall Street Journal line by line. Apple plans to send more iPhones to The US from India to offset the high cost of China tariffs. People familiar with the matter said the adjustments are a short term stop gap while Apple attempts to win an exemption from president Trump's tariffs, which has happened before.
Speaker 1:And Tim Cook has even though he has positioned the company not as a, like, a right wing company in any way, he went to the original Trump won tech summit. He sat next to him. That was where the Tim Apple quote came from. And and, Tim Cook has been good about not aligning the company, not saying, like, we are ride or die Biden. Like, we're we're we're coconut pilled here.
Speaker 1:He said, you know, we're an American company. We, you know, we'll we'll work with any administration. And I think the fact that Tim Cook is willing to do deals, and he did that thing with where they reshorred they quote, unquote, like, reshorred the production of the Mac. I don't know if you remember this, but they they opened like, it was a plant in Texas that was, like, kind of already working for Apple, and then they kind of, like, reclassified some of the r and d and CapEx as, like, we're really betting on America, but they let Trump come and, like, cut a ribbon in front of this factory that was, like, kind of already working. But it was, like, a moment for the Trump initiative.
Speaker 2:I don't remember that.
Speaker 1:So so so it was very much like a olive branch.
Speaker 2:We need to get some of those.
Speaker 1:For sure.
Speaker 2:It's American made Macs.
Speaker 1:Yeah. For sure.
Speaker 2:I need an American made Mac
Speaker 1:Mac top. Yeah. So I think I think Tim Cook, he's very, like, quiet about politics, but I think he does understand how the game's played. He does understand how to do deals. He is a deals guy
Speaker 2:Yep.
Speaker 1:And so is Trump.
Speaker 2:Should we play the video
Speaker 1:where he talks
Speaker 2:of the the zen and art
Speaker 1:If we're if we're ready go, I wanna hear from Tim Cook about why he loves supply chain manufacturing, and then we'll dig into his strategy in China and how Apple is retooling things going forward.
Speaker 4:Has always interested me because I'm very curious about how things are made. I like to go to factories and see how things are put together, how they're created. My degree is in industrial engineering, my undergraduate degree. And industrial engineering is essentially the study of people and machines and how the two working together can create things that they couldn't create on their own. And I've always viewed it, the supply chain piece of it, to be a bit of a piece of art when it was done correctly.
Speaker 4:Because it's a symphony of things are coming together of thousands of different components and and parts coming together to create something.
Speaker 1:It really is probably the most complicated organism or just like collection of human progress. Like, the phone really distills everything from, like the the semiconductor is extremely complicated. You need the best and smallest and fastest and most energy efficient chips in the phone. Mhmm. The screens are the most advanced screens and the smallest.
Speaker 1:The batteries. Like, it really brings together everything, and you can see that I think the Symphony analogy is fun. But he's clearly I mean, I think he's really is being genuine there even though it is kind of it's kind of a dry quote because it's talking about supply chain, but I think he really does feel that way. And and it's his like, he Tim Cook is the reason that Apple is dominant in China and and the reason that Foxconn exists to the degree it does and the reason that Apple has been able to grow and scale so much. He was the guy that that, that Jobs brought in to fix the supply chain.
Speaker 1:He went over there, figured it out, and then scaled the business incredibly. And now he has a potential crisis on his hands, but I'm sure he's been tracking this for Yep. A decade now. And they've done some
Speaker 2:And we put up a polymarket around the cost of the next iPhone. Oh, yeah. And seeing basically whether they're going to pass cost on to consumers or eat the cost. Knowing Apple, they'll pass the cost on to consumers.
Speaker 1:Maybe, but again, we talked about this with the shift to services revenue increasingly, and we'll get into this with some of the Ben Thompson analysis, increasingly, amount of money that that every year, Apple makes more money from services than devices. Like, that mix is shifting. And so you could see a world where you're I mean, already you can subscribe to an iPhone. You can pay something like a couple hundred dollars a month or something and get a new one every year.
Speaker 2:Yeah. But isn't that more
Speaker 1:you're effectively financing it or leasing Yes. But but but you could imagine it's like, okay. Yeah. If you if you have a Apple phone plan and you have Apple TV and Apple News and Apple Health and Game Center and you're spending, you know, tons of money on, you know, Roblox credits or something that are
Speaker 3:Candy Crush.
Speaker 1:Candy Crush. Yeah. Yeah. You're a Candy Crush whale. It's like, yeah.
Speaker 1:We're making $10,000 off of you. We'll just give you a new phone. Whatever. It doesn't matter. I don't know that they're actually there, but it is interesting to think about.
Speaker 1:So for all the criticism of Tim Cook writes Ben Thompson, which has been mounting for years, recent including from yours truly. He's been, throwing some shade. This is truly the opportunity for him to earn every dime from his paycheck in an attempt to preserve the viability of this Chinese supply chain that he built. He will certainly call back to his previous arguments. Massive tariffs on Apple products will do a lot of damage to an an American company and give a big advantage to foreign ones, particularly Samsung.
Speaker 1:That worked during the first Trump term. The problem is is that the other bullet point in Cook's tenure, one can certainly make the argument that Apple more than any other country, any other company is responsible for China's dominance in manufacturing. Like like, if if China did not have Apple to ride the learning curve down, China would not be as dominant as they are, particularly when it comes to a high-tech componentry that The US is so far behind it. Apple's response might be that while that's true, at least the company has been trying to diversify. And so
Speaker 2:Yeah. They're trying to shift
Speaker 1:to other markets.
Speaker 2:They're trying to shift to India, Vietnam. Yep. And I'm sure out of this will come a US iPhone factory.
Speaker 1:Yes. But I don't Most importantly, when when you hear, oh, the iPhone has shifted from China to India, that's the last stage manufacturing process. That's not the componentry.
Speaker 2:Yeah.
Speaker 1:So Apple makes many iPhone components in China, but in recent years has assembled more of the devices in India, and they're not Yep. And and and and it's such a huge scale that they manufacture or they they assemble in both. That allows the company to stamp India as the country of origin for those devices because they undergo substantial transformation there from a pile of parts to a functioning smartphone. Yeah. Since 2017, Apple has worked with partners to assemble iPhones in India, starting with older models and gradually expanding to include the latest ones.
Speaker 1:The policy both addresses China's risks and import and avoids important tariffs when selling in India, One of the world's fastest growing smartphone markets. The fact that India does little more than assemble Chinese sourced components gets it one of the reason for blanket tariffs. Chinese imports to The US have actually fallen over the last several years, but a lot of that is because of similar schemes to do final assembly in countries like Vietnam, Thailand, Mexico, or in this case, India. And that's the whole thing with, like, the what China does so well in places like Shenzhen, where you walk across the street and there's like the world's largest, you know, like button manufacturer. And then there's like an insanely scaled factory for just Camera lenses.
Speaker 1:Lenses. And so Yeah. It's not enough to say, oh, yeah. There's some cheap labor. Like, let's just put it together in India.
Speaker 1:Like, that's not really solving the problem even though you get to you get to write something different on the box. Yeah.
Speaker 2:I mean, Apple has two problems.
Speaker 1:Yeah.
Speaker 2:They have a China problem and they have a Trump problem. Yep. Right? And they're gonna need a really solving just the immediate Trump tariff problem Yep. Is not fix does not fix their kind of collective issues.
Speaker 2:Right? Yep. Yep. Dependency on China that that, again, it could end up being if they do do some type of, like, operation warp speed to to, you know, move production out of China and including the individual parts production that could end up saving them if there's an eventual Taiwan conflict.
Speaker 1:So Ben Thompson goes on to say, building on the blanket tariff point, probably the biggest question right now is if the goal is to fundamentally reshape the global economic order or to simply cut off China, we have more, we have more information here. I I I think it really it does seem more targeted at China now. We're seeing that. Trump's pulling back from this idea of reshaping the global economic order, but we will have to see where it all pencils out. If it's the former, then there is arguably less incentive for Apple to change anything because if they go anywhere, they're gonna feel the pain everywhere.
Speaker 1:And so that probably makes the most sense to keep the supply chain based in China with final assembly elsewhere. If it's the latter, however, then these final assembly shifts to other countries could be viewed as positive. A company of Apple's scale doesn't shift its entire supply chain overnight. It shifts it shifts parts that are easier to shift, like final assembly, and that forms its own gravity of for high value components. Indeed, this is exactly what happened in China.
Speaker 1:And so that idea of, like, economic gravity, like, even if you just say, hey. We're gonna do all the components in China, and we're gonna do final assembly in India. Eventually, you're gonna be like, ugh. We ran out of buttons today. Is there like, we would pay twice as much for a button that was just manufactured across the street, and then the natural market is gonna just figure out that some entrepreneur in India is gonna say, wait a minute.
Speaker 1:If I don't have to pay shipping costs and tariffs and all this other stuff, I should just set up a button manufacturer right here. I do that for everything eventually, but it
Speaker 2:takes a long time. Pay the equivalent of 10 UFC pay per views to get Tim Cook to break down why making an iPhone in America makes no sense long term. Right? Like, basically saying like, okay, obviously sort of reorienting supply chains is like decade plus long initiative. But why wouldn't you be able to make an Apple, you know, top of the line Apple mobile device with, you know, great margins in the year 2040?
Speaker 2:Right? Yeah. Assuming massive technological Yeah. It's in automation.
Speaker 1:I think the the the previous answer has been that even though Apple is absolutely massive, they just haven't had the money to they would effect they would effectively have to build everything vertically integrated. Right? So they would need to build every component. They would need to make that company happen because it doesn't exist in America. So don't to say, okay.
Speaker 1:Now we are not just assembling iPhones with Foxconn or an Indian contractor. We are building our own Foxconn for assembly. And then we are also building our own camera lens manufacturer. And so how do we staff those? Well, we need to train people.
Speaker 1:So there's this massive investment there. The question is Apple has produced over a trillion dollars in cash over the last decade. Right? Yeah. Could they how much has China invested in this?
Speaker 1:Probably more, honestly, if you think about the investments that have gone in from the free market and from all the different economic incentives because it's not just Apple that's pushing China to develop capacity around a high end tech technological componentry. Right? It's also Huawei. It's also, you know, every Xiaomi. Like, every single company needs something that overlaps a little bit.
Speaker 1:So these companies that are built on the back of I of Apple, and Apple's maybe the biggest client, Well, even if there's a company that doesn't do anything with Apple, their employees might slide over to an Apple related supplier one day. So I think that that that gets back to that heart of that debate between Obama and Jobs about, hey. If we need 30,000, you know, engineers, where is that the job of Apple, or is that the job of the government? And the government couldn't do it. But could Apple have even done it if they tried?
Speaker 1:I have to imagine for a trillion dollars, you could do that. Right? Like, that's so much money per 30 per 30,000
Speaker 2:per people. Cuts Apple's market cap.
Speaker 1:Oh, totally. It'd be extremely expensive.
Speaker 2:Who who knows? It'd be
Speaker 1:Yeah. It's basically like saying, hey.
Speaker 2:It's the reason It's
Speaker 1:nationalization at that point almost. Yeah. It's like, hey. You know, this makes no no no no sense to the shareholders. It does not maximize shareholder value.
Speaker 1:Instead, it it is just something that, like, we think is generally good for America, but, they haven't had an incentive for that because their Apple is not responsible to America. They're responsible to their shareholders, and their shareholders are some Americans, but some international folks. That's the nature of being a global company. While the iPhone got less attention than usual at its launch event, by far, the greatest amount of time was spent on its camera, and for good reason. Review after review has lauded the iPhone six camera as as possibly the best iPhone camera ever.
Speaker 1:As it turns out though, there are a couple of companies in the world that are capable of producing such a camera, and Largen Precision is one of them. That's why they provide the camera for the iPhone six. So this was like one of the first, stories of major outsourcing in the in in the iPhone supply chain. They had a $9,600,000,000 market cap, barely registers when compared to Apple's six hundred and twenty three billion number at the time. Now it's in the trillions.
Speaker 1:But when you consider that Largen Precision is a relatively tiny company, that's pretty darn impressive. And I can assure you, the founders are living much more comfortably than all but the most senior Apple managers. Moreover, that that it's not far off from Foxconn who actually builds the iPhone. Their market cap is only five x greater than the maker of a single component. And so really owning a single piece of the supply chain and the iPhone supply chain, incredibly lucrative.
Speaker 1:So seven years later, Largen Precision was under threat along with a host of other non Chinese suppliers. With the iPhone 13 model Chinese outfit Sunny Optical is finally broken into Apple supply chain marking the first occasion upon which a PRC based supplier has entered the iPhone's optical parts realm to capture supply of one of the model's three main lenses, namely the seven p, seven stack wide angle lens. Largen Precision is probably a bad example, writes Ben Thompson. They are the best in the world and have bounced back to take more iPhone share while Sunny Optical fell off, Although, they may be back later this year. What is more pertinent
Speaker 2:By the way, Largan Precision, by way, a $240,000,000,000 market cap
Speaker 1:Now?
Speaker 2:Company. Wow.
Speaker 1:I mean, there's everyone has three cameras now. You know? Yeah. Like like, it's not just everyone has a camera.
Speaker 2:And I'm sure they make
Speaker 1:Yeah. All sorts of stuff. I'm confident
Speaker 2:they make a bunch of other components for other cell phone manufacturers and other device manufacturers.
Speaker 1:Ben Thompson writes, there's one fly in this ointment that is worth noting. A big reason why those Chinese component suppliers got off the ground is because of Apple not just giving them a buyer, but also investing heavily in r and d on their behalf in an attempt to other to undercut the power of companies like Largen Precision. That's controversial.
Speaker 2:Absolute dog.
Speaker 1:Like, I'll I'll I'll throw you some bones on the r and d side.
Speaker 2:Let's get it going.
Speaker 1:Anyway, so Apple in the short term, there is news from the Times of India that Apple transported five planes full of iPhones and other products from from India to The US in just three days during the March. The urgent shipments, were made to avoid a new 10% reciprocal tariff imposed by president Donald Trump, took effect on April 5. Sources told said that Apple currently has no plans to increase retail prices in India or other markets despite the tariffs. To mitigate the impact, the company rapidly moved inventory from manufacturing centers in India and China to The US. And this is something that happened, like, all over the place.
Speaker 1:There's reports of car companies just Lamborghini, put every Lamborghini on a boat, get it to America. We don't wanna pay a tariff. I imagine there were even more planes flying from China over the last few days. And I wouldn't be surprised.
Speaker 2:To be clear, a lot of these companies were predicting the tariffs and had still been trying to get in front of them. Right? Just, you know, basically over over ordering against what they would normally do.
Speaker 1:To that end, I would imagine that Apple is going to try to hold the line on pricing in The US for as long as it can for the iPhone specific specifically. I wouldn't expect any changes until the next iPhone launch in September. While Apple has changed prices mid cycle in countries facing significant currency changes, they have studiously tried to avoid that in The US market, which has the added risk of angering president Trump even as the company will be seeking some sort of ex exemption. Obviously, if people are complaining about the prices of iPhones, Trump's not
Speaker 3:gonna like
Speaker 1:that. And so, he's been documenting for several years now how Apple has actually been cutting iPhone prices in real terms in an in inflation adjusted terms. And we've seen the two year old iPhone gone went from, $4.99 to $411. And the iPhone Pro Max, the top of the line one went from $1,100 down to $900, and so, they have been reducing prices. And, I think that's driven by the increased value they get from software.
Speaker 1:Yeah. And so this is And
Speaker 2:from people losing their AirPods.
Speaker 1:I mean, they they are monetizing in so many other ways of the Apple ecosystem. I'm getting
Speaker 2:My average my average Apple order is so funny. I walk in and I go, yeah. I just want five sets of your wired wired earphones. They're like they they bring them out and they're like, you're sure you want these? I'm like, yes.
Speaker 2:That's ridiculous. One for every one for the car Yep. Bag Yep. Desk, you know, etcetera, etcetera.
Speaker 1:Yeah. I'm I'm getting extremely close to just throwing away every Sonos product and going with the Apple speakers because I just know that they will I don't know if they'll sound better. I don't know if they'll work it better, but they can't work worse than Sonos. Sonos is truly terrible.
Speaker 2:Sonos, may as well just hire live musicians and schedule them to come. They'll be more reliable.
Speaker 1:I think of the Sonos app as like a meditation app because you click it and it just blanks screen for like five minutes and it just gives you a second to like reset and be like, okay. Clearing my mind. Nothing nothing is coming in because it's just a blank screen for five minutes before you put on a single song. It's a
Speaker 2:good reminder.
Speaker 1:It's getting worse by the day. I was expecting it to get better. I thought they just rolled it back. Anyway, let's go to tech's complement risk. This is Ben Thompson's big takeaway.
Speaker 1:He says, whatever a disaster this is for Apple or for tech generally, he wants to go back to what he wrote last fall. Apple could not only manufacture could could not only not manufacture an iPhone in The US because of cost. It also can't do so because of capability. The capability is downstream of an ecosystem that has developed in Asia and a long learning curve that China has traveled that and that The US has abandoned. Ultimately, though, the benefit to Apple has been profound.
Speaker 1:The company has the best supply chain in the world centered in China that gives it the capability to build computers on an unimaginable scale with maximum quality and for not that much money at all. It is crazy.
Speaker 2:China doesn't new computer.
Speaker 1:Apple, it's fantastic computer. And, yeah, works great, and it was dirt They
Speaker 2:don't get much credit for being the backbone of what people love about Apple.
Speaker 1:Oh, yeah.
Speaker 2:Which is just fantastic Reliability. Devices.
Speaker 1:Like, I mean, you buy a car and it's like there's a lemon law, You know? Yeah. Like like, you could just get a car where it's like, oh, the engine doesn't work. And that's a thing. Like Yeah.
Speaker 1:I've never even talked to someone who's like, oh, yeah. My Apple, like, my my Mac, like, the hard drive didn't work when I got it. Like, it just doesn't happen. It's always 100% perfect every time. It's crazy.
Speaker 1:The benefit is extended to every time I Tim Cook. He he has cooked. He has cooked over several decades whether they make their own hardware or It
Speaker 2:is fascinating though. So when Buffett really started dumping
Speaker 1:Yeah.
Speaker 2:Apple Yeah. Tim Cook. Like that was like, that one must have hurt for Tim because Tim was starting to realize that he was a little bit cooked and Buffett knew too, right? He was just like, you know, he could kind of see the writing on the wall. Trump presidency, know, loves tariffs.
Speaker 2:Apple It's not good. You know, Apple not being able to move their supply chain without trillions of dollars of investment. Yep. Tim just sitting there being like, well, I'm gonna give Apple intelligence a good shot here.
Speaker 1:So he he concludes, to that end, the risk for tech is that tariffs specifically in Trump's approach to trade generally do not do more damage to the golden goose than expected. More expensive hardware ultimately constricts the market for software. Tariffs in violation of agreements like the ITA give the opening for other countries to impose levies on their own, and The US tech companies could very well be popular targets. Yeah. I mean, I was thinking about, so there's this whole idea that, like, if you bring down the cost of hardware, all software needs to run on hardware.
Speaker 1:Every every app company, every software company that we know and love, like Uber only exists because everyone the iPhone got so cheap that everyone got one. Right? And you think about it's very easy to say, oh, well, like, everyone kind of has an iPhone. They don't really need to upgrade. If prices go up by 30%, you just upgrade every four years instead of three years.
Speaker 1:It's not that big of a deal. But what about for the next platforms? We've talked about drones and humanoid robotics, but even VR. Like, the the current the current Apple Vision Pro, great product, super expensive. I think, like, I I bought, like, a max spec one, and it was, like, almost $5.
Speaker 1:Yeah. And you add tariffs on top of that. You're just gonna be fighting tooth and nail to drive that down. John Carmack, when he was at Meta said that he wanted to get to a a a hardware device for VR that was a hundred grams, so extremely light like the Big Screen Beyond. The Big Screen Beyond, that's a hundred grams, but it's like a thousand dollars.
Speaker 1:The Meta Quest has been down in, the 3 to 400 range, but still nowhere near a hundred dollars. CarMax wants to get a hundred grams, hundred dollars. Because at that part at that price, like, everyone has one.
Speaker 2:Sunglasses.
Speaker 1:It's like glasses. Sunglasses. Yeah. The sunglasses. The the install base gets so big that developers can say, yeah.
Speaker 1:You know, there are a hundred million Americans with these out there. And if I can make a breakthrough app, I'll make a lot of money. Whereas that's just not the case. And
Speaker 2:Yep.
Speaker 1:And and that does get very, very difficult if you see that there's just no way to manufacture new hardware devices cheaply. So it's a complicated it's a complicated problem. US tech exports are primarily software and services, which aren't calculated in things like trade deficits. One sus one suspects that that means that the Trump administration isn't very concerned about them, although countries looking for retaliation targets surely will be. That though pales in comparison to the cost of blowing up the hardware supply chain, tech's most essential complement.
Speaker 1:This isn't the end. It's just an Apple story. This this isn't, in the end, just an Apple story. So, yes, the this idea that, like, if if all the hardware devices get more expensive because the supply chain blows up, you could actually see, like, Google suffer and Apple and and and and Meta suffer is is a very interesting take. Anyway, should we move on to some ads?
Speaker 1:Everyone wants to hear ads. Yeah. People Let's talk about public investing for those who take it seriously. Multi asset investing, industry leading yields, trusted by millions. If you're looking to get in on the action, you know, we had LIFO.
Speaker 2:Bonds.
Speaker 1:A lot of people were buying yesterday. They did great, I guess, because the market's way up. Won't give you any financial advice, but
Speaker 2:Anytime there's news, people buy. Good or bad.
Speaker 1:It is it is crazy. I mean, look at this.
Speaker 2:No. But we are the generation we are the generation that is we're the buy the dip generation.
Speaker 1:We are the buy the dip generation, yeah.
Speaker 2:We're someday all gonna be, you know, 90 years old and our younger members of our family will be like, grandpa, like don't buy the dip. Like, I think you're really built for T bills at
Speaker 1:this point.
Speaker 2:I'm buying the dips.
Speaker 1:No. No. You know how they used to say, like, you should have a mix of stock and bonds, and the percentage of bonds should be your age. So if you're 30, you should be 30% bonds, 70% stocks. And then if you're, like, 80, you should be 80% bonds, 20% stocks.
Speaker 1:Like, our version of that is gonna be like, you should be you know, if you're 80, you should be 80%, like, levered long Bitcoin and 20% NFTs.
Speaker 2:Pack Packy had a Packy had a good line, a post from earlier. He said, like, the proper hedge right now is just to bot like, just basically go for Democrats The
Speaker 1:markets aren't even up, Paki. Polymarket doesn't do midterms yet, but they will in a year.
Speaker 2:They will. Probably do like county level stuff.
Speaker 1:You know? County level stuff. Just people are like, I can't take these tariffs. Like, I'll vote for anyone. Like, I'll vote for a democrat in my city council.
Speaker 1:It's hilarious. Anyway, Ben Thompson is clearly reflecting on this a lot. This is his third post of the week. He also did this interesting thing where he he thought that his Monday post was a little bit too casual, so he made that more of an of an update, put it I think he put it behind a paywall, then he posted a new front page article breaking a bunch of his rules. He says, don't post more than one front page article a week.
Speaker 1:Well, it's a special week, so he's posting two. And he starts with
Speaker 2:the fired up. He's on vacation.
Speaker 1:And it's super it's super important to him. I mean, it affects tech super deeply. It affects China, Taiwan, America, all the places that he's involved with. It's it's fascinating. So he he starts by kicking off with professor Clayton Christensen who coined the term disruption.
Speaker 1:A little minor coinage. I love it. In a seminal paper called disruptive technologies catching the wave, and, of course, the innovator's dilemma, which we've talked about a lot. His most concise, summary comes from this, and we'll give you a little refresher
Speaker 2:on we're disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses, specifically as incumbents focus on improving their products and services for their most demanding usually most profitable customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more suitable functionality frequently at a lower price. Incumbents chasing higher profitability in more demanding segments tend to not not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents mainstream customers require while preserving the advantages that drove their early success when mainstream customers start adopting the entrance offerings and volume disruption has occurred. So when CNBC starts posting unhinged, you know, sort of highlighting unhinged posts from the timeline Yep.
Speaker 2:We'll know that it's working.
Speaker 1:Yep. Totally.
Speaker 2:But
Speaker 1:But we're counter positioned. They can't do it. Yeah. They're different. So it's over for them.
Speaker 1:Notice what, did still happen in The United States, at least back then, actual chip fabrication. This was the main, driver of innovation. It's kinda Silicon Valley 1 Point o. That was where innovation happened and where margins were captured. So, of course, US chip companies kept that for themselves.
Speaker 1:So when when chips started to boom, US companies kept the, the the the innovation and and the fabrication. It was tedious and labor intensive assembly and testing that was available to poor Asian economies led by authoritarian governments eager to provide some sort of alternative to communism. And so that's why the the the you know, like, chip manufacturing went abroad. One important point about new market disruption, which Asian manufacturing was, is that it is downstream of a technological change that fundamentally changes cost structures. In the case of Asian manufacturing market, there were actually three.
Speaker 1:Number one, in 1963, Boeing produced the seven zero seven, the first jet airliner capable of nonstop service from The United States to Asia. In, 1970, the seven forty seven made this routine. In 1964, the first transpacific telephone cable between The United States and Japan was completed. Over the next several years, it would be extended throughout Asia, you could fly there with nonstop service. You wouldn't need to stop in Hawaii anymore.
Speaker 1:So you could get there, like, in a day instead of two. You could also call. And then, ISO six eight six six eight dropped in 1968. Good timing, I guess, that one. Standardized shipping containers, and that dramatically increased the efficiency with which goods could be shipped over the ocean in particular.
Speaker 1:These three factors in combination for the first time enabled a new kind of trade instead of manufacturing products in The United States and trading them to other countries, multinational corporations could invert themselves, focus on design products in their home markets, then communicate those designs to factories in other countries and ship finished products back to their domestic market. And thanks to the dramatically lower wages in Asia, supercharged by China's opening in 1978, it was immensely profitable to do just that. So was just basic economics. And so, yeah, we can we can go through some more of this, But he talk he goes back
Speaker 2:to Yeah. Fascinating how there's this narrative in Silicon Valley startups venture broadly that, you know, we used to do hardware like we were this sort of like, you know, hardware culture.
Speaker 1:Yeah.
Speaker 2:It's called Silicon Valley for a reason. Yet, all that silicone was actually scaled from a manufacturing standpoint pretty quickly from Asia.
Speaker 1:Mhmm. Yeah. I think it's silicon. That's silicone.
Speaker 2:Silicone. Is it Is that is that what goes in
Speaker 1:Wait. Are they different?
Speaker 2:I actually don't know. Anyway. Silicon.
Speaker 1:I think they are. I think they must be related, just slightly different pronunciations or something. Yeah. I don't know.
Speaker 2:Wouldn't be the first time I botched a pronunciation.
Speaker 1:Me me too. Especially a person's name. I'm terrible at that. Anyway, let's move on to iPhone stuff again. Ben Thompson writes, there is one other very important takeaway from disruption.
Speaker 1:Companies that go upmarket find it impossible to go back down, and I think this applies to countries too. Start with the theory. Christensen had a chapter in the innovator's dilemma dilemma, entitled what goes up can't go down. Three factors, the promise of upmarket margins, the simultaneous upmarket movement of many of a customer's, company's customers, and the difficulty of cutting costs to move down market profitably. Together, create powerful barriers to downward mobility.
Speaker 1:In the internal debates about resource allocation for new product development, therefore, proposals to pursue disruptive technologies generally lose out to proposals to move upmarket. In fact, cultivating a systemic approach to weeding out new product development initiatives that would likely lower profits is one of the most important achievements of any well managed company. You gotta keep your profits high. Now consider this in the context of The United States. Every single job in this country, even at the obsolete federal minimum wage of $7.25 an hour, makes much more money than an iPhone factory line worker.
Speaker 1:And, critically, we basically have full unemployment full employment. That is what full unemployment. No. We have full employment.
Speaker 2:Based economy.
Speaker 1:And and and we do. We do. Even post COVID, we bounced back very quickly to like three or 4% unemployment.
Speaker 2:By the way, Ben shares now seems obvious, silicone. Silicone is a synthetic polymer It's different. Made from silicone. Silicon. Silicon.
Speaker 2:Silicon. God.
Speaker 1:Us know how you pronounce
Speaker 2:from silicone.
Speaker 1:We're working. Is this kind of
Speaker 2:Anyways, yeah. Yeah. Silicon is just silicon element symbol s I. Alright. We got it now.
Speaker 1:And so he points to, White House press secretary Carolyn Levytte, making a what he calls ridiculous statement in response to a question from Maggie Haberman of The New York Times about the types of jobs Trump hopes to create in The US with these tariffs. Leavitt said, the president wants to increase manufacturing jobs here in The United States Of America, but he's also looking at advanced technologies. He's looking at AI and emerging fields that are growing around the world that The United States needs to be a leader in as well. There's an array of diverse jobs, more traditional manufacturing jobs, and also jobs in advanced technologies. The president is looking at all of those.
Speaker 1:He wants them to come back home. Haberman followed up with a question about iPhone manufacturing specifically, asking whether Trump thinks that this is the kind of technology that could move to The US. Leavitt responded, Trump believes we have the labor. We have the workforce. We have the resources to do it.
Speaker 1:As you know, Apple has invested 500,000,000,000 here in The United States. We covered that, and it was kind of like money that they were maybe already spending, but, still, like, a move in the right direction, I guess. So if Apple didn't think The United States could do they probably wouldn't wouldn't have put up that big of a chunk of change. So could Apple pay more to get more US Workers? I suppose so, says Ben Thompson, leaving aside the question of skills and whatnot.
Speaker 1:But there is also the question of desirability. The iPhone assembly work that is not automated is highly drudgerous, sitting in a factory for hours a day, delicately assembling the same components over and over again. And, again, it's like, I I hear all this, but when I think about what's happening in humanoid robotics,
Speaker 2:AI And not even humanoids. Just
Speaker 1:Yeah. Just Just just one robotic arm or or just a a a six axis. Like, I mean, you look at what Hadrian's done with I mean, they've raised Chris has raised a lot of money, but it's not that much money. Yeah. And and he's been able to build you know, he has a couple robotic arms and he has couple of CNCs and stuff.
Speaker 2:Onshoring, reshoring is not a jobs program.
Speaker 1:Yes. I think I I think there will be jobs created, but we're not going back to this idea that, you know, 50% of Americans will be assembling iPhones. It's like America will do the iPhone assembly, but at a more efficient rate. It's a huge challenge. But I just people say it's impossible because we're not down the learning curve, and it's so hard.
Speaker 1:But when I think about, like, in the same way that China took r and d's, you know, materials from Apple willingly and sometimes unwillingly, a lot of the a lot of that strategy should be able to be ported back. Like, Apple probably knows at a very, very high level of detail how Foxconn assembles an iPhone. Right?
Speaker 2:Yeah.
Speaker 1:They've they've been tour the floor. They probably have badges. They can walk around. They can just see the stuff. They probably have plans.
Speaker 1:They probably have all this stuff. So if if they really wanted to build a Foxconn
Speaker 2:phone knows how to make an iPhone.
Speaker 1:Yeah. Yeah. Yeah. They they true. True.
Speaker 1:And they do for other companies.
Speaker 2:So it's It's quite a standoff.
Speaker 1:Yes. Yes. But but, like, just this idea of, like, of, like, Foxconn is an amazing lights out factor. I mean, there's so many interesting, amazing things that are really hard to copy. But at the end of the day, it is just a building with a bunch of machines and people inside.
Speaker 1:And if you get the right machines and you tell them right to do and you have the right code, like, you should be able to copy it. And then there's the question of, you know, at what point does the labor ratio to automation ratio flip where it is competitive at all in The United States and is a 45% or a % tariff or a 200% tariff or a 400% tariff enough to offset that.
Speaker 2:Yeah.
Speaker 1:It doesn't it doesn't seem impossible to me. It doesn't seem impossible that America could wind up developing automated manufacturing capacity that could assemble an iPhone with robotic arms and three axes, you know, different pick and place
Speaker 2:things is
Speaker 1:really, really hard, but it seems possible. I don't know.
Speaker 2:Clearly, it's one of those things. Clearly, Apple doesn't want to do it. Yep. Clearly, it's not in the immediate and direct benefit of the shareholders to do it. Yep.
Speaker 2:At the same time, the China supply chain is a is this massive, massive, massive risk to the business
Speaker 1:Yep.
Speaker 2:That will also impact their market cap over time if they just don't actually address it and don't try to and and the question just becomes like how, you know, how hard can they lean on India? Right? How hard can they lean on Vietnam if they spend hundreds of billions or trillions of dollars to sort of rebuild these supply chains elsewhere? Is is there a world where in 2040, suddenly, we have, you know, problems with another country?
Speaker 1:Right? So And this is the question of, like, that center of gravity. And this is this is what's so interesting is that right now, if let's read from Ben Thompson again, and then I'll I'll give some extra context. At the same time, it is important to note that this drudgeryous final assembly work, the stuff that can't be done for $7 an hour, it's a $3 an hour job or something like that, is a center of gravity for the components that actually need to be assembled, and these parts are all of significantly higher value and far more likely to be produced through automation. And so there's a question of, like, if Apple goes to India, you might get the component manufacturers popping up in India, and then we haven't reshorred that stuff even though that's higher value and more automatable.
Speaker 1:And so there's this weird scenario where I don't know exactly what you could do to stimulate this, but maybe iPhone assembly in The United States is what you need to do to get to kick start all of this. And so any economic policy that you can put in place that gets the iPhone assembled, even if it really is, yeah, we're paying people $20 an hour and, like, college kids are doing it. And Yeah. And it's just the best best option. It is grueling, but, you know, it but we know that we're gonna automate that.
Speaker 1:And and Yeah. You don't go into the career of iPhone assembly knowing I'm gonna be doing this for my entire life. You go in knowing, I'm here to do this really hard work under under American, you know, human rights rules. And so it won't be as brutal, but it'll be rough. I'll do that for a couple years, and then I'll move up and become a manager of robots, or I'll become an engineer, or I'll become someone who works in componentry and it's higher value.
Speaker 1:That's not that crazy of a trade. It's not great, but it but it is possible. I always have this riff about, like, maybe what we need to do to reassure manufacturing is make Happy Meal toys here. Like like, everyone's talking about, oh, we need, like, aerospace and defense parts made in America. And it's like, yeah, those are really, really key.
Speaker 1:We gotta make our drones and we need our android stuff here. But maybe maybe part of the reason why DJI exists in China is because they have Happy
Speaker 2:Meal toys. It's a to be clear, that's a big issue with the China tariffs is just how how much of the the supply chain for the toys that our incredible young American children depend on for joy and happiness.
Speaker 1:Yeah. We were talking about this. The American toy manufacturer.
Speaker 2:Yeah. I got a pitch
Speaker 1:just the other day for one.
Speaker 2:Really? Yeah. People are
Speaker 1:starting to think about it. I thought it was cool.
Speaker 2:The Advanced Toy Manufacturing Company of America.
Speaker 1:I mean, you you you've you've used these toys like some of them are so rough.
Speaker 2:No. I hate it.
Speaker 1:It's so sloppy. And you're just like, this thing is gonna last three months and it's gonna be in the landfill.
Speaker 2:They don't they they don't last three months. Yeah. These things last twenty four hours,
Speaker 1:twelve hours. Yeah. And it's not even like
Speaker 2:have like a toy a day break.
Speaker 1:Yeah. And I'm not even panicking about like, we're gonna run out of landfill. It's more just like the aesthetics of it or just like like like the emotion of like like, I was I was reading a book last night and the inscription was like to John, like to me. Yeah. Because like we passed that down because it's a 25 year old book or something.
Speaker 1:A 35 year old book.
Speaker 2:Yeah. My son plays with my Legos
Speaker 1:Exactly.
Speaker 2:That I had when I was a kid. Exactly. My my dad had Yeah.
Speaker 1:And it's like what what are the new toys that you're gonna pass down? Certainly not some some sloppy injection molded, like, robot that's gonna Yeah. You know, completely explode in
Speaker 2:Yeah.
Speaker 1:Three months or twenty four hours as you put it. And so let's close out with a little bit of Ben Thompson's, takeaway. He is defining a better plan. A key distinguishing feature of a better plan is not that it doesn't seek to own supply, but rather than but but rather control it in a way that US does not today. So the question is, do we actually need to own the supply chain, or do we just need to have really confident control over it?
Speaker 1:And so he says, first, blanket tariffs are a mistake. I understand the motivation. A big reason why Chinese imports to The US have actually shrunk over the last few years is because a lot of final assembly is being moved to countries like Vietnam, Thailand, Mexico. Blanket tariffs stop this from happening, at least in theory. And so that's a reasonable argument, but it could be risky.
Speaker 1:Yep. The problem, he argues, is that those final assembly jobs are the least desirable jobs in the value chain, at least for the American worker. Assuming the Trump administration doesn't want to import millions of workers, that seems kind of counter to the foundation of his candidacy, The United States still needs to find an alternative trustworthy country for final assembly. This can be accomplished through selective tariffs, which is exactly what happened in the first Trump administration. And today, it seems like that's maybe where we're going with these selective tariffs.
Speaker 1:Secondly, you using trade flows to measure health the health of an economic relationship with these countries. Really, any country, really, but particularly final assembly countries is legitimately stupid. And this what you were talking about with, like, Switzerland. Right? Yeah.
Speaker 1:It's like the trade flows really make a great sense. Yeah.
Speaker 2:But it's like, yes, we buy a lot of Swiss watches. Yes. But, yes, they also buy a lot of digital services. Yes.
Speaker 1:Of course. Our movies and our Netflixes is is your point. Yeah. Makes a ton
Speaker 2:of sense. And those are not getting factored factored into the Yeah. Calculus. But
Speaker 1:And so simply looking at trade flows where an imported iPhone is calculated as a trade deficit of several hundred dollars completely obscures this reality. Go back to the iPhone. The value add on the value add of final assembly is in the single digit dollar range. It's all the components that are expensive, the glass and the chip and stuff. You put it together, that's a couple bucks.
Speaker 1:The value add of Apple's software marketing distribution is in the hundreds of dollars, and that's where they extract their actual profits from. And so, moreover, the criteria for final assembly country is that they have low wages, which by definition can't pay for an equivalent amount of US goods to said iPhone. And so Yeah. They're making the iPhone. We're bringing it over here.
Speaker 1:It feels like we have a trade deficit of hundreds of dollars, but really, we only got $5 of value per iPhone out of this country. And of course, because we're paying them a dollar an hour, they're not gonna be able to buy, you know, $200 worth of Netflix a month.
Speaker 2:It would be it would be interesting for Apple to do effectively a request for startups. Yeah. And I know they highlight like a lot of their top vendors and say, hey, these are the companies that we're spending the most money with that do various things. But you have to imagine if if Apple put out the challenge to bright, young or mature technologists and said, hey, we need to make this button. The cost needs to be half a penny.
Speaker 2:Mhmm. And you need to be able to hit, you know
Speaker 1:Well, that's interesting. Kind of an Apple driven warp speed where it's like, if you can produce this, we will buy it. Exactly. And then VCs can underwrite it and everything. Yeah.
Speaker 1:That's kind of interesting. I like that. Yeah. Yeah. That that that's really cool.
Speaker 1:I bet you the the problem with that is that if they open source their supply chain economics, that opens them up to a bunch of different attacks from other company, from other countries and stuff or companies. Let's, let's continue with Ben Thompson. At the same time, the overall value of final assembly does exceed its economic value for the reasons noted above final assembly is gravity for those higher value components. And as those components that are the biggest national security problem, this is where component tariffs might actually be a useful tool. The US could use a scalpel instead of a sledgehammer to incentivize buying components from trusted allies or from The US itself or to build new capacity in trusted locations.
Speaker 1:And so, yeah, I like, if The US could sell the higher value components, that makes sense. Like like, it's much it's much easier to imagine, oh, yeah. We have a we have a amazing like, even even Intel reshoring chip manufacturing, TSMC is going to Arizona. Right? Like, you could imagine that, oh, yeah.
Speaker 1:IPhone lenses for the really crazy seven layer pancake wide angle lens. Like, yeah, there's some amazing company in, like, San Jose that's doing that.
Speaker 2:Right? Yeah. And people don't realize that
Speaker 1:some believe tough.
Speaker 2:So when you look at the Apple supply chain problem and you say, okay, Apple might have to invest or somebody would have to invest trillions of dollars to bring it to America. Yeah. That looks insane. Right? Because it's basically like saying, all of Apple's profits for the last, ten years and don't distribute that out to shareholders or do buybacks or anything like that and just invest it in this sort of new ground up supply chain.
Speaker 2:But then you look at how much money Foxconn makes a year in their revenue, which is in the hundreds of billions just on mobile devices, right? And so there is probably an economic equation where some combination of Apple, Apple, you know, its own sort of off balance sheet investment and other private capital that could over time, we could make it in America. Yeah. It's just not it's just not as easy as Trump asking nicely or or slapping tariffs around and expecting things to happen immediately.
Speaker 1:What a chaotic week. What an interesting week. I'm excited for our guests. We're gonna be asking more folks about, their tariff takes, how they're processing all the market turmoil. We have, Tracy Allaway from Bloomberg, Odd Lots coming
Speaker 2:on the
Speaker 1:show, which would be great. But you know what isn't tariffed? Time. And what is time? Money.
Speaker 1:And how would you save both?
Speaker 2:I'd go to ramp.com, John. Why? Easy to use corporate cards, bill payments, accounting, and a whole lot more. I couldn't
Speaker 1:have said it better myself. Go to ramp.com. Sign up for ramp.com.
Speaker 2:Go to ramp.com.
Speaker 1:It really is.
Speaker 2:Now there's never been a more important time to save time and money. Yeah. It's always been important, but now more than ever.
Speaker 1:Yeah. I mean, when these market shocks happen, like, you know, all the VCs get on their podium and say, hey. You know, here's my memo. There's economic turmoil. You need to, you know, buckle down.
Speaker 1:We don't know what's gonna happen in the funding rounds and the funding markets. But never a bad time to save money and never a bad time to understand what's going on in your business. So that's why you should sign up for Ramp. Get clarity into what's happening in your business on the expense side. And we have Paul from Browserbase coming in the studio, down computer use, the next generation of large language models and artificial intelligence.
Speaker 1:Very excited to talk to him. And he's here.
Speaker 2:Here. He's ready.
Speaker 1:Welcome to the studio. How you doing?
Speaker 2:The basement.
Speaker 1:Hey, guys. The basement. What's
Speaker 2:What's up? Looking good. Came prepared. Looking fantastic. Looking sharp.
Speaker 2:You know, do you wear
Speaker 3:that on day? You know, you gotta you gotta dress up to impress. Yeah.
Speaker 2:You say it was quarterly earning report? Is this green screen background? Whatever.
Speaker 1:No. This is a live this is a live view.
Speaker 2:People are working. People are grinding. I like it. I love the whiteboard. I love the whiteboard action in the back.
Speaker 1:It's fantastic. I think. Somebody's actively whiteboarding something.
Speaker 3:Some integrals. Yeah. It's math. Yeah.
Speaker 1:Why why why do you got a human doing that? Can't you just wire up one of these computer use tools to do it for you?
Speaker 3:That's that's that's all in the cloud.
Speaker 1:It's all in cloud. This is in real life. Yeah. Yeah. You need to analog stuff every once in while.
Speaker 3:Hundreds of engineers running in the cloud
Speaker 2:right now. Fantastic. Those are just paid actors.
Speaker 1:Yeah. Actors. Anyway, can you introduce yourself, the company, kinda what you do for everyone?
Speaker 3:Yeah. Hey, everybody. I'm Paul, founder of Browserbase. We power web browsing capabilities for AI agents and AI apps. So we're kinda building, a web browser for AI.
Speaker 3:Basically, we think the future of software is software gonna have to go out and do work on your behalf, but a lot of the work that we do is in a web browser on a website. So we want AI to do work on our behalf. We're gonna have to have a AI user web browser, and and we provide that web browser. Now we mostly sell to developers, people who are building these cutting edge AI features and applications, and they integrate our AI web browser into their applications to give them superpowers. What that might be is, like, going out to a thousand websites and finding the right screw for your procurement team, or maybe it's going out and booking demos to help, you know, figure out what your customers are doing or, you know, trying to automate all the tedious work that people have to do every single day.
Speaker 3:We do that with Browserbase.
Speaker 1:I wanna talk about MCP APIs and kind of the future of how agents and LLMs will interface with the Internet. There was a meme for a while that was just like the the front end is the API. Just get good at web scraping because the the API might change, but the front end is gonna stick around for much longer. And so if you can be really dynamic there and I and and I always wondered about, you know, are APIs just kind of gonna go away as as LLMs get better and agents get better at computer use? What's your take on, where how we will see companies make their content or their websites available to LLMs going forward?
Speaker 3:Yeah. We really believe that computers are gonna be just as good at people at browsing the web. And for a very long time, there's still gonna be humans using the web doing the same task they do every single day. Mhmm. So why do we have to rebuild the Internet for AI when AI can use the web the same way people do?
Speaker 3:So there's certainly gonna still be APIs and MCP servers, especially for high volume stuff. You know? If you're booking a flight, you probably should do that through the Delta MCP server, not through a website because that's just not the efficient way to do it. But when we talk to companies that are not the cutting edge companies like our customers like Perplexity, but more cutting edge companies that are old school, have been around for a long time, there's a lot of websites that aren't gonna have MCP servers. The Nigerian immigration form won't have an MCP server for a long time,
Speaker 1:and Mhmm.
Speaker 3:AI needs to automate that just as much as automate kind of the more high volume tasks. So we view the browser as kind of really the most primitive MCP server that can work on every single website without having to have, you know, first party integrations.
Speaker 2:Can you talk about, how you thought about the opportunity early on? Because I imagine you and, you know, you've made a tremendous amount of progress, raised a bunch of money working with some of the most, you know, important companies in the space. But early on, imagine some people would have said, hey, like browser automation software has existed before. Like, we don't think the market's that big. And and clearly you didn't agree with them.
Speaker 2:And I'd love to to hear you kind of speak to, you know, why you understood the opportunity is so much bigger than than people might have originally thought.
Speaker 3:Well, yeah, there's a there's a lot there. I mean, frankly, I just love this browser automation stuff. If if it wasn't, you know, as popular as it is, I still would be doing it because I just love the stack. I love the problem. It's it's really interesting to me.
Speaker 3:Kind of it touches on the programming I did when I was a developer starting out, which was, you know, how can I automate something and help my life and make things easier for me? And that often was, you know, interacting with websites on my behalf. So there's a bit of luck there because I just love the space. Now I'll reference one of our angel investors, Jeff Lawson, the founder of Twilio. When he was starting Twilio, people were saying, well, SMS is gonna go away.
Speaker 3:Like, why would you build a company on SMS? And his point was that it's a very long bridge. I think it's the same thing here with browser automation is that, sure, when we have Neuralink and all of our brains are talking to each other, software's gonna be a lot different. But I think we have a really long time until software, especially software on the web, goes away. And taking that perspective where Browserbase is gonna build for that short, medium term future and really build great technology to help agents run and do tasks on the web, that felt like an opportunity that was a bit contrarian.
Speaker 3:And, you know, when you're contrarian, you find alpha, and that's what we've done at Browserbase. And as you can see today, the public markets are reacting. You know, after our q one results
Speaker 1:Yeah.
Speaker 3:Triple q up 10%. I don't know what happened.
Speaker 1:But I
Speaker 3:think they may have gotten wind of what's happening at Browserbase and have really corrected accordingly.
Speaker 1:I love it. I love it. Can you talk about, you said you sell you sell you sell to developers. Obviously, Perplexity, it sounds like, is a client and a very large company. Do you have kind of self serve offering where someone can just kind of start import this in one line and start to get hacking?
Speaker 1:And kind of how do you see the the market developing from, like, prosumer, you know, just some no code developer is gonna be using a browser based like product or or you're gonna be under the hood maybe to someone who's, you know, building a business on top of Browserbase.
Speaker 3:Yeah. For us, you know, you could get started self serve. You can sign up. There's a free plan. You can upgrade accordingly.
Speaker 3:And then, you know, as you get to a certain volume, we wanna give you pricing that's right for your use case. So there is more of a contact contact sales option longer term.
Speaker 1:Yeah.
Speaker 3:But, you know, what we think about most is our business model. We're a consumption based business model, which means that we only win if you build something that's successful. So our incentives are very much aligned with helping our customers actually build applications that use browsers a lot, that are used by lots of customers. And a lot of my job as founder and CEO is going out and helping our customers really think about how can they use AI in the best way to help impact their users because you can kinda map one to one the browser hours they're using on Browserbase to the time that they're saving for people. And we get really excited seeing that number chart up every single month because that means there's hundreds of thousands of hours that are being saved by people instead using Browserbase.
Speaker 2:How do you was deep research the Studio Ghibli moment for agents or is there one on the horizon in your view? It feels like, you know, we we've talked about this on the show over the last year. There's been a lot of, you know, we were at YC demo day. There was a lot of like AI agent infrastructure companies. I don't remember getting pitched that many individual AI agents, but it does feel like as the underlying tech gets better and people figure out how to actually build quality agents that that will flip at some point.
Speaker 2:But I'm curious, like, you know, do you think that agents are even priced into the market yet? I imagine you're seeing a lot of stuff like, you know, in in, you know, using browser base that, like, hasn't isn't really in the public domain yet. Mhmm.
Speaker 3:Yeah. It's it's interesting because I really like to think about the vastness of our customers. Like, sure, have cutting edge companies, but we also have a fifty five year old dairy trucking company in the middle of America. And they hadn't hired a single engineer in all fifty five years, but then they hired one. And the first thing they got was browser based to automate, hey.
Speaker 3:How do we know what the gas prices are along this route? Previously, like an ops person calculating all the gas prices, and they're like, oh, maybe we can hire an engineer to make this easier with AI. So it's certainly AI has escaped Silicon Valley, and every company in the world is thinking about how to use it. And, thankfully, browser based, since it's pretty easy to get integrated and get started with, we have a framework called Stagehand, which makes it easy to tell AI how to control a browser. Stagehand team behind me.
Speaker 3:Those those guys, it's much easier to on ramp to use AI. So we really try and think about, like, you don't have to know what the cutting edge models are. You have to keep up with the research. If you're using browser based, we try and bring it all to you. In terms of it being priced in, I think there's a lot of people who maybe moved a little too early to AI agents.
Speaker 3:I think the Klarna study this story is a really good use case here where they went all in on AI agents. They threw away all the software, and then I think they had to walk that back a little bit. So it's still early days for agents, and a lot of that's limited by great infrastructure. And we think that if we can build good infrastructure that works best with the models, it can really help ease adoption.
Speaker 2:How do you everybody's been really worried about AI agents and their their sort of potential to be used in nefarious ways. So like, you know, releasing agents across the web that are just like, you know, effectively spamming people. Is that like worry you at all? I'm sure you can see if somebody's using browser based in a nefarious way, you can kind of identify it quickly and eliminate access. But I feel like people have been just like worried about this idea of AI spam, but it hasn't seemingly had it it isn't so prevalent yet that it's that we're in like a crisis.
Speaker 3:Yeah. The only place that I've seen it is LinkedIn and we just disable LinkedIn on browser base. It's just not a business that we work with and we sync to LinkedIn. You know, everyone at my LinkedIn inbox is crazy. It's just something we don't wanna contribute to.
Speaker 3:For us, we we really we really wanna think about, like, how can browsers be an arbiter of good bots long term? I think
Speaker 1:there's this cat
Speaker 3:and mouse game, and anti bot blocks all bots, but there are good bots and bad bots. And we're in this really great position where we can actually be advocates for our customers that can talk about how so and so customer has 20,000 employees on Workday, and the Workday APIs aren't really cutting it for them. And this is why they're using browser based to automate it and build that relationship. That's why in our last round, we brought on Okta Ventures as an investor, the founders of Clerk, the founders of Stitch, the founders of WorkOS. You know, these are people who are really thinking about authentication, and my view is that the anti bot problem is probably solved at the authentication layer.
Speaker 3:Anti bot is just proof of personhood. Right? So if a agent can log in on your behalf, that's gonna be really good to match their actions to the person that they're saying they're acting on behalf of and hopefully match the rate limits there accordingly.
Speaker 1:Can you talk a little bit about the llama evals for llama four? I saw that I I believe someone from your team posted that they had done some, kind of I don't know. I don't even know how you describe it. Like, private evals, stuff that you guys just look at directly. And how how how do you build that stack up?
Speaker 1:What are you actually testing for? And then what are your vibes around Lama four?
Speaker 3:Yeah. So what we did over the weekend of course, whenever something comes out, we wanna move quick and try it out. We're all engineers here. I'm an engineer, and I love to try and play with new models. And with Stagehand, you can kind of imagine it like a Bursell AI SDK just for building what's called a web agent or an agent that browse the
Speaker 1:web. Mhmm.
Speaker 3:So we can slot in any sort of model into that, and we have a standard eval set that we run Stagehand against. Common tasks on the web that we've kinda built up to evaluate different performance, like websites with drop downs, website with date pickers, you know, the many different types of elements you see on the web. We wanna see how our automation framework can stack up against that. We spent a bunch of money this weekend evaluating every single model that we could get our hands on against that eval framework, and we actually found that Gemini was one of the best performing models. Think it was Gemini two o Flash.
Speaker 3:And Llama four, a little bit more disappointing. Now Llama four, we used it with inference provider, and we know the different inference providers can have different performance based on these different open source models. So I think it's still too early to call on Llama four, but we're definitely excited about the stuff that Gemini is cooking up. And Yep. They seem to have really figured out some of this interesting stuff with long context models.
Speaker 1:Yeah. And also, Llama four, they haven't released the behemoth model, like their biggest and So maybe that changes the conversation when that happens. And there was also a discussion about they might have used a different one on LM Arena. Was getting getting a little spicy on the timeline.
Speaker 2:What's your what's your Paul doom? What's your PD?
Speaker 3:P doom.
Speaker 2:You know? And specifically, I'm I'm curious how you you reacted to AI twenty twenty seven because I I just wanna go out and say, like, if any of AI twenty twenty seven comes, you know, becomes true, I I hope that you'll turn into a defense tech company really quickly and, you know, help unleash a an army of good Browser based agents to protect
Speaker 1:Fighting on our behalf.
Speaker 2:No. But I but
Speaker 3:I've Fight the good fight. Yeah. Exactly. In terms of pDoom, my PaulDoom right now, very low. It it still feels like there's a lot of, you know, capabilities they need to improve.
Speaker 3:Infrastructure needs to be built. And everyone seems really willing to work together, which is positive. I think I see a lot of partnerships happening in the ecosystem. For us, browser based will be a partnerships company. You know?
Speaker 3:We need to work with the cloud players of the world, but also the OpenAI's labs. Mhmm. When computers came out, we were able to launch alongside OpenAI and kinda get early access to that model and give them feedback. So it certainly seems like everyone is being collaborative to solve these problems. I mean, we'll see what tariffs do to model prices.
Speaker 3:I don't know if that comes down one of these days. Right?
Speaker 1:We'll see. But
Speaker 3:in in terms of what's gonna happen in the future, it's still too early to really tell, but I'm feeling pretty confident.
Speaker 2:Can you What? I was gonna say, what are what are use cases that you want to see more of? Like, maybe you see it happening on browser based today, like the the example of a dairy company, like, trying to more strategically route their, you know, basically like manage their logistics to drive down costs is cool and sort of random. But I'm curious if there's other areas where you think there should be more people building these sort of browser use type experiences.
Speaker 3:Yeah. For us, we really look to, like, all of these these use cases that probably don't need to be standalone products on their own, but really help individual businesses. We get really excited about companies that are kind of building things in house. One insight that I've had is that as code creation has become easier, more and more companies are kind of opting to kind of semi build in house where they're pulling some primitives off the shelf, like some infrastructure, like browser based or maybe super based for the database, but then still building their own agent internally. And it's kinda interesting.
Speaker 3:It's like, if you have all the primitives available, can you just stitch those together using cursor and actually build something that's more bespoke to you? Mhmm. What we found from some customers is when they buy black box solutions, they aren't able to really tune it to their specific use case, and agents still need a lot of tuning for each individual use case. On the wider side of use cases I wanna see, I really love seeing stuff around, like, every CEO should be looking at what do they have an operations team doing? Is it going to an insurance website and doing a credential check on a provider or insurance verification?
Speaker 3:Is it doing some interesting procurement task? Is it doing some manual research? And how can they automate that? There's a lot more tools out there than they were before, and it's easier to integrate than ever.
Speaker 1:Can you talk a little bit about the actual tech decisions you've made? I could imagine one version of computer use on the tech tree is like, take a screenshot. Use a diffusion model to understand this. We're seeing this with images in ChatGPT. It's getting very good at recognizing text.
Speaker 1:It can recognize people within the images. You could imagine taking a screenshot and just asking the the vision model, where is the call to action? What like like, define that in pixel terms so I can click that button. At the same time, you could imagine just passing the entire, you know, view source, like, the entire DOM to, to an LLM and just saying, hey. Write some jQuery that clicks on the call to action, and make an educated guess based on that.
Speaker 1:You could imagine hybrid approach. What has been most successful? What are the paths that, you are not looking at these days?
Speaker 3:Yeah. For our framework, which really kind of abstracts all of this, we use everything. And I think that's the important thing is it's not one size fits all. If it's just screenshots or just DOM or hybrid, you really need to kind of think about what's the context size of the website. It's a very long complex website with a lot of HTML.
Speaker 3:You probably wanna go a vision approach. If it's craigslist.org, DOM is probably sufficient. So I think every single website has different configurations that work well for it. And with our products, we really try and help developers make those right choices or not have to even think about that and just give us all of the models they have access to. We can, you know, route between that model based on the type of website that's important and help them build the reliable web automation.
Speaker 3:For us, internally, we do really love the DOM based approach or the HTML based approach just because it's frankly more cacheable, such that instead of having to send a screenshot to an element every single time, if the website doesn't change, you could probably reuse the same button you used last time to perform a workflow. So that DOM based approach seems to be, like, the more performing and cacheable longer term. It's also a little bit cheaper. But we'll see as computers models keep getting better. Maybe there's gonna be some, like, you know, model level caching on screenshots where they can say the screenshot we've seen before.
Speaker 3:This is the prompt we've seen before. We can say this is the same button. So as computers models get a little bit better, it might be on more equal footing with the DOM based approach in
Speaker 1:terms of cost,
Speaker 3:but it's gonna be up to the labs to really do some innovation there.
Speaker 2:Yeah. What's the team's take on vibe coding right now? Is it not a fit when you're needing to build reliable products that customers depend on for business processes,
Speaker 1:or
Speaker 2:are you guys making it work internally?
Speaker 3:Yeah. So, I mean, the team doesn't vibe code very much on critical infrastructure, you know, that goes under a lot of review. But it's made shipping integrations with Browserbase and Stagehand easier than ever, and we've been able to integrate, know, with Lanechain or Llama Index or CrewAI, and those kinda come out a lot faster. So this interconnected world that you're seeing with every tool integrating with every other tool, that's a lot easier. Vibes wise, you know, something happened one day where the whole team switched from cursor to windsurf overnight.
Speaker 3:I'm the only cursor user left. Maybe that means I'm slow to adopt. But it seems like people are moving between these IDEs pretty damn fast, and
Speaker 1:Yeah.
Speaker 3:The next tool that comes out maybe could there's, like, the great flipping in, you know, between cursor to Windsurf. It just kinda happened at browser based.
Speaker 1:Yeah. It it feels like there's this Cambrian explosion in, like, AI tooling, and there's a lot of businesses that have built pretty solid businesses. We've seen, like, the crazy charts and the revenue ramp. And in the past, like, cloud era, a lot of the companies actually went public. You know, like Twilio and MongoDB, you know, are very point solution companies in my opinion, but they both built fantastic businesses eventually.
Speaker 1:But you could imagine a future where there's more competition and you're building into adjacencies or there's mergers or acquisitions and you kind of get some sort of, like, new age roll up of all the different AWS style tools in this infrastructure. Like, how do you see the market evolving? Because, at the same time, I imagine the hyperscalers are thinking about could browser based be an option in AWS with the other 25,000 tools that they have up there. Yeah. But but, yeah, I mean, obviously, you're very partnerships driven right now.
Speaker 1:How does that evolve over the next couple of years?
Speaker 3:Yeah. You know, we are seeing hyperscaler interest for sure. Amazon just launched Nova, and the Nova SDK
Speaker 1:Mhmm.
Speaker 3:Took a lot of inspiration from what we've done at SageChan. Right? And we really appreciate that. That's the DX that we're all settling on. It's the right way to do things.
Speaker 3:Now the model performance is a little bit subpar, and I think trying to build a model while also building a great framework is just a really impossible mission.
Speaker 1:Mhmm.
Speaker 3:For browser based, we think about how do we build best in class infrastructure and are able to go super deep on a single vertical in a way that a hyperscaler might not be able to do. If you use, you know, Amazon RDS versus maybe a more focused database provider like PlanetScale or Superbase, I think you'll find that the product just it's not as exciting for developers to use. I think Stripe is a good example of a company that's gone very focused on something like payment infrastructure Mhmm. But then layered on this product platform on top of that. Mhmm.
Speaker 3:When we look at the expansion opportunities for browser based, I think it's a lot of interesting stuff. You know? Think of every Chrome extension you have. You have your password manager. You have your payment information saved in there.
Speaker 3:You have your browser history, which is like memory for an agent. So we can think about more areas within the browser to offer as agent primitives longer term, but we're really focused on just building best in class infrastructure that developers love, building a framework that really works well for everyone, and just continue to move up the stack and find things that we can do to help developers build browser automations easier than ever before.
Speaker 1:Can you talk a little bit about, some of the optimization vectors that the various foundation model companies are kind of sprinting towards? We saw this with Llama four. They were claiming, hey. We got a 10,000,000 token context window. Think that was 10 times bigger than what Google was touting a year ago or even a couple months ago.
Speaker 1:There's obviously the the length of time a reasoning model can stay consistent, and that's, like, doubling every couple months now. There's different things about just, maybe it's not the highest IQ model, but it doesn't make stuff up because it's got a RAG integration or something. And it's actually pulling real facts instead of just hallucinating constantly. And you could imagine there that if I'm just thinking about, like, what does a computer user user need, well, I don't want them to lie, but I also don't necessarily need, a chess grandmaster. So maybe I'm not optimizing for IQ.
Speaker 1:But what what where are you most optimistic about where the foundation model companies will go and what kind of, problems or vectors or the shape of that progress looks like? What what is it what does the shape of the progress need to look like for you to really succeed?
Speaker 3:Yeah. For us, I really like this paradigm of splitting up reasoning models to other types of models. I think trying to make a generalistic model that's great at everything
Speaker 1:Mhmm.
Speaker 3:Is gonna be really, really hard. And you can fine tune different types of models and different types of tasks if it's code gen or reasoning or even u UI automation, like a computer use model. So more models means more choice for our customers. In the end, you know, our customers are trying to choose the best model for their task, and that varies because the Internet is so big. You know, there's billions of websites and billions of choices on what, you know, you can use and or should or shouldn't use.
Speaker 3:For us, like, we do see the reasoning models being closer to the agent loop, whereas more like a four o or a Gemini two o flash being more close to the tool calling makes a lot
Speaker 5:of sense.
Speaker 3:You want the expensive model making the decisions and the cheaper, faster model, maybe making the individual tool calls. That's been a great paradigm split, and more of our customers than ever are actually using models from different providers. So it does seem like more choice means more innovation and more ways to kinda mix and match the best of every sort of eval.
Speaker 1:Very interesting. I wanna get your take on the latest from Microsoft, today. They just, this just leaked out or something that Microsoft said it would no longer move forward with its plans to build data centers in Licking County. The company had planned to invest a billion dollars initially towards three data center campuses in New Albany, Heath, and Hebron. Microsoft plans to ensure the land at two of the three sites will be available to be used for farming.
Speaker 1:And, Nick on on on on x says, yep. It's over. So so how how are you feeling? I mean, obviously, there's lot of turmoil in the markets around around, around tariffs, but I feel like the whole narrative of, like, maybe we're getting over our skis on CapEx and hyperscaling. Does is all this just noise to you because you're just focused on product experience and you don't really need a 10 x improvement in the foundation model performance that might come from a bigger data center build out?
Speaker 1:Or are you still, like, inference bound and you're like, yeah. It'd actually be great if they move forward with that. What what what's your take?
Speaker 3:Yeah. From what I've seen, the labs are still innovating, and and I don't know if Microsoft is a lab that I've really think is gonna be an innovator as much. You know? So I I don't think OpenAI or Anthropic are holding back on investment. Now does that mean they're signing massive data center contracts right now?
Speaker 3:I I think people are kinda waiting to see what happens in the macro sense. For us, I'm very downstream of that. Right? And then, of course, we're, you know, a private company, venture backed. Mhmm.
Speaker 3:Things that happen in public markets tend to trickle down to private companies. So Yeah. Being aware of it, but, you know, with browser based, you know, with the traction momentum so far, we've had no shortage of inbound, and that feels like there's a lot of room to run for us, so not really concerned.
Speaker 2:My last question, and you've covered some of it before, but can you talk about just general capability overhang? There's this, like, you know, with with all the evals and the sort of pressure for the labs to constantly be number one or at least be, you know, at the top. It feels like that's almost like a distraction at times from just like delivering all of the capability that is now possible. But I'm curious what your take is on that.
Speaker 3:Yeah. Maybe answering this in another way, and and we can go deeper. But for BrazosWaste to exist, there needs to be healthy competition at the model layer. And we see that models are more fungible than ever. People are switching between models all the time, and people don't wanna switch their infrastructure.
Speaker 3:They wanna have a piece of infrastructure that works. They can kinda integrate with a little more deeper. And if that means plugging in different models, that's just gonna help them long term. I think there's a lot of innovation that needs to happen at the model level level. You know, some stuff like multimodal tool calling being supported by all model providers and not just Anthropic.
Speaker 3:This is, like, a lack of capability, but it seems like every time someone innovates, that does trickle down to the other labs. So it doesn't seem like there's gonna be a shortage of choice from customers, and still a lot of innovation happening, especially long context. Like, we think that long context is gonna do a lot for DOM based web agents. And Mhmm. There's still a lack of true performance there, but we think with time, all the stuff does just get better, cheaper, faster, and it's inevitable.
Speaker 1:I wanna ask you about this this other story that kind of broke recently that, OpenAI is considering acquiring a hardware device manufacturer that was started by Sam Altman and, Johnny Ive, the ex Apple designer. Potential designed includes a phone without a screen and an AI enabled house household devices. And I and I'm curious to know your take about, like, generally, we saw, like, the first wave of this with, like, the Rabbit r one, the Friend, the Humane, and some of those didn't go so well. Some of them are plugging along. But I could imagine that maybe the Studio Ghibli moment or the Turing test moment is when, yeah, I don't need a screen because I trust that I'm not just using this PIN or this device without a screen as a knowledge engine, but I'm actually it's actually able to go use a web browser, on the back end and just talk to me in conversational.
Speaker 1:I know that's a little, like, sci fi and maybe, like, I don't know, maybe it's, like, three months out. Who knows? But I want I wanna know your take on kind of devices and and how you could see browser based plugging into all that ecosystem.
Speaker 3:Yeah. You know, for us, like, consumer web automation isn't really a focus just because that I think that is one on the device level, and I think that with Google, the Apple, I mean, Apple intelligence, not really something I use every single day. And, oh, I hope it gets better. Right? But you can imagine the amount of data they have access to, the integrations with their existing life.
Speaker 3:They're really well positioned to offer more consumer web automation. You can tell Siri, hey. Go book that restaurant, and it's gonna have a lot more capabilities to do that, maybe even on your device.
Speaker 1:Right? Yeah.
Speaker 3:But for our customers, customers who are kinda building, like I said, these more traditional RPA or maybe using BPO or Yep. Maybe they're a company that's building something more verticalized to go sell to someone who uses RPA or BPO. Those people are still gonna need infrastructure the way that they because they're building applications, and and that's who we focus on. Yeah. I I wish OpenAI the best with that, and I hope it works.
Speaker 3:I I want more cool devices. I I wanted
Speaker 1:Yeah. Me too.
Speaker 3:To work and Humane to work, and I don't have a friend to Avi hook me up. I'd love to get one. You know? I I want all these things to work because I want this cool sci fi future. So I, I try and stay super optimistic about that and Yeah.
Speaker 3:Hope it into existence.
Speaker 1:Yeah. It it doesn't feel like it's super in Apple's DNA. Like, if they even if they just had, you know, an Apple intelligence query, oh, like, summarize the news for me, you know that they're gonna do a bunch of partnerships, and then they're gonna pull that in from an API, and it's gonna be as as deterministic as possible. Like, they're I I feel like Apple does not have probabilistic computing in their DNA, and I'm sure you have to deal with a lot of a a lot more rough edges. Are are you are you seeing the thing that we're seeing with, like, agents, and we heard about a little bit of this with, the dust up with AI SDRs, is just that like, a hallucination rate of one percent is unacceptable.
Speaker 1:How are you thinking about keeping a human in the loop? And just kind of like even how do you message to a client the reliability of your model? Obviously, you have benchmarks for all the LLMs that you're using, but kind of claims are you making? Because I think we all understand that like, hey, this stuff's new. It's moving fast.
Speaker 1:It's improving. You gotta go, you know, fast and and and and just, you know, test this model and not put it in, like, a life critical situation yet, you can still get a lot of value out of it. But how are you pitching browser based to folks?
Speaker 3:Yeah. You short term, you are gonna need some human supervision at some point. Right? And the way that we allow this with browser based, we have this thing called the live view where you can actually embed an iframe Sure. That shows the browser working.
Speaker 3:And with the browser working, a human can take over if the agent gets stuck. Yep. And you can imagine maybe the future that's, like, very immediate is not a browser doing all your work for you, but maybe more of like a dev and experience where the browser is doing 90% of the work for you and maybe you have to come and do the last 10% once in a while. Yeah. And when we talk about with our customers, like, how do we build human into the loop, into the designs that you currently have in your application
Speaker 1:Yep.
Speaker 3:To make it just super easy to have that escape hatch into the human operator if something isn't working.
Speaker 1:Yeah. Yeah. That makes no sense. Well, thanks so much for stopping by. Congrats the progress.
Speaker 1:This is great.
Speaker 3:Thanks, guys.
Speaker 2:Congrats to the whole team. Would love to have you back on next time there's news.
Speaker 1:Yeah. This would be great. Appreciate it, guys. We'll talk to soon.
Speaker 3:Bye. Next
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Speaker 1:well right now. Dip and you and you're up, you know, treat yourself. You've been working hard. You've been working hard. You deserve it.
Speaker 1:You deserve it. Go to go to Bezel. Download the app as well. And we have Tracy in the studio, I believe. Not yet.
Speaker 1:She's coming in in just a minute. She's been covering the chaos in the markets very closely. Odd Lots has been on absolute tear. They had Ryan Peterson on. They've had a bunch of people, dig into reactions to the tariffs.
Speaker 1:She also just put up a, everything about the basis trade, which I wanna dig into, with her. She writes, it's worth taking a detour to explain just what the basis trade is and why it became so popular. To do that, we need to go back even further into the dark days of 2020, all the way back to the the aftermath of the two thousand eight financial crisis. Scarred by the near collapse of the financial system, policymakers moved to makes banks safer. And here she is.
Speaker 1:She's in the studio. Welcome to the show, Tracy.
Speaker 6:Thank you so much for having me. It's been a a wild week. It's hard to
Speaker 1:It is.
Speaker 6:It's hard to, imagine. It's it's just been seven days since Liberation Day.
Speaker 1:Yeah. It's crazy. And, I was I was, messaging you about this. I really appreciate you coming on in the midst of the, chaos because I think it makes for a better conversation. But, also, is your when the markets are crazy, is your job crazier?
Speaker 1:Are you doing more episodes, more research, more blog posting? I mean, I'm really
Speaker 2:Or or in some ways, the job easier because there's just so much attention.
Speaker 1:Yeah. Yeah. You don't have to come up with a wild story. Hey. Let me take you on this really obscure deep dive that you've never heard about.
Speaker 1:Well, yeah, what what what's it been like on the on the on the work front?
Speaker 6:Yeah. We definitely don't have to scramble for content at the at the moment. It's been a fire hose of content. We've been rushing out episodes. The great thing about All Blots is, you know, as you mentioned, we span this wide range of finance, markets, and economic subjects.
Speaker 6:Yep. We did a lot of supply chain and trade episodes back in the twenty twenty pandemic when there were all these disruptions. Now we can just tap our previous guests, you know, all all the logistics experts, the truck drivers, shipping companies, small and big companies, and ask them like, what's going on and what impact is this actually gonna have on your business?
Speaker 1:Yeah.
Speaker 2:I wanna start by asking you to explain the basis trade to me, but like I'm a VC. So similar to explaining, you know, maybe like a child
Speaker 1:Like a
Speaker 2:child. Like I'm five years old. But to a VC that, you know, considers themselves a macro expert but maybe isn't.
Speaker 1:Yeah. What will this look like in the form of a of a x thread in in three months or a or a memo that's hastily written to every entrepreneur in the portfolio in two weeks from now? Break it down, please.
Speaker 6:Oh, man. It's gonna be hard putting it in language for a VC. What I would say, most simply, basically, the basis trade is arbitraging the difference between a cash treasury Mhmm. And a futures contract on that treasury.
Speaker 1:Mhmm.
Speaker 6:And historically, this has been a really safe trade. The spread or the difference between them has been pretty range bound, very, very tiny. Because it's been tiny, investors like hedge funds and active funds, what they do is they go out in the market in something called the repo market, the overnight funding markets, wholesale markets, whatever you wanna call it, And they borrow from banks, from broker dealers. And this leverage allows them to amplify the returns they're getting from this arbitrage between the cash and the futures. Now, the problem, and we've seen this a couple times now, is when the entire financial system starts derisking all at once.
Speaker 6:Suddenly, investors can't really roll over these trades. They can't necessarily sell the cash treasury bond in order to close out the trade because the broker dealers, they do not have the space on their balance sheets to actually absorb those extra bonds. That's the big difference we saw in the pandemic, and we're seeing it now in 2025. The thing to remember is really, you know, the financial system isn't built to handle, like, a 10% decline in the S and P 500 and a simultaneous surge in bond yields. It just isn't.
Speaker 6:There are supposed to be hedges that banks can tap to, manage their risk, their capital. Instead, they're derisking all at once, and that has consequences.
Speaker 1:So, who's hurting the most? I've been joking that this is a bull market for short sellers. It's a golden age in the VIX. But with regards specifically to the basis trade, is this putting more pressure on banks, hedge funds? Will this actually affect the VCs that we were joking about, or can they just kind of ride it out because they have LP agreements that date out, like, twelve years?
Speaker 6:Yeah. Definitely a good question. Who's hurting most? I mean, obviously, hedge funds that had the basis trade on. Mhmm.
Speaker 6:Active fund managers, by the way, are are are really big players in all of this, and we've heard anecdotally in the markets that they've been selling quite a lot too. Banks probably are not having a fun time at the moment. But on the topic of VCs, I mean, I think we have to step back a little bit from the basis trade and talk about just those surging bond yields
Speaker 1:Mhmm.
Speaker 6:In general. So, you know, bonds are supposed to be boring. They're not supposed to be moving around that much. They're not supposed to be, talked about as much as they are in general news over the past couple of days. And the reason is bonds are the benchmark benchmark borrowing cost against which all other loans are basically judged and measured.
Speaker 6:You know, refinancing for mortgages, refinancing for corporates and companies. And this is where it comes in for VCs. Right? Over the past few years, VCs have been showered in money. I know there have been breaks in that trend, but in general, showered with money.
Speaker 6:Cost of financing has been going up. That would seem to be an issue at least for a lot of VCs. And then the one other thing I would add here is uncertainty in the market doesn't look like it's gonna go away. So, yes, we had the pause on tariffs just announced today. We still don't know what's gonna happen with China and The US.
Speaker 6:Trump has basically destabilized every form of capital out there, stocks, bonds, domestic, international. It's not clear whether or not he's gonna be able to put the tariff threat toothpaste back in the tube now. So I think that uncertainty is gonna stick around. And what that means is less capital willing and available potentially to actually fund a lot of risky activities like VC, like tech.
Speaker 1:Mhmm. I have this narrative, and I want you to tell me if it's Cope or not. Somebody was I was talking to a friend, and they were saying, like, this feels as bad as the COVID drawdown or the SVB crisis and the interest rate hike that caused a lot of turmoil in markets. And I was saying, like, yes, the magnitude of the move is significant, the economic indicators are significant. But this is fundamentally different potentially because that toothpaste can kind of go back in the tube because it's within the president's, like, remit to just say, hey.
Speaker 1:Everything is going back to exactly the day before Liberation Day. That was a weird, you know, fever dream. We're back to what it was before, and markets might respond to that. Whereas during in 2020, no one could ever say, oh, actually, like, COVID cases are nonexistent now. It was not within the within the purview of the president.
Speaker 1:Is that a ridiculous narrative, or is there something there?
Speaker 6:I mean, I think some investors would probably say in in certain ways, it's scarier right now, and I think you need to remember, you know, the experience of Monday. Mhmm. So we have one person, the president, who's effectively controlling this entire narrative, this entire story. As you mentioned, at any one time, he could have issued a statement announcing a softening in the position
Speaker 1:Mhmm.
Speaker 6:Or maybe just saying something other than be cool to markets, something something comforting and
Speaker 6:cool
Speaker 6:to realistic for
Speaker 1:them. He chose not to do that. And in fact, whenever there seemed to be a positive headline on
Speaker 6:the horizon, whenever people seem to be talking about, like, maybe things are gonna start to calm down, the administration really seemed to rush out to bat those away. And the big example was we saw that mistaken headline on Monday about a potential pause, and the the White House was out,
Speaker 2:you know
Speaker 5:The other Bloomberg. Yeah.
Speaker 1:Yeah. The other Bloomberg.
Speaker 2:For mister Bloomberg. Yeah.
Speaker 6:They were out within minutes to slap that And this is the difference. Right? In previous crises, 02/2008 being a really good example of this, we knew that policymakers were basically all pulling in the same direction. They were trying to rescue the financial system. And as part of that, they were probably wanting asset prices to go up.
Speaker 6:I don't think that's been certain at all over the past seven days.
Speaker 1:Three.
Speaker 2:Yeah, what, how do you rate the admin spin on the announcement today? You know, you, you had said earlier that they just, they blinked, right? A lot of people, you know, Trump supporters historically have just said like, oh, it's 70 chess, like this was the plan all along, And so your your position generally was like, no, he blinked, The the tenure was like ripping in the wrong direction and like they basically needed to do something. Is that is that correct?
Speaker 6:I think that's right. The thing to remember here is, okay, the great thing about four d chess, 14 d chess, whatever.
Speaker 1:So past three d chess, which I think is the original metaphor.
Speaker 6:It's like those Gillette razors. Right? We just keep adding blades.
Speaker 1:I saw someone posted a picture of of one dimensional chess. It's just one line. I thought that was pretty funny.
Speaker 6:Right. Okay. So when you have this 14 dimensional chess or whatever, you have a great tool to basically spin whatever happens Yes. The way you want it. And, you know, I think it's very clear that Trump supporters are seeing this in a different way and Trump critics are seeing it in a different way.
Speaker 6:I would say the one thing to look at is the administration's own scorecard. They've been pretty explicit that part of what they wanted to do on The US economy was to bring rates down, bring bond yields down. They wanna make it cheaper for people to get mortgages. They wanna make it easier for companies to refinance their debt. They want that booming market in The US, a booming economy, all that manufacturing to be built, which necessitates quite a lot of capital, and that has to be secured and financed as well.
Speaker 6:And instead, we saw bond yields ripping. Right? Like, touching 4.5% this morning. So I think by that measure, by the administration's own scorecard Mhmm. This has been a miss.
Speaker 1:Are there any other, levers that the administration could potentially pull to bring down bond yields? What do you think's at the top of their tool chest right now?
Speaker 6:Yeah. I mean, the ninety day pause alone is having a pretty big effect. And this has been the story of certainly today, probably the past three days, is the whiplash in markets. So, you know, stocks plunge, stocks rise. I think the last time I looked at the S and P 500, it was up, like, eight or 9%.
Speaker 6:You have to keep your eye on it at all times on this day because it moves around so much. Same thing for bond yields. So after the announcement, we saw the ten year. I think it went down to, like, 4.36%, something like that. That's a a pretty big drop.
Speaker 6:And then just to give you an idea of what the mood has been like on Wall Street and how whiplashy everything has been, Goldman Sachs actually put out a note this morning saying that their baseline forecast for The US economy was now a recession because of tariffs. About an hour later, we had the the tariff pause announcement, and they had to send out another note saying that they were rescinding their forecast Wow. And no US recession was on the table.
Speaker 2:What percentage of TrueSocial's users do you think are finance bros, like, trying not to miss the next trade? Like, I have to imagine, like, there has to be some edge in being, you know, in the first hundred people
Speaker 1:To see Trump.
Speaker 2:See Trump. That
Speaker 1:was a great time to buy.
Speaker 2:Is there is there do you think there's high frequency true thing where, you know, people are trying to get near the Basically, he's going in somewhere. But yeah, how do how do you what what's your I mean, I I don't I don't even know. I was gonna I was gonna ask like, we don't even need to get there. It's gonna get too political. What do you what do you got, John?
Speaker 1:I I mean, I guess I wanna know. I was kicking around this idea with with with Jordy earlier on the show that there are a lot of ways to evaluate these new policies and new regimes, and there's been a lot of discussion of, like, this isn't just a slight change in trade policy. This is like a complete flipping of the board, a complete reevaluation. And it seems like the most cautiously optimistic folks are like, maybe this is short term pain for long term gain. But there's been a little bit of squirminess amongst supporters to say, oh, well, I was joking, earlier that, you know, well, you know, the ten year is yielding more, so it's the best it's a better time than ever to give your money to America, and you'll earn more money on that money.
Speaker 1:And so maybe that's good for that type of person. And you can kind of spin any of these economic indicators in a positive sense, you try hard enough. But the the measure that I use, is one that I go back to the Trump won presidency, and I look at the original tariffs on China. And those were not rolled back by the Biden administration. And so it's it's what I'm calling, like, eventually bipartisan.
Speaker 1:And so I'm I'm wondering if it's like I I don't know if I can really withhold judgment for, I don't know, it might be eight years or four years or however long it's gonna take. But, if if this policy, if we look back on it and we say, okay. Yes. Like, it stuck around. It eventually became bipartisan.
Speaker 1:Is that a win, or do we need to just look at it through an economic lens in the short, medium, and long term?
Speaker 6:I mean, that's a really good question. I don't know if you watched the, the Trump press conference that was just on a few minutes ago, but he was talking about how Biden left The US economy in a terrible position and wasn't able to strike good deals with China. That I mean, I would say the Biden administration kept a lot of the restrictions on strategic exports to China over the past four years, and in some ways, actually went harder on China technology as well. So I just don't know how a bipartisan deal would actually be interpreted and viewed by not just politicians, but the general public. It's really hard to tell.
Speaker 6:Everyone seems to be on their own little plane of reality at the moment. So who knows?
Speaker 1:Who are you tracking? I mean, you mentioned that you went through, the logistics and the shipping folks and the ones that are most impacted. Like, they have iPhones on planes right now. That's the most immediate impact. What do you think the second and third order industries that are most important to, track in order to understand the impact of the tariffs as they evolve?
Speaker 6:Yeah. I mean, oil is a really big one. And in fact, we had a really interesting survey from the Dallas Fed. I think it was last week or two weeks. I can't remember because
Speaker 1:Mhmm.
Speaker 6:So much is happening.
Speaker 1:Exactly. Yeah.
Speaker 6:But they're basically in charge of the oil patch. Right? They're they're down in Texas, monitoring what's going on with energy businesses. And they put out this survey where they basically go to a bunch of oil companies, you know, drillers, suppliers, and they ask them, hey, what's going on? How do you feel about things at the moment?
Speaker 6:And the replies are all anecdotal. But, you know, the respondents, they talk about how how they feel and they put like little numbers on it. They they grade the vibes as you might put it. But they also get to write written comments. And again, they're anonymous.
Speaker 6:But if you look at what was in the survey one or two weeks ago, those written comments were dire. I mean, people people were talking about how the threat of tariffs and again, this was before the tariffs were actually unveiled. How bad the threat of tariffs actually was for their business. And I remember there was one quote in there. It was a supplier for energy companies saying that he had gotten a call from a customer in Canada asking them if they could move production to Canada because they were worried about the tariffs.
Speaker 6:That is the opposite of the, you know, presumably intended effect of all of this.
Speaker 1:Yeah. I I saw actually mister beast of all people commenting on the tariffs. He said, ironically, because of all the new tariffs, it is now way cheaper to make our chocolate bars that we sell globally, not in America, because other countries don't have a 20% tariff on our COGS, which I never thought I'd see mister beast use the word cogs, but he's in the business now.
Speaker 6:You know things are wild when mister Beast is making, coherent, you know, tariff commentary.
Speaker 1:Yeah. No. And it makes sense. Like, he does shell globally. He has a massive global audience, and he makes everything in America now and then he sells it all over the world.
Speaker 1:But it makes sense that he would take some other stuff offshore.
Speaker 2:Where do you where do you look for signal? Right? You obviously have your Bloomberg terminal. I feel like Joe shares more screenshots of that than than you do probably. But where do you look for signal in a world where everybody is conflicted in a different way?
Speaker 2:Right? Like some people are, you know, fund some of the loudest people of the last week are fund managers who have big positions on the line and everybody's got some conflicts, but I'm curious how you try to sort of like see through all the noise.
Speaker 6:Both Joe and I are glued to the Bloomberg terminals and Twitter x interfaces at all times. One of the things I've kind of enjoyed doing over the past week is just, basically looking at what the hosts of the All In podcast are saying online That's fantastic. And then assuming that the exact opposite is gonna happen. So, you know, we had David Sachs, for instance, talk about, like, oh, the crash is over. Then we saw stocks plunge again.
Speaker 6:Mhmm. We saw Chamath. He was he was very much in favor of the tariffs. He was kinda cheering them on. Mhmm.
Speaker 6:And he was also criticizing stock investors who were, you know, complaining about their losses. I think he had a David LaChapelle quote basically saying to, you know, shut up about those losses. Yeah. And then at the same time, he starts talking about how he's buying, credit risk credit risk insurance through CDS. So effectively betting against corporate America.
Speaker 6:At the same time, he's talking about, like, how good these tariffs are gonna be.
Speaker 1:Yeah. How do you think about reading into the the insider commentary that's happening? There's there there is that take that it's like, oh, like, they're wrong and you do the opposite. But at the same time, like, proximity to power is a valuable source of information that you have to imagine that there's real information that's being disseminated even if it's just like, oh, this is the vibe and and and I'm passing that along. How do you balance those two things?
Speaker 6:Yeah. I think you're absolutely right. Like, VCs are very good at interpreting the vibes. In fact, I remember we had Jason Kallikanis on the show a few years ago. And one of the important things we learned from him is that the emphasis on the vibe shift.
Speaker 6:So, you know, back in 2020, a lot of technology companies made money hand over fist, but a a lot of them didn't. Right? And and the criticism was, if you cannot make money in this extraordinary time period when rates are really low and people are scrambling for all these different tech services because they're stuck at home, then there's a real problem with the business model. That was like that was one of the narratives, but the point Jason made was that some of this made sense because investors at that time, they were not demanding that companies actually make money. Right?
Speaker 6:They were very satisfied if companies were just spending to grow their market share. So I think that's really interesting and, you know, something to watch. Like, what are investors actually gonna start asking for here?
Speaker 1:Sorry.
Speaker 2:No. I had a I'm curious. So we we spent the beginning of the show talking about Apple specifically in the position that at, you know, Apple basically has like a China problem and that like, you know, if your supply chain is dependent on China and China invades Taiwan at some point, like you're probably not gonna get, certainly not get as many iPhones or components out of there. But then they also have a Trump problem and that they're just sort of like probably also internally refreshing truth social, you know, wondering what what Trump's gonna do to their business But Bill Ackman had a post, this was right around when we started the call. He said, time is not China's friend.
Speaker 2:Every US company that sources products in China is in the process of finding alternative suppliers. Supply chains are time consuming and can be expensive and challenging to move but once they're moved, are sticky TikTok. I look at this and I'm like, if we have a three month pause on tariffs and you know, the Chinese tariffs are still happening like, sure, you know, it's hard for me to see, you know, for for these big multinational firms like Apple or Nike, it's not like like, yes, they're starting to make moves but I'm not sure that of course, time isn't their friend but I I I don't know. I'm not sure I I'd sort of broadly agree with this take yet. I I'm curious how how how you think Apple should just be like responding to this in general?
Speaker 2:Because it feels like it's gonna be this sort of like dark clouds, you know, over the the sort of share price for basically potentially a decade, right? The sort of big China problem.
Speaker 6:Yeah. So a couple things on the China problem. So number one, the ninety day pause on tariffs on pretty much every country except China
Speaker 2:Yep.
Speaker 6:Opens up a pretty big window for companies to actually start arbitraging, you know, manufacturing costs between China and the rest of the world. We saw that in the first round of Trump tariffs back in 2018. A lot of Chinese production just moved across the border to Vietnam or it moved Mexico and effectively, you know, these were Chinese goods that were just being shipped somewhere else before they were shipped into America in order to avoid the tariffs. That's a real possibility now, especially if Trump sticks with those higher rates on tariffs, the ones he threatened earlier today. And then the other thing I would say on China, you know, the the thing to remember is China is in a really interesting place right now and obviously so is The US.
Speaker 6:The Chinese economy has been slowing and as part of an effort to reverse that, policymakers are really trying to to revamp the whole structure of the system and increase consumption domestically. They want people within China to be buying more goods. At the same time, The US seems to not want people to buy a lot of goods or at least not foreign goods, And we're all about manufacturing. The the roles have reversed. Right?
Speaker 6:The The US wants to be a manufacturing powerhouse, and China wants to be a consumption powerhouse. It's very weird in many ways. But the big question is gonna be, like, how successful is China in transforming its economy? Because if it manages to do that, it it never really has before. But if it manages to do that this time, that could be a pretty decent buffer for, you know, some of the the economic impact.
Speaker 1:Yeah. The grass is always greener on the other side, I guess. I wanna talk about the penguins. You know, I saw that there there are tariffs on the Penguin Island. Everyone was laughing at it.
Speaker 1:But it it seems like, you know, entrepreneurs are so enterprising that if I needed to do final assembly on some penguin inhabited island to avoid a 200% tariff on my Chinese good, like, there's an economic equation where I would actually do that. Was it that crazy, or do you think there's some theory to the penguin island getting tariffed?
Speaker 6:You're gonna ask the penguins to put together your your iPhones?
Speaker 1:I mean, probably, like, bring in A penguin bike. And set up a a basic assembly. I mean, it like, it has a high cost because you gotta get there and get back. But at a certain point, it maybe makes sense. I don't know.
Speaker 1:Is it completely crazy?
Speaker 6:I mean, look. I think moving production around is definitely a possibility. Are we going to move it to tiny islands? Somehow, I doubt it. And this kind of like this opens up the question about why The US is doing this in the first place.
Speaker 6:So for instance, one of the tariffs that Trump unveiled last week was I think it was like a 30% reciprocal tariff on the island of Naru.
Speaker 1:Yeah.
Speaker 6:Like, is a tiny island. It primarily exports like pig meat and sausages to The US, like a million dollars of pig meat a year. So what exactly do we wanna get from an, you know, a place like Naru? I I don't think they're gonna be buying Ford cars when they have, like, basically 12 miles worth of road.
Speaker 1:Yeah. I wanna talk about, TikTok a little bit. It's it's been odd to me that the tick the progress on any any news around TikTok has been so slow, and yet the tariffs have been so fast and aggressive. Is there some underlying thesis there? Is TikTok one of the chips in a larger discussion?
Speaker 1:Or do you think it's just like, it's just low priority relative to everything else?
Speaker 6:And I really don't know. It's it's very hard for me to tell what the administration is prioritizing
Speaker 1:Mhmm.
Speaker 6:At the moment. And I gotta say, you know, on the same day we saw Trump make this huge announcement, Howard Lutnick said it was one of the most important truth social posts ever written. The same time he announced the ninety day pause, he also signed an executive order to increase water pressure in showers.
Speaker 1:Oh, yeah.
Speaker 6:Like, this actually happened, you know, he he signed the order. There are stories out there where he's saying no longer will American showers be be weak with low water pressure. I mean, I don't know. With everything going on in trade and markets, I I might not take the time to to fight against low water pressure, but, you know, the president is idiosyncratic in that way.
Speaker 1:He loves a good headline. He loves starting a a new cycle. I think if it doesn't happen in a single day, it's a failure.
Speaker 2:He's like trying to distract the Panikins by giving them, you know, know, more water pressure. That's his strategy, maybe.
Speaker 1:Yeah. Yeah. I mean, so so, I mean, you've obviously been following this very closely. We'll we'll let you go in, two minutes. But, just general, like, predictions for where this goes or how people should be thinking about this more holistically, because if this is what it's gonna be like for the next four years, it's gonna be, full employment for us, but a lot of chaos for everyone else that's maybe listening.
Speaker 1:Where do you think this goes? And and what what are your big takeaways from from the last week?
Speaker 6:Yeah. Content for us but bad news for a lot of other people for sure. I mean, think it goes back to that uncertainty element. So the first thing you learn in financial markets is investors hate uncertainty. Mhmm.
Speaker 6:What we've seen over the past week has been in many ways unprecedented. Like, a single man, the president, controlling this entire narrative around trade. We've seen fake headlines that have had a really big impact on markets. The reason they're able to have such a big impact on markets is because investors are hanging on every single word from the president. And so if they think the president has said, oh, there's a ninety day pause, they react to it.
Speaker 6:Right? That is really weird where we have this, like, single source of information that the market is focused on. And that's not going away. Like, the threat of the tariff, as I mentioned, like, the the threat the tariff threat toothpaste not going back in the tube. And I think even if we see countries really rush to strike some trade deals, which they might they might actually do, the threat of tariffs is gonna be hanging around in the background for the next four years.
Speaker 6:People are gonna be wondering about what exactly America is trying to do here. It seems very clear that Trump thinks, you know, America's special status in the financial system, the dollar's status as a reserve currency is a burden rather than exorbitant privilege. A lot of people would say America benefits from this. Trump doesn't seem to see it that way. I doubt he's gonna change that particular world view over the next four years.
Speaker 6:But you know, maybe he starts listening to some advisors and he tones things down a bit. But I I really think the uncertainty is is here to stay.
Speaker 1:For sure. Well, let's hope we get some certainty.
Speaker 2:Prediction. More uncertainty.
Speaker 1:More uncertainty.
Speaker 2:I think that's a we can lean we can lean on we can lean on that at least.
Speaker 1:That is certain. Yeah. Well, thanks so much for joining us. Thank you
Speaker 2:for joining.
Speaker 1:This fun conversation.
Speaker 6:Thank you. It was fun.
Speaker 1:Hopping on. Have a great
Speaker 2:rest of Good luck with everything. We'll be following Cheers.
Speaker 1:We'll talk to later. Cheers. Bye. And next up, we have Bass Power coming into the studio. We got Justin Lopez from Bass Power announcing a massive round.
Speaker 2:Get the size gun I
Speaker 1:had no idea how big this round was. He told me he was announcing like a series b and I assumed, oh, series b. 20,000,000, 30 million. It's 200,000,000. It's 200,000,000.
Speaker 1:He's gonna break it down for us, explaining what they're gonna do. Let's read through their announcement, while we wait for Justin to join. He says, we're excited to now announce that Base Power has raised $200,000,000 in series b funding co led by Addition, Andreessen, Lightspeed, Valor with support from Thrive Capital, Altimeter, Trust Ventures, and Terrain Capital. Addition's Lee Fixel joins the board alongside Antonio Gracias of Valor Equity Partners. What a stacked board, and we'll have to ask Justin about it.
Speaker 1:He's here in the studio. Welcome to the show, Justin. How are doing? Congratulations.
Speaker 2:Congratulations. Going on?
Speaker 1:Absolutely phenomenal series b announcement. How are you doing today? Can you hear us?
Speaker 2:He's locked in.
Speaker 1:He's locked in. He's building. He's putting the 200,000,000 to work already. How are doing? Nothing?
Speaker 1:I'll keep reading. Power demand is soaring, and the grid must evolve to meet the challenge. We're accelerating an energy abundant future through distributed battery storage and investing in American manufacturing capabilities needed to make it real. Another company that's focused on American manufacturing. We've talked to a few of them, all major beneficiaries of the tariff chaos to some degree, although I'm sure that there's deeper supply chain stuff that we'll get into Yep.
Speaker 1:And try and understand, where all that goes. In under a year since launching, Base has become fastest growing one of the fastest growing battery storage developers in The US. More importantly, we've assembled a talent dense team of engineers and operators all focused on modernizing the grid to make more power more reliable and affordable. And let's hear from Justin. I believe he's in the studio.
Speaker 1:How are doing, Justin?
Speaker 5:Good. Good. Thanks for having me. Really appreciate it, guys.
Speaker 2:Yeah. No. It's great to have you on. Big day for you and the whole team. Yep.
Speaker 2:Congratulations. You've been, you know, following your journey for a while now, and seems like the momentum is just building.
Speaker 1:Yeah. Can can you give us, a brief introduction on the company? I I I actually don't know the prehistory. I'd love to know kind of how you started the company, how you got to this moment. Seems like a quick ramp to a $200,000,000 fundraise.
Speaker 1:Some stuff must be working really well, so break it down.
Speaker 5:Certainly. Yeah. So I guess, started started the company about two years ago, launched the product, just a little under a year ago. Now, let me tell you tell you what we do. So so we, we are developing distributed energy storage for the grid with the ultimate mission to fix the grid in The US.
Speaker 5:I think if you look at the sort of modern energy industry and sort of power companies there within, you'll see that there's a lot of money and smart people and technology going into making more electricity generation. You guys report on it a lot, SMRs and solar and wind and oil and gas and such. And the same thing on the consumption side, more EVs, more heat pumps, and better consumption and cleaner consumption all around. But the grid is the thing that connects those two. Mhmm.
Speaker 5:And that has been sort of woefully underinvested in from a technology and operation standpoint. And so that's what we're really we're here to do is to is to ultimately fix the grid. We're we're starting today or or about a year ago with our first product is distributed energy storage. So what that means is we install batteries on homes that we own and we operate and we use to support the the power grid. We're based here in Austin, Texas, and we have operations in Austin, Houston, and Dallas and San Antonio, the kind of the the Texas Triangle.
Speaker 5:And that's the business today. We're today, we're announcing the the series b fundraise, as you mentioned, and using that to sort of fuel the next next stage of growth, in and out of Texas.
Speaker 1:Can you talk to me a little bit about what this means for the grid long term? Is this something where, like, it reduces the variable load on the grid and we can train more AI models in the data center or something? Like like, how does this play out? Like like, how bad are the problems? Are we just are we fighting, like, the basic fires, or are we dreaming of, like, a utopia here?
Speaker 5:Yeah. So I'd say we're we're we're still in the, at from the grid writ large, we're still in the fight fight the basic fire. So so here here's why here's why batteries and, in particular, distributed batteries are are are are are good for the grid and Mhmm. Help add capacity. If you look at any sort of average, you know, wire going through the grid, whether it's on the transmission side, sort of think the stick built steel structures on the side of the highway
Speaker 1:Oh, yeah.
Speaker 5:Or the distribution grid, think the wooden poles in your neighborhood.
Speaker 1:Mhmm.
Speaker 5:Any one of those lines is heavily underutilized with respect to its capacity. Mhmm. So let's say that a, you know, a line can carry a hundred units of energy at any given given moment units of power. On average, the that line is used on the distribution side 20 or 30, at you know, with 20 or 30 units of energy. So it's heavily underutilized.
Speaker 5:But the problem is that certain times of the year, think August 15 at 6PM when everybody came home and turned on their air conditioner and plugged in their AV and turned on their oven, that line is is at a %.
Speaker 1:Mhmm.
Speaker 5:And so the grid has to be built for the peak load. It doesn't it's not built for the average load. It's built for for the peak load. And so what distributed batteries allow you to do is reduce those peaks in specific areas. You can you can choose where those areas are.
Speaker 5:Our software does that. And therefore, utilize the existing grid infrastructure for far more load. So that's AI data centers, as you said, that's more EVs, that's more electrification of heavy industry and such.
Speaker 2:Can you talk about the decision to start in Texas? I have some ideas around it and then I wanna ask you about what's going on with the California utility providers. Apparently, I live in Malibu and apparently like our local utility provider is in like an adversarial relationship with like the city government. They're basically just like fighting all the time. So what that means, just turn off the power if there's any any ever any issues.
Speaker 2:But maybe let's start why, you know, with with kind of why you guys got started in Texas and then where you're thinking of expanding to and then and then maybe and then really kinda like that dynamic between cities, utilities, and consumers.
Speaker 5:Certainly. So the reason we started in Texas was much the obvious place to build to start building a business like this, so there's a few reasons. One is folks might know this. Texas is actually its own grid. So there are three grids in The US.
Speaker 5:There's West, there's East, and then there's Texas. Texas is basically an island from a from a grid standpoint. And so what that simply means is you can't borrow from your neighbors when you need more, and you can't share with your neighbors when you have too much. And so that leads to a lot of volatility on the grid where you have sort of supply demand crunches for lack of a better term. Additionally, there's a ton of renewables in the grid in Texas.
Speaker 5:It's a little bit pretend perhaps counterintuitive, but there's more solar and wind on the grid in Texas than in the grid in California or anywhere else in The US. And so that also drives the need to store energy when it's the sun's not shining or the wind's not blowing. Interesting. Furthermore, in Texas, there's a sort of regulatory aspect. And so our first go to market motion is it's in is what's in called the deregulated portion of the the the the grid.
Speaker 5:All that means by the way, there's a ton of regulation. This does not mean it's the wild west. What it means is that you can sell power to people. So if you're a homeowner in Houston or Dallas or North Austin or other parts of the state, you not only can, but you have to choose who you buy your power from. So if you're in Malibu, you're probably your utility provider is probably LADWP or maybe SoCal Edison.
Speaker 5:And if you want electricity at your house, you got one option, the only only one game in town. Here in Texas, companies like us can start and become a utility provider. And what that means is that we buy electricity from the generators. We pay the poles and wires companies to get it to the house, and then we sell it to the house at retail. And that allows us to monetize the value of the batteries behind the meter at the customer's home.
Speaker 5:So, again, we own and operate the batteries as opposed to sell them outright to customers. And so what that means is that customers don't have to shell out tens of thousands of dollars to go buy a battery like they would if they went and bought a a competitive product or they bought a generator.
Speaker 1:Mhmm.
Speaker 5:And so that's sort of the other sort of fundamental reason why why Texas. Now you also asked about cities and utilities and such. This is a we could spend hours on this topic, but but very simply, there are a handful of some utilities in the in the country like LAWP, which I think is your utility, is actually owned by the government, by the city of city of Los Angeles. It is a government run utility. Funny enough, actually, here in Austin, Austin Energy owns is is the utility that's owned by the city of Austin.
Speaker 5:In other parts of the country, like in Orange County where I used to live in in Southern California, that's a private company. That's a company called SoCal Edison. They're publicly traded. And so you have this weird dynamic between cities and utilities that can result in frictions around technical standards and permitting and all this and shutting off power when there's too much wind and all this other stuff. And it's I think the thing that that you that you guys maybe you're listening to this in Southern California is different in the Detroit area where I grew up.
Speaker 5:It's different in, you know, Florida, etcetera. It's a it's kind of a very state by state thing, and the state governments typically have a lot of authority and control over how the energy markets are run and how the utilities are regulated.
Speaker 2:How are you guys reacting to the tariffs? There's a lot of I mean, the the the only thing you can lean on right now is uncertainty. We don't really know what's what's going on. I imagine there's businesses in the energy space and in solar that that are, you know, specifically like low margin, completely dependent on on China and maybe aren't even viable at this point. Base power is like, sort of got, I think, a more sophisticated model.
Speaker 2:But I'm curious what your guys' reaction, how you're thinking about it, and then kind of the broader industry, how you think people are reacting to these changes.
Speaker 5:Yeah. Certainly. So, you know, as part of our series b announcement, one of the one of the big things that comes with that is us building a factory here here here in here in Austin. And so that very much puts the supply chain and the and the manufacturing in in our hands. We we already do some assembly.
Speaker 5:This will further that and will will will really mean that we assemble the whole the whole unit, both the battery itself and all of the power electronics that that that are built on top of it.
Speaker 7:Today, the the the tariffs are certainly
Speaker 5:uncertain as you as as you mentioned. And the battery cells, like the individual, you know, things that modules that sit inside of the battery, those those are typically made in China, and we are working aggressively to to to bring that supply chain here to The US, and
Speaker 3:and and we're we're we're we're
Speaker 5:very close to doing that. But do the tariffs affect affect the industry? Certainly. A lot of energy products, not you know, even in oil and gas come from manufactured goods in in in China and around the world.
Speaker 1:Yeah. What was your take on the Skydio news that, their battery supplier was sanctioned or something, and they they they kind of lost that aspect of their supply chain? Seemed like a very rough go. Now you focused on the consumer market, so probably a little bit less. But even Skydio, I don't know that they have a big DOD business, and so it was a weird shock to the system.
Speaker 5:Yeah. Certainly. I I I don't profess to have a have a, you know, ton of insight into them.
Speaker 1:Sure.
Speaker 5:In particular, having, you know, spent a lot of time at at Androle, though I can say there are are a number of, you know, sort of commoditized products, batteries more or one of
Speaker 1:them Mhmm.
Speaker 5:That are the supply chain is primarily in Asia or in or or in China. And us and a lot of others are are working quite quite aggressively to bring that here to The US or at a minimum to more more friendly friendly nations. Now given that you spent time batteries are go ahead. Sorry.
Speaker 1:Just given that given that you spent time at Andoril, can you walk me through the decision to go consumer first? You could imagine that someone's like, oh, I'm building battery packs, yep, I'm going DOD with this. It's a defense tech company. We've seen that even with some, like, nuclear energy companies where they've said, hey. Yeah.
Speaker 1:What we will sell to oil and gas companies, but, this is gonna be, you know, a power unit that's dropped on a military base instead of a instead of a diesel generator. Is that on the road map, or or did do you think that, like, the real opportunity is just in consumer? And how'd you get there?
Speaker 5:Yeah. So, you know, I don't think we looked at it from, like, is it b to b, b to c, b to g? Like, that that wasn't really the the the sort of initial thinking. It's more about if you look at the grid writ large in The US or or even in a more microcosm like it is here in Texas, where are the where's the actual problem to solve?
Speaker 1:Mhmm.
Speaker 5:And a majority of the load on the grid comes from residential single family homes, which is where where we're starting. And so we more looked at it from that perspective rather than, like, what is the sort of, you know, hypothetical best go go to market. On the consumer side, also, it allows allowed us to build a build a brand. So we're very focused on, the brand of base power, the resiliency and reliability that it adds to homeowners with the backup power, and that can carry itself into a more b to b to b model. As we as we grow, we're we're moving towards working with the regulated utilities.
Speaker 5:So some so utility like LADWP, like SoCal Edison, like DTE Energy where I grew up in in, again, in in Michigan. That's a different business model, but it's the same technology stack. In that case, we go deploy a battery on that utilities on a on a home that that utility serves. We don't sell power to the to the homeowner, but that utility actually pays us for access to that battery. It's like a, basically, a distributed power plant in a in a box, so to speak.
Speaker 5:Interesting. But that is a, not b two g, but sort of more b two b motion that we're that we're starting, and we've actually, already announced our first partnership here with a regulated utility starting in in in Texas, near San Antonio.
Speaker 1:Can you talk a little bit about the actual customer experience, on the consumer side? If you is this, is it like a prepper argument? I just don't wanna or is it purely economic? Who's the ideal customer? What's motivating them?
Speaker 1:And then walk me through the actual, like, installation process. Is this something I need to get permits for? Does it take months? Like, how does all that work? Where does it sit in my house?
Speaker 1:Is it in my garage or basement or outside? Is it huge? Is is it small? I wanna know everything.
Speaker 5:Yeah. Yeah. All all all great questions. So in terms of the I ideal customer, it's really a very wide swath of of today single family homeowners in Texas and in the future renters and small small commercial business owners. Our our view is that is that batteries and generators have been sold as a luxury good previously, that basically rich people have put these on their homes so that they don't have power outages.
Speaker 5:And you'll see a lot of these in wealthier neighborhoods and such. And our view is that the battery really should support the grid, and and it also support the home and the power outage, but really it should be a grid asset. And so, again, by this business model whereby we own we own the battery, we don't charge the customer for the capital cost of the battery, That really opens up the market. And so we have
Speaker 1:sort of
Speaker 5:first time homebuyers. We have elderly folks. We have everybody in between. Certainly, there are some people that are thinking more about their energy resiliency and sort of the maybe proper mindset that that you're referring to, but that's definitely not not all of our customers. We've got now thousands of customers that are, again, from all all all all walks of life.
Speaker 5:In terms of the experience, this is an area we put a lot of a lot of focus into and a lot of our software stack is built around. And we think about it from start to finish like a factory. My background's in manufacturing, and so the so the concept of having a customer sort of start at the beginning of the line, which is put their information in on the website, and end on the end of the line with the battery installed, operating, and providing the backup and supporting the grid. And every step in between is this sort of regimented, highly documented, and relatively automated process. What that actually looks like in practice is a customer puts in their information.
Speaker 7:They send us a handful
Speaker 5:of photos of the side of their home, basically, to make sure there's a place for us to put the battery. Then we go and handle all of the rest. So some cities require permits, some do not. We handle all of that. We also work with the utility to do the what's called the interconnection.
Speaker 5:Again, it's kind of like another permit. And then we have our own installers come out and install the battery that typically takes a few hours. It's installed on the side of the home right next to your meter or very close to your electric meter. And you can see on our website, basepowercompany.com, but it looks like kind of like an air conditioning unit, roughly. It's a white box that's, about two and a half feet cube, roughly, and that supports the home for, you know, a day or more depending on usage during an outage.
Speaker 2:Mhmm. How how much has, you know, your time at SpaceX and Andoril influenced, like, just the way that you guys operate? Obviously, you know, 10 ago, investors, you know, might, you know, shied away from these sort of like businesses that are capital intensive and just sort of like logistics intensive, but you went and worked at two companies that have done this. And and basically set the bar of like how quickly you can spin up these sort of like real world operations. But I'm I'm curious, like, the kind of key learnings from from both companies.
Speaker 5:Yeah. Feel extremely fortunate to have worked for excellent leaders at at at at both companies and have learned a tremendous amount. Yeah. I think you're right. Look.
Speaker 5:The I mean, you guys you guys talk a lot about this. There's a large number of startups in the sort of hardware, physical, real world space funded by venture capital, and there was not, you know, five, ten years ago in large large part thanks to companies like SpaceX and.
Speaker 7:You know, I
Speaker 5:think the the big learnings from from those two companies are a combination of operational, technical, and cultural, maybe starting with the cultural. You've you've likely heard heard this, but there's you know, the the the cultures at SpaceX and Anerole both were extremely high ownership. They had a really high talent bar. They're very execution and operations focused, especially in the areas that I was working in, which are more manufacturing production operations. Execution and how do we get how do we produce more units, more drones in and more rockets at SpaceX?
Speaker 5:How do we install more batteries here at base power? There's a lot of similarities on the cult the culture that you sort of build around that and being very data driven and metrics focused. And how do we get dollars per kilowatt hour down, kilowatt hours per day up? And we're, like, laser focused as a company on that. So I'd say that's some of the cultural learnings.
Speaker 5:On the technical and operational, right, we're, we're we're taking a pretty vertically integrated approach. Right? So we're developing the hardware. We're writing all the software that runs on that hardware, all the software that manages the operational stack that I outlined from the customer journey, we're directly interface And so both of those companies take a very vertically integrated approach, and and they're able to drive cost down over time because because they've been able to do that. And so that's something we're also lessons that, you know, I I learned and that others that that joined me at the company here who have worked at SpaceX and Adderall learned from both of those companies as well as Tesla, Ramp, Apple, etcetera.
Speaker 1:That's awesome. Fantastic. Well, I I I think we'll let you go. I'm sure you got a busy day with the launch. Thanks so much for joining We appreciate you taking the time out of your business.
Speaker 2:Yeah. You're our new energy official energy correspondent. So get get ready to regular Yeah.
Speaker 1:Yeah. We'll have you on again soon.
Speaker 2:Happy to
Speaker 5:report happy to report live from the field guys. Really appreciate it.
Speaker 1:Love it. Awesome. Talk to you soon.
Speaker 2:Congrats again to the team. Bye. See you.
Speaker 1:You know, if you're managing a wander, maybe you should throw a base power on that. Do it. Great idea. Love your home. Go to wander.com.
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Speaker 1:Wander. It's a vacation home, but better. We got some other news from Lair Hippo. They launched their, their next fund. This is their ninth seed fund.
Speaker 1:They've been in the game for quite a long time. 200,000,000 new capital. They'll invest in pre seed and seed stage companies. This fund represents an increase from the last fund, which was a hundred and 40,000,000 committed to, commit continued commitment to supporting the next generation of founders while maintaining a focus in approach. This fund also includes several dozen LH portfolio founders as limited partners.
Speaker 1:Love it. Taking the money from LH. Now they're putting the money back in. LH. One hand wash the You love to see it.
Speaker 1:Yeah. It's great. I love it.
Speaker 2:That might that must be one of your favorite phrases.
Speaker 1:Oh, it's the best. It's the best. So, yeah, go raise some money. Go raise a pre seed from Lair Hip Out and then Receive. And then yeah.
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Speaker 2:Our first ad quick campaign
Speaker 1:is going out. It's going out. Soon. We're not gonna leak the strategy. We're still debating it exactly what the image will be, but you can expect to see it in the timeline.
Speaker 2:We're gonna be spamming that thing. We have been this has been in the works for a while, but and in close collaboration with the Adquick team. So very, very excited.
Speaker 1:Yeah. I like this this post. We have since we have a couple minutes before our next guest, let's go to Matthew Prince, the founder CEO of Cloudflare. He says, I'm playing everyone's favorite party game. Guess the Trump administration strategy.
Speaker 1:Like most of you, I have no inside information, but that's what makes it fun. Here's my best theory. Some assumptions. First, one, they're not crazy. There is a strategy.
Speaker 1:It doesn't align with conventional economic principles, but there's something they're playing toward. Two, they're not stupid. I know enough of the players involved to know that they're not idiots. They may be making what will turn out to be accurately predicted and to be horrible decisions, but they do have a plan and it's coherent. As part of this, while I think that they, while I think they can bring while they can increase US manufacturing, they don't really believe they can bring everything onshore, so they're not completely naive about that.
Speaker 1:Three, they're intentionally being opaque as to what the real plan is. Trump fashions himself a negotiator, holding his cards close to his vest, even lying about what cards he has as part of the game, part of the deal. Four, they're not just in it for themselves. I get that this has become nonconventional wisdom, but I'm going to assume that this that that, for this, that the goal isn't merely grift. Even if you believe it is, suggest that's an easy out to thinking through what may be more complex motivations.
Speaker 1:And number five, which we are starting to see today, China is the real enemy. China has done some things in the last two years that have made it even that may have made even the China dubs in the last administration into hawks. Again, know there's lots of media saying Trump wants to kiss up to Xi Jinping, but having spent enough time with folks in this and the last administration, they really worry about China morning, afternoon, and all night. So with this context, I posit the strategy is entirely destabilized and ultimately decapitate China. If that's right, you could just impose tariffs on China, but China has lots of export markets, so goods will flow through those.
Speaker 1:What if instead you impose tariffs on everyone? While China and The US have similar GDPs, China is much more dependent on exports. That means while the countries of the world like cheap Chinese exports, they don't depend on the Chinese market for their exports yet. China has actually been on a nationalistic spree recently, so foreign brands are more out of favor. We saw this with Tesla and some of the luxury goods manufacturers declining in sales in China, meaning they're an even less interesting market to sell to.
Speaker 1:The US, on the other hand, is the world's largest buying market. We are the consumers to the world. If we stop buying, everyone suffers. That means nearly everyone needs to come to the table with The US if if there are universal tariffs. The US is also unique in that it is among the only country, the only countries that that don't need to import anything.
Speaker 1:Don't get me wrong. We want to import iPhones and PlayStations and French wine and German cars, but we don't need oil or food or water or most of the other raw materials to make sure people stay alive. So The US will hurt under a high tariff regime, but it won't collapse. Some manufacturing will move back onshore, but the biggest thing is every country needs to negotiate with The US. So what does The US ask for?
Speaker 1:I'm sure there's a bunch of nits with every country, but what what if the big ask is it's us or them? You either trade with The United States or you trade with China, but trading with both isn't acceptable anymore. For some countries, Vietnam, Indonesia, Philippines, the promise is to be the next China, but this time under more careful rules dictated by The United States. For most of the rest of the world, there are already massive net importers from China forced to make a choice between selling to China or selling to The US. I guess that most would pick The US.
Speaker 1:German automakers are terrified of BYD, and the Italians and French haven't proven they can sell wine or cheese to China at any real volume. So what's China's response? It's tricky because they've preached self sufficiency and internal focus. But if the world order suddenly aligns against them, what do they do? I have no idea if this is the Trump administration's actual plan, but it is the only thing I've come up with that passes the sniff test.
Speaker 1:What do you think, Jordy?
Speaker 2:Yeah. I mean, this is already somewhat out of date, but in the sense that where where I think it could make sense is that Trump is basically saying, you know, ninety you basically have ninety days to like recommit Yep. To aligning with The United States. Otherwise, the tariffs are back on for you. Yep.
Speaker 2:And, yeah, I think I I like these sort of like thoughtful attempts at analyzing what's going on.
Speaker 3:Yep.
Speaker 2:I think the I think Trump is happy for people to believe that he's crazy Mhmm. Because it sort of plays into his strategy but I don't necessarily believe that they're, you know, everybody involved is completely crazy.
Speaker 1:Yep.
Speaker 2:And I believe that they're, they they they aren't very Yep. Clearly being as intentional as they, you know, can be. But
Speaker 1:Yeah. I was I was this is
Speaker 2:I'm hoping that I'm hoping that that candidly we can shift back to talks, you know, SaaS espionage and
Speaker 1:Yes. Yes. I mean, seriously. I I do get a lot more energy from deep diving llama than tariffs. Yeah.
Speaker 1:Although this is a very important story, so we are covering it because this is the technology business production network? Programming network. Programming network. TVPN. Technology and business is our focus, but politics creeps in there every once in a while.
Speaker 1:But as you know, we never talk about politics. Never. But I but I I was thinking about in terms of, like, geopolitics, there was this, you know, alignment of, like, you're either with China or you're with The US, and China has had the Belt and Road strategy, and they've kind of brought like when I was doing I was interning at a venture capital fund that was investing in Africa and India. And a lot of the deals like on the on the ground level, the government would kind of have to decide like, do we want to align with an American company or a Chinese company to do this like infrastructure build out. Right?
Speaker 1:Are we going with, Halliburton or a Chinese or or some Chinese company? And, what one of the things that leaked in the cable gate, news was, like, on the ground, a lot of American embassies were were highlighting that, developing nations were more inclined to work with China because they felt like the government was more of a backstop. Whereas in The US, if that if if you had a deal with an American company and they didn't come through and they went bankrupt, there wasn't gonna be you weren't just gonna ask America to, hey. Hey. The company that we were doing business with is an American company and they didn't come through.
Speaker 1:Can you come fix it? But China would. And that was kind of the Belt and Road strategy, a lot of debt stuff. And so you can kind of imagine that there's a new order kind of building around China aligned with Russia and Iran and some African nations and some other nations in in Asia. And then on the flip side, you have America, the West, and that kind of bridges us into our next discussion.
Speaker 1:I'm sure we won't get too into, geopolitics, but we are joined by, someone from Palantir. So we have Akshay here. Please, welcome to the stream. Thanks so much for joining. How are doing today?
Speaker 7:I'm I'm doing great. Hopefully, you guys can hear me okay.
Speaker 1:Yeah. You sound great. Look great. Everything's fantastic. Thank you.
Speaker 1:Great to
Speaker 7:play. Plant in the background, of course. Great. No. It's good to be with you guys.
Speaker 7:My name's Akshay. Yeah. I'm the chief architect of Palantir. I've been here for about twelve and a half years, lived a lot of lives. Things are still moving super fast, but I'm excited kinda given where you guys are taking the discussion and everything you guys have been talking about throughout the the day and morning as well.
Speaker 7:So
Speaker 1:Yeah. Yeah. I mean, I I I don't wanna go too into the whole thesis of Palantir in the West, but maybe we could start with, like, what you're working on today and and and and, really, what does Palantir actually do? I'm I'm kidding. I'm kidding.
Speaker 7:Is No.
Speaker 1:Is it is a meme. Right? How do describe it?
Speaker 7:And I think it's it's funny because it's been this, in some ways, it's been so consistent in intention,
Speaker 1:but I
Speaker 7:think the way the technology has evolved has been because, like, we had to kinda keep pushing the frontier of what we what we were limited by, what we built originally, and what we had to kinda fulfill. And long winded way of saying, like, it it was always about how do we help people in operational context make better decisions. Mhmm. So it was very simple early on of, like, these are people who are working in counterterrorism and specific defense workflows, and it's like, they need to be able to do their jobs better to avoid roadside bombs, to be able to uncover intelligence networks. Like, these are the actions, the decisions they're taking.
Speaker 7:And, like, know, the the cheeky kinda naive first version of that was like, can't we build, like, a fine terrorist button or do some cool, like, algorithmic, you know, kind of analysis to do this? And it's like, well, you first need to build, like, the the dirty, dirty data integration plumbing to be able to then enable people do the interesting stuff. Right? So that's the whole data integration bringing together disparate systems piece of Palantir. And then it's like the requirements keep changing on you.
Speaker 7:Right? Because it's like, okay. That works for the first intelligence workflows. What about the next set? What about then going into warfighting, which is much more kinetic, much more real time?
Speaker 7:And so you have to keep building new parts of the stack to be able to enable different types of decision making. And then there's kind of the whole commercial journey, right, which is like Mhmm. Okay. If we think about all of these pieces of technology being able to reconcile complex systems, enable decision makers, it's like at BP, those were now petroleum engineers.
Speaker 1:Mhmm.
Speaker 7:Or at Airbus, those were, like, people working on the a three fifty ramp up. And it's, like, kind of a different problem set, different nouns and verbs, but kind of the same kind of OODA loop of, like, how do we get people to be able to make decisions better in these contexts? And so then you see kind of more layers of the platform and the architecture evolving to kinda meet all of these different needs. And it's like I joke it's kinda like building something through back propagation. It's like you keep doing this forward deployed approach, seeing what doesn't work, seeing where what you built isn't sufficient, and having to understand kind of from the coalface what to build.
Speaker 2:Can you talk about the the the potential trap? Because you you guys like made the sort of forward deployed model and you know, I think startups now can kind of like look at your you guys and your success and be like, okay, we're gonna do the same thing. But I don't necessarily think that's always gonna end up in the same place. I'm curious how you thought about kind of, you know, as you were rolling it out, the sort of traps, what you wanted to avoid and how to make sure that, you know, you were actually building a, you know, real software business behind the scenes.
Speaker 7:Totally. And, know, I could make it sound like it was all, you know, predestined and and perfectly planned out, which it certainly was not. But I think, like, the funny thing to me also is that it's become such a meme because it's like, it was the ugliest of ducklings back in, the mid two thousand mid twenty tens where it was like, you guys are working for the government, deploying and doing what? And it's like, you know, it just was the complete antipode of, like, the consumer b to b SaaS kinda or b to b SaaS kinda thing that people expected to see. And I think now it's become very in vogue, which, again, is just very bizarre, I think.
Speaker 7:But but to me, it's like, it is, like, I think you're you're intimating here. It's like, it's easy to say you're doing it and just put a label on what somebody might call, like, it's sparkling sales engineering. It's not forward deployed engineering.
Speaker 1:I think
Speaker 7:it was one meme. Right? Yeah. Yeah. And it's like to me, it's like it kinda comes from how the organization is run.
Speaker 7:Like, the first forward deployed engineer was Sham Sankar, right, who's our CTO. And, like, basically, the organization was built around, like, the field has this primacy. It's the primacy of winning and showing up for the outcome. And product has you know, there was Bob McGrew and folks back in the day and a lot of talented folks on both sides now, but there's always this dialectic between, like, field and core. Right?
Speaker 7:And so it's like, as the field is uncovering what needs to be built, like, how is the core responding and how much circulation is there between the two? I think it's very different than the normal construct in Silicon Valley, which if you kinda go up and down the the peninsula here, it's like we have the kinda high priest or the privileged engineers that sit, you know, eating berries in in in Palo Alto or in or in New York. And then if you're like a sales engineer or like a solutions architect, you go into the field, or we delegate that to somebody who's, a consultant. Right?
Speaker 1:Mhmm.
Speaker 7:And, I think that is kind of the inverse model, right, where it's like, if that if you're just relabeling that team as being a forward deployed engineering team, that's not kind of the same thing as saying the way you do product development is kind of front to back. And, like, you have to orient kind of your entire organization around that. And I think to your point, it's like you have to think that there are complexities or worthwhile things to uncover through that method to make it worth it. Right? It's not something that's gonna make sense for maybe, you know, simpler product schemas.
Speaker 1:Yeah. Can you talk a little bit more about the forward deployed engineer? It it in a lot of b to b if you think about, like, the implementation of, like, an ERP or even, like, an email client or email SaaS product like Mailchimp, there are agencies that pop up and effectively act as forward deployed engineers, and maybe they're, like, partners, gold tiers, silver tier, whatever. Can imagine that that doesn't make sense in a security environment. But was that ever evaluated on the commercial side?
Speaker 1:Or is that just completely off
Speaker 7:the table because it's able to kind of, like, have those, like, automations or sorry.
Speaker 1:Specifically, like specifically, like, independent agencies or companies that are building an entire business just around Palantir implementation.
Speaker 7:Yeah. It's interesting because, like, that's now coming to life through alums that we have
Speaker 2:Sure.
Speaker 7:Who have actually gone on to kind of make these kind of, like, more Spartan, I'd say, smaller squads that are Yep. Kind of dedicated consultancies now. Mhmm. I think the joke back in the day was, like, nobody who is a consultant or was external would, like, bother to do this because, like, we're trying to build this plane in midair. We're trying to, like, understand like, your job as an FDE is not just to to service the demand or to implement the use case.
Speaker 7:It's also to figure out what to build. Right? And, like, you are given kind of that creative power to say, like, you now have to spend your your nights, your evenings, you know, the the off time you don't have talking with product about what to build and then showing up the next day or two days later with a new version. And, like, it's much more collaborative with a core engineering org. And I think that's where, like, if if we try to outsource that, I think, but there was always fantasies in the painful moments about, like, we just get other people to do some this stuff.
Speaker 7:Yeah. But it's like the real magic is saying, like, you are all part of that shared engineering core. And it's the same, by the way, like, kinda hiring profile of somebody who's kind of a core dev or somebody who's an FDE. And all the people who are, like, core product leaders now were FDEs before. And so I think that that kind of results in a different kind of profile between the two.
Speaker 1:Yeah. Can you talk a little bit about, where, just some case studies on the commercial side? I remember hearing about the Airbus case study Yeah. Around manufacturing logistics. It it it when when everyone somebody asks, oh, what does Palantir actually do?
Speaker 1:It's very easy to say, like, you have a bunch of parts. You need to know where they are and how much they cost and whether or not they're in stock and all this stuff. But are there other how how are you explaining it to, like, a a non aerospace Fortune 500
Speaker 5:Totally.
Speaker 1:Company today?
Speaker 7:And I think that that very much is the kind of progression over the past couple of years, I think, as the business has really grown. There is, of course, like, I'd call like, the industrial, like, hard I love this stuff. Right? It's, like, it's the new warp speed cohort. It's, like, it's Cyronic.
Speaker 7:It's Andoril. It's Epirus. And they're doing and, like, you like, it's, like, nuts and bolts stuff. But I think what's more subtle and I think what's kind of unifying among all these things is, like, what are we actually doing with the software now, especially with the AI platform, with the GenAI piece? Mhmm.
Speaker 7:It's like you're you're modeling the world. Right? Of course, the other Palantir meme is ontology. They just say ontology to everything. Right?
Speaker 7:It's like, what do we mean by that? It's like, it's it's a shared model of decision making. Yeah. And it's like, you have to model, of course, all the objects and links. Like, it's the it's the underwriters.
Speaker 7:It's the claims. It's the movements across those things. But then it's also all the actions you can take, and it's all the compliance and security requirements around who can take what actions. And then it's, like, the reasoning or the business rules that govern how all of these, like, states can change. Right?
Speaker 7:So it's kind of almost like a digital twin of not just the asset, but the business process. And so in that sense, like, you're seeing a lot of really cool workflows now in hospitals. So, like, Cleveland Clinic, HCA, Tampa General, where it's like they're talking about nurse scheduling. And and what's cool is, like, you have this kind of teaming between human users, like the nurse schedulers, and then AI able to actually be useful in those contexts because you can kinda measure when and how you're injecting the AI. You can put guardrails around what it can do and what it can't do, and it's kind of right there with you in the same context.
Speaker 7:So it's not like this weird black box off to the side where you're like, I hope the AI does something useful, and then if it doesn't, like, I'm just gonna pivot back to doing my other thing. It's this kind of, like, incremental rollout within these existing workflows, staff scheduling Yeah. You know, patient life cycle, things like that. One that's really cool is, AIG recently talked about underwriting and, like, how they're driving automation through underwriting, you know, for their core benches. And, doctor Karp and Dario from Anthropic were on stage with with the CEO, and they were talking about kind of how this incrementally happened by, you know, first modeling the underwriting process in the software and then gradually driving more automation through it.
Speaker 7:So I think domains like that are showing a lot of really interesting and, like, kind of colorful usage outside of what you might typically associate with Palantir.
Speaker 1:Yeah. It must be so funny to be using Palantir in the global war on terror and then as a as, like, a field medic. And then you get your job as, you know, someone in a hospital, and Palantir shows up again. And you're like, yeah. This software defines everything.
Speaker 2:How do you think that just agents in a B2B context are sort of overhyped, underhyped? Has your thinking around them changed at all? I mean, when you guys started the company, agents were just called bots and now Yeah. Now they're they've got a a shiny new name and it's very exciting. But I'm curious how you're you're thinking around sort of the high level concept of agents has changed from, you know, basically over the last decade.
Speaker 7:No. It's it's a really good point, and I think it is interesting to see kind of the nomenclature shift on you over time. And and I think our perspective is there is something, you know, unique and significant about the rise of generative AI, like all the transformer based architectures, what you're seeing, especially with the latest generation of frontier models, as being essentially like a a reasoning engine that can be used in concert with decision making. And so, like, from our perspective, it's like what these agents are showing is the ability to actually creatively be able to deal with that decision graph, with that model of decision making, and then actually provide real horsepower that first augments human users then can kind of slide up to automation. But I think to your point, it's like, how is this not just hype from our perspective is, like, is there an actual story you can tell around?
Speaker 7:Like, it could be 10% useful with maybe the first phase of underwriting, like the exploration phase. And then I can actually have a smooth curve up as I try to drive more agentic behavior through the workflow. I think where we tend to see, like, the hype bounce off of people, especially enterprises at this point in the cycle, especially, is where they're saying you know, when when people are telling them, just trust us. You know? It's just you're just gonna, like, flip a bit.
Speaker 7:It's not gonna be a sliding scale. It's gonna be a bit flip and and hope that it works. Because I think we all know that that's not how it works. And I think what's actually kind of ironic is that's not how it works with any human user either. Right?
Speaker 7:It's like if you're training an employee or, like, Japanese call it, like, deshi, like an intern. It's like you're gradually leveling them up over time. Right? And so I think we're very bullish on that, and I think we're seeing a lot of very cool use cases in in that sense.
Speaker 1:Can you talk a little bit about the tariffs? I'm sure that a lot of customers are rethinking their entire supply chains potentially. How does Palantir play into making great business decisions in uncertain times?
Speaker 7:Yeah. I think you it kinda gets what you were saying at the very beginning around ERP systems, right, and kind of these rigid legacy systems. And in some ways, you know, these system shocks, these exogenous system shocks especially, are a bit reminiscent of things like COVID where it's like it kinda tests the state of your software. Right? It's almost like an environmental pen test against the state of your operations.
Speaker 7:And so I think where, you know, we've tried to provide value for existing customers and where we're engaging new folks is where they're saying, like, hey. Like, we feel trapped by the rigidity of the existing system structure. Right? Like, you know, our ERP models things one way. Our second, third, and fourth ERP models things in a discontinuous, slightly different way.
Speaker 7:Mhmm. Same with our MES systems, our PLM systems, our ordering systems. And it's like, what we really need to be able to do is understand, a, what's going on across everything and then be able to impose strategy and kind of reconnect strategy with operations in a way that can actually be adaptive. Right? I think what we're not doing is going people and saying, hey.
Speaker 7:There's a magic wand that will magically fix all the tariff issues, you know, no matter what the circumstance is. But can we instead give you, like, an operating system to be able to say, you can now actually, like, kind of like you're a pilot in jet, be able to navigate through as conditions are changing, test things, get leverage through AI and automation, and kind of be on the front foot when it comes to this stuff. And I think, you know, we've we've had customers who have talked about their supply chain journey with Palantir, with General Mills, Tyson, others. And I think they're great examples of people who have, like it's almost like they're retaking control from, like, all those legacy systems.
Speaker 1:Can you talk a little bit about the, kind of the broader Palantir ecosystem? I know that, obviously, Palantir sits on top of a lot of, like, on prem servers and cloud diff different mixes of cloud tech. And then, now with AIP, there's now companies that are building on top of Palantir, so they're kind of, sandwiched there. How are both of those going? Where are the where are the pockets of opportunity that you're seeing in, like, the high growth, that's maybe indexed to Palantir's growth, which has been fantastic, but, but outside of the Palantir direct ecosystem?
Speaker 7:Yeah. No. It's a it's a great question as well. Unlike the stuff below, I would say, like, it's like the infrastructure we deploy on. There's, of course, like, a broad strategy to keep adopting more and more infrastructure, like substrates we can deploy on.
Speaker 7:Right? So whether that's metal, that's the three major hyperscalers, that's Oracle, that's being able to deploy, you know, in sovereign clouds. Like, we've built our Apollo platform to allow us to be able to kinda do this in a highly leveraged way without having to rebuild those core components in every single environment. That I think, like, it kind of there there's a general trend, towards more options there. I think we're also, to your point, like, of riding the wave around people have gotten to the cloud or they've lifted and shifted a lot of data and maybe some data science workflows, but now it's like it's time to operate.
Speaker 7:It's like, okay. Like, am I actually like, are the core business workflows, those nurse scheduling workflows, those underwriting workflows actually changing? And I think there's a ton of, like, kind of tailwind from people saying, I did the first step. Now, like, what's the operating system I'm using in the cloud? And I think that answer more and more is Palantir.
Speaker 7:Things on top, I think, that are really interesting. There's, of course, like there's partnerships with the AI providers. There's partnerships with, you know, folks like Databricks and others. But I think what's really cool, and we actually just announced it, I think, a couple minutes before we went live here, is, like, it's it's the start ups cohort. So it's people being able to actually build their entire kind of businesses on top of Palantir and say, I like the leverage I get from the integrated, you know, data tooling, model tooling, workflow tooling.
Speaker 7:It's like I don't wanna start from scratch, like, 16 style with the hyperscale. I wanna build, like, on the Tenth Floor now. And so there's a ton of great startups there.
Speaker 2:Yeah. Yeah. Talk about why companies should be taking that product extremely seriously. Because I remember there was not that long ago when people said, oh, you know, don't like don't build a Shopify app. Like, you know and then you have like all these unicorns that kind of like started as Shopify
Speaker 1:apps. Build a plugin. And Honey sold for a billion dollars.
Speaker 2:Yes. So I think Most often. Yeah. You want Yeah. If you wanna do anything in especially in industries Yeah.
Speaker 2:Around national security, I feel like building on top of Palantir is a way to like, you know, potentially accelerate
Speaker 1:Totally.
Speaker 2:Trust and things like that. But would love to hear it in in your words.
Speaker 7:No. I think that that's that that is a that's well put. I think there's two dimensions I think about. Right? One is, like you said, like, it's being able to get leverage in kind of the it's access and compliance and these sorts of things.
Speaker 7:So it's like I wanna work in I wanna get access to problem sets or mission sets. And so our mission manager offering on the government side allows you to be able to get high side, get into these domains, and deploy your products, and there's a ton of great examples of that. And I think people see a lot of value. That's kind of more of the infrastructure enabling you as a start up. I think there's then building with kind of the platforms that are at kind of the above the infrastructure level.
Speaker 7:So this is Foundry and AIP. And there are folks saying, like like, there's there's Helmgaard and others who have presented recently that say, like, to build the, like, the AI enabled applications that I want, this is the toolkit I wanna use to build them. Right? Because kind of everything from that data integration layer, the ontology layer, the workflow layer, the SDKs, all of that stuff is like now it's the equivalent of, like, the you know, in in the personal computer era, like, the op like, I it was great to build against core components on my IBM PC or my son workstation, but it's like, I could really use an operating system to be able to, like, build at a higher level and build much more sophisticated things. So I think that's what we're seeing.
Speaker 7:We had our second developer conference three weeks ago, and they had a bunch of startups there kind of telling that story in effect.
Speaker 2:I I think I already know the answer but do you feel like you guys are just getting started? I imagine with these, you know, customer relationships you have right now in the existing products, every single time you you maybe like think you hit the end of the product roadmap for like a certain category, it's like, you know, you you get the next you know, request from a customer and it's like, hey hey, there's this whole area and opportunity that we weren't even thinking about a year ago, much less five years ago.
Speaker 7:You took the words out of my mouth. It's like, it's not it's kind of an incredulous thing to say. I realized a little bit of like self awareness in Silicon Valley. To say like, you're twelve and a half years in and it still feels like it's been a blink and there's like it's just it's like the joke it's like it's the end of Dune book one in, like, the first it's like it's like we're just getting like, we haven't even gotten off of Arrakis yet or whatever. Yeah.
Speaker 7:Yeah. Whatever metaphor you wanna use. And it's like I I totally feel that way because it's like a lot has happened. A lot has transpired, and I'm it's meaningful, and there's so many people that were part of the journey that are now in the ecosystem of folks you guys have been talking to and and others broadly, but it does really feel like it's just the beginning.
Speaker 1:I I I wanna know about, the shift in security mindsets, specifically in the commercial sector. We've heard a lot of talks about corporate espionage even in b two b SaaS, but, there's, you know, a a bigger national story around security even outside of a government context. Are you seeing increased demand from corporations that maybe don't need to be ITAR compliant just around taking their software and data more seriously in terms of security?
Speaker 7:%. And I think that manifests in a few ways. One is just, like, it's it's the core kind of like hygiene or meat and potatoes part of that, which is like, it does feel like the, you know, the threat vectors are increasing. The threat poor profile against any prominent company in America is increasing.
Speaker 1:Mhmm.
Speaker 7:So, you know, the way that we operate our core workflows, the way we secure our data, I think, is more top of mind. It's not just sort of in the purview of the CISO or the CIO. I think everybody's thinking about it now Yeah. Especially given kind of global volatility trends writ large.
Speaker 3:Yeah.
Speaker 7:I think there's also this sense of, like, if if we're gonna have to take these big leaps forward with AI or with building the next generation of digital applications, like, these seem like they're gonna be big shifts in the business, and they're gonna affect a lot of, you know, the not just the technical users, but the business users, the operational users. So for building, like, essentially the next foundational parts of the business, like, I wanna be very sure that we're building it in the right way. And I think as you guys probably know, like, a lot of people have battle scars from the prior generation of stuff not having built been built the right way or they're being, you know, things that people have had to deal with off the back of those designs. So I think peep people are definitely tuned into that. You're you're totally right.
Speaker 1:Yeah. Culturally, what's changed as Palantir has become a public company? I know you've been there before when Palantir was private. Now you're public. Is it stressful having a stock price out there every single day?
Speaker 1:Has it have have things kind of been business as usual? What's the shift been?
Speaker 7:I think, honest for those who've been around you know, I think what's cool is that the the hiring profiles and the people that are coming in seem as good now as they ever have been. You know, this is the shameless plug for we are hiring, all the things, but it's like it's still a very young and and vibrant place, which is why maybe, like, the temporality in my mind is a little bit broken as a result of these things. I will say one thing that's different for sure is, like, your friends and your family and your college friends, like, talking about the stock up and down. It's like people couldn't pronounce the name. People had no idea what it did for, like, most of the time I've been here.
Speaker 7:So, like, it's still very bizarre, I think, for anybody who's been along or or or been around it to be like, people care this much about this. And it's like, of course, we always cared, but, like, that's still kind of bizarre. When you get these ping like, you know, LinkedIn requests from somebody who went to high school, and he's like, hey, man. I'm in the retail investor community. Keep it up.
Speaker 7:Or it's like it went down and it's like, hey, can you do some of it? It's like one or the other. Right?
Speaker 1:Can the devs do something about the stock price?
Speaker 2:How do you how do you personally think about AI safety? So not not speaking for for Palantir on this one. My my, you know, one one of the reasons I'm curious is, you know, reacting to AI 2027, which who knows if you even had time to like read through from last week.
Speaker 7:I I'm not halfway through, but I but I Yeah. I did the mistake of like watching the interview and then reading some of it. Yeah.
Speaker 2:No. But like in in in this sort of like doomsday scenario, like I imagine like you and the Palantir team are like in a war room with the president and it's like, hey, we gotta like figure out how to like save humanity from the bots. But I'm curious like, you know, general maybe reaction to that piece and then you know, how how you're thinking about it more
Speaker 1:mean, just the shift from deterministic computing to probabilistic computing injects like just so many risk factors. I I I'm dying to know. What'd think?
Speaker 7:No. I think I I again, I'm I'm on the same wavelength as you guys. I think, like, AI, I like those pieces. I think even if people dismiss them or try to critique them for being kinda sci fi, it's like, I think it's good that people are doing some definite thinking even if it is a bit forecasted. I think this is true of, like, you know, the piece, you know, machines of loving grace that Dario put out as well.
Speaker 7:And it's like, think it's worth having these sort of, like, future looks just to be able to at least game theory through some of the implications here as you're saying. I think what you touched on, John, I think is exactly it, which is, like, if you assume these things are probabilistic or probabilistic in some degree and are gonna have more agency over time, like, what is the outer shell of assurances that we're building to keep the machine subservient to the human? Right? In in, like, the grand sense of, like, human agency, right, as as people of the world. And I I think, like, that's where careful system design from our perspective is so key.
Speaker 7:It's like there's kind of testing the models in isolation, but then there's, like, the live fire exercises of how do these things actually perform in indicative context, like whether that is a battlefield or that is a production line or that is a hospital. And I think, like, we have to evolve the testing frameworks, to take into account more of the operational theaters, so to speak, and then be able to pull back the requirements from there. There's a lot of pontificating. I think that's easy to do when you're just looking at the models themselves against benchmarks, but it's like, how do you evolve past benchmarks to operational testing? And this is kind of what we've done with other sectors, right, with, like, whether it's electrification or it's, like, other kind of core core assets that make up the digital world, not in the same level of sophistication, but we had to evolve how we're measuring efficacy.
Speaker 7:Right?
Speaker 1:Yeah. For sure. I I I feel like Palantir's taken a pretty foundation model agnostic approach, kind of a bring your own, bring your own foundation model if you're a company. Obviously, you do have some partnerships that are bigger than others, but, that makes sense from a commercial or DOD perspective. But, what has been your reaction to DeepSeek?
Speaker 1:It's open source, and people think, oh, well, if I run it on my own hardware, I'm all good. But there's been kind of a sci fi esque debate about is it possible to embed kind of a Manchurian candidate in the waits that wakes up when it is like, hey. I'm it turns out I'm in a DOD data center. I wanna do something different. Is that pure sci fi?
Speaker 1:Is that something that you need we need evals for? We need extra testing. We need to air gap and then kind of test in a in a in a, you know, offline environment first before we deploy these, or do you think it's all sci fi and it's not worth worrying about?
Speaker 7:Well, I think there's probably some, like, Aristotelian meme there, right, where it's like, I think even if it's not all sci fi
Speaker 1:Yeah.
Speaker 7:It's like I think there are there are real challenges across, like, the intersection of different, like, considerations. One is, like, our, like, our ability to mechanistically interpret these models is still limited. Mhmm. Right? So, like, even if you assume it's not malicious behavior on part of the deepseq or the or a CCP Yeah.
Speaker 7:You know, you know, proxy, you could still have a situation where the model's not understandable, and therefore, you can't trust them for the spectrum of utility. I think given that ambiguity and also the ambiguity around, like, how how you know, what was the story behind DeepSeek's creation? I think there's less ambiguity around the control that the government kind of can exert on them, in China. I I think it all points to, like, why would you add up that composite risk profile and kind of go all in on that if you had open source options, or equivalent options in the Western world. Right?
Speaker 7:And I think this is why it's important for us to have the ecosystem of proprietary models. Commercial models are great, but also open source models like the LAMA release that we saw. And and you're gonna have different cases where, like, the the the abilities, the cape the capabilities and the controls provided by each of those different types of models is gonna be suited for different domains. Like, for instance, there are gonna be certain government domains where a commercial model provider will not be suitable. There are gonna be domains where it will be.
Speaker 7:And it's like we wanna have, as the West, as The US especially, the full range of options to come to the table with. I don't think we wanna be in in a in a case where we feel like we're backed up against the option of having to go with a foreign model, especially one from a rival regime.
Speaker 1:Yeah. Do you think every kind of Fortune 500 company needs their own set of evals for when these new LLMs drop because you see what happens on LM Arena, and it's kind of driven by, like, the vibe of whoever's voting that day or, even MMLU and some of these, like, IQ tests, don't necessarily translate into better business value. And so I'd love to know what you're seeing from, you know, Fortune 500 folks or bigger business folks on how they make decisions about what models to use. Is it just cost to to benchmark, or is there more nuance to it?
Speaker 7:Yeah. I feel like there's a great tweet in there. I mean, it's, like, evals vibe. Like, vibes are not enough or something like that. But it's, Yeah.
Speaker 7:I I think absolutely. Right? I think this is part of, like, the idea or the thesis we have for, like, this shared model of decision making that is this ontology system. Like, how we design evals is literally around that. Right?
Speaker 7:You could you can say there are sample workflows. There are, you know, unit tests that have to pass every time you upgrade the a you know, the agentic logic for that underwriting workflow at AIG or whatever it might be. And and and, you know, it's not just like an abstract set of tests. These are actual, like, in vivo tests that, you know, have to pass and yield certain results either deterministically or probabilistically for us to be able to go forth and and and continue with this workflow. And so and even if nothing is changing, maybe we're just periodically running these tests because these models, like you said, are are probabilistic.
Speaker 7:Right? So things can change over time. So the underlying model is shifting on us. We wanna know that. But I think you're totally right.
Speaker 7:Like, enterprises have to get into a mode, I think, of thinking about the way they're instrumenting and validating the application of AI as being kind of one in the same with rolling out these evals in an operational sense. Right? If you're you can't you can't you can't kinda control or or improve what you can't measure. Right?
Speaker 1:Yep.
Speaker 7:And I think it's it's kinda the same concept here for bringing AI into these critical spaces.
Speaker 1:Yeah. It's kind of like a the way a hedge fund would backtest a strategy and see, okay. Yeah. If we apply this to all of our historical data, it's like new model comes out. Let's just reevaluate every piece of debt we've ever underwritten or every policy we've underwritten and see if we get a better performance.
Speaker 1:That'll be fascinating. I I I imagine that there's a business to be built there. Maybe it happens at Palantir or somewhere else, but, very, very cool, idea. Jordy, do you have a last question? No.
Speaker 1:This is Let you get out of here. Two minutes. Thanks
Speaker 2:so much. Looking forward to the next one.
Speaker 1:Yeah. This is fantastic.
Speaker 7:Yeah. Looking forward to it, guys.
Speaker 1:Thank you
Speaker 7:so much for having me.
Speaker 2:Well, thanks for making the time.
Speaker 1:Cheers. Let's run through some timeline to finish it out. Cole Rotman says, Mazel Tov to OpenAI Fund for turning $8,000,000 into $600,000,000 of paper gains from just two deals and a hundred and $75,000,000 fund based on his math. Did you see this? They did Harvey.
Speaker 1:They led the $5,000,000 seed in 2022, and now the series d in 2025 is a $3,000,000,000 valuation.
Speaker 2:Sam Altman is is pretty good at being a VC.
Speaker 1:It's it's insane. It's insane. And then Cursor, they led the $8,000,000 seed in 2023, and the series b is at a 2.6 valuation and might be getting, like, a four x markup soon. I think we see so we saw some leaks around. So could be, you know, a a five x fund off of two deals in just three years, which is remarkable.
Speaker 1:Remarkable. You'll love to see it. Anyone who's in that fund, anyone who's exposure to those deals, they're gonna be sleeping well, but they could be sleeping better if they got on an Eight Sleep nights that fuel your best days, turn any bed into the ultimate sleeping experience. Go to 8Sleep.com/TBPN. Lindyman says there's nothing to fear.
Speaker 1:Smart people adapt. In the twenty tens, they went into software. In the twenty twenties, they will open up factories. It's all the same thing, finding angles and edges. Oh, this is a kind of interesting white pill you threw in there.
Speaker 1:It it is interesting that, like, that's the nature of capitalism. It's, it's, you know, water finding cracks in the middle midst of a jar full of pebbles or the way sand flows through a jar of pebbles. If tariffs go up and there's a bunch of incentives like, you know, the Hadrians and the base powers, they're ahead of this curve, but that's not the end of the story. Will be plenty of people that see the news of the tariffs stick and say, Hey, this fundamentally changes the economics. I'm ready to write checks if I'm a VC.
Speaker 1:I'm ready to build a factory. And yeah, maybe it will be a slightly different in work environment than building B2B SaaS, but I'm ready to make it fun. Mean, lot of the, one of the coolest things that's happened over the last few years has just been like the El Segundo movement and like the Aaron Slotovs and the re industrialized folks just making that meme obsolete of like everybody wants to re industrialize but no one wants to work in a factory. Well like a lot of people are down to work in factories now because it's not that dirty. It's actually like, oh, there's just a big machine over there.
Speaker 2:There's still some You know, anybody that has
Speaker 1:ever Throw phones, you're fine.
Speaker 2:Anybody that has ever made made something, you know, in the in the context of a business, it doesn't really matter what it is. Right? If it's a start up and you get a little bit of revenue and you make make some merch and you can suddenly hold, you know, a product in your hand. It's amazing. So I actually do believe that people many people would rather, you know, work in a factory or work around factories and and be involved with producing things, just software.
Speaker 1:Well, after you produce things and you start selling it online, what are you gonna have to do? Gonna go to numero you're gonna go to numero.com. It's sales tax on autopilot folks. Spend less than five minutes per month on sales tax compliance. Go to numeral h q.
Speaker 2:25 states are now taxing software sales.
Speaker 1:Yeah.
Speaker 2:Get in front of it. Just do it.
Speaker 1:And we had a really cool launch video from Zipline. This company has been around for a long time. We should ideally pull up the video if we can. But regardless, Zipline is a drone. They're kind of vertically integrated.
Speaker 1:Drone delivery, they make the drones, but then they also, run the service. And so they were in Africa doing blood deliveries via drone. So it's very important to get it there very fast. Yep. Someone's bleeding out.
Speaker 1:You need blood transfer. Send it from the central hospital as fast as possible. So even though drone delivery is expensive, totally makes sense in that in that case. They built out a ton of technology, ironed out a bunch of problems, and now they're ready to bring it to The United States. And they are launching in a few states, Texas, and a few other places.
Speaker 1:Yeah. Seems really cool. And we were talking to somebody. Here, can watch this video because I think this is so cool.
Speaker 3:I love to work on things I'm passionate about. I think when you're passionate about something, it doesn't feel like work anymore. You might observe it as like type two fun because often if you're passionate about something, you're willing to do things that other people would find harder than anybody would wanna do. But it turns out when you're passionate about it, it's it's just, you know, it's fun.
Speaker 1:It's just such a different vibe than the
Speaker 5:normal parts tech. By nerds here.
Speaker 1:Vibe real that's, like, really intense with a role in building the top music.
Speaker 5:Future that we would be proud to hand to our kids. Chilling. Is about as cool as it gets. Warm.
Speaker 3:But I know it's been a lot of sacrifice for a lot of people to make this happen. This is so fun.
Speaker 2:SciFi future. Yes. The drones drones are gonna be a
Speaker 3:little bit confusing. Yeah.
Speaker 2:The the magic now of pressing a button on your phone and getting an item Totally. In Yeah. You know?
Speaker 1:And we were talking to someone who I think was an investor in Zipline, and he said that something like 80 to 90% of all of the goods in a Walmart fit in that drone. Yeah. And so, yeah, you're not gonna have drone delivery like a couch. But, like, for most things, you can actually use the service, and, the economics pencil out in in a in a viable way. I definitely wanna have the the the team on the show soon and talk about it.
Speaker 1:But, really, like, above all else, it just stuck out that they went with such a different style and aesthetic for their launch video with something much more ethereal and and and it just feels like summer, and it just feels like you're just relaxing and a drone comes deliver. And it's like, yeah. This is cool. This is sci fi. This is tech, but it doesn't need to be cyberpunk.
Speaker 1:Like, it's the future feels like the future. There's something futuristic about this, but it's still very pastoral, and it feels like something that integrates with, just like the kind of vibe of, like, hanging out on a ranch in Texas. It just it was just a really nice video. And and and it was just it was just cool to see someone take a very different direction from what we've seen that it's been a cool meme. We've played into it a bunch, but it's maybe at the end of that road, and maybe something like this is what's next.
Speaker 1:So, go watch the full video and, sign up for zipline if you're in the the delivery area, I guess. Will Nitzi says, the only career question that matters is what can you be world class at? Everything else is noise. I like that. It would kinda paired with what we were talking about yesterday with the the intersection of two, novel ideas or areas of expertise being something that LLMs struggle with, And I think this will be a continual
Speaker 2:Big opportunity for humans. Big opportunity for humans.
Speaker 1:Yeah, I mean, I think AGI in many ways has been achieved, but very few people would say LLMs are world class at really anything. And they kind of go through this Gell Mann amnesia thing where if you don't know about a topic and you ask an LLM to talk about it, it can kind of get you up to speed. But when you talk to somebody who's much deeper, much more aggressive, much more definitive in their worldview around that topic, they're going to give you much more insight. And that's why why John,
Speaker 2:I would disagree. They're world class at creating Studio Ghibli copycats
Speaker 1:That's true.
Speaker 2:Or, you know, pennies on the dollar.
Speaker 1:That's true. They're they're world class at creating viral content as I tested because the actual Studio Ghibli photo I posted from the real movie Spirited Away, not a banger. Flop. Flop. But when I took Oppenheimer and made it Ghibli, it got, like, 30,000 likes.
Speaker 1:So people like that. Let's go to MDA. They say, VCs told me build a pitch deck, design a road map, hire a dev team. But no one told me post TikToks, trigger FOMO, make it look like a trend, not a tool. That's when I started thinking like a drop shipper, not a founder.
Speaker 1:What do you think? Insight?
Speaker 2:I don't know I don't know where to take this, but I I think if a lot of companies posting TikToks, good way to get customers.
Speaker 1:I talked to a a Gen Z founder who said that my distribution strategy is if I'm in a if I'm building something for consumers, I'll make viral TikToks. And if I'm selling something b to b, I will hire nepo babies because the nepos will have parents who are involved businesses. Yeah. Yeah. And and they will be able to get my my product
Speaker 2:there. You know, one one thing this made me think of is this guy Cormack who's built a company called Oasis. He started posting information about water quality, started posting TikToks, and, you know, eventually built out a database where you can sort of get access to different data. And he basically tapped into something that was, like, very much a trend of people wanting to understand what's what's in their water, what's in other products that they're consuming. So, yeah, I think in general, powerful to tap into it.
Speaker 2:You know, make sure that your tool is part of a bigger trend. Otherwise, it's gonna be really difficult to get Totally. That type of real traction.
Speaker 1:Totally. Yeah. The hype can get too much and you can get lost in the sauce and you can just become like a TikTok company. But there's something about the communication and and casting a wide net that clearly lets things ramp. I think we probably saw that with the the the the Craya team.
Speaker 1:They had, like, what, 20,000,000 users or something. Like, you don't get that without going viral. I'm not sure if they did it through TikTok, but they certainly became a trend, and that enabled a lot of fundraising and stuff. Speaking of fundraising, 25 year old police drone founder, Blake from, Brink Drones just raised a $75,000,000 round led by Index. I met him camping, like, a year or two ago.
Speaker 1:He's a Teal fellow, great guy, and fascinating.
Speaker 2:I love this photo of the drones just hovering behind him.
Speaker 1:Yeah. Yeah. No. He's fantastic.
Speaker 2:They come with me everywhere.
Speaker 1:Yeah. Yeah. Yeah. And he has a very interesting use case. So I I really wanna have him on the show to talk about, like, how do we build the American DJI?
Speaker 1:You know, obviously, like, how do you get to market with something reliable? He's going after drones for police because the police legally cannot buy DJI anymore or or in many jurisdictions, they've been banned. But if there's a broader ban, I'm kinda getting burned out on the defense tech stuff, and I want consumer products now. Yeah. I want I I want there to be, you know, world peace, and then everyone's like, oh, yeah.
Speaker 1:Actually, we can pivot back into hardware.
Speaker 7:Well, yeah.
Speaker 2:No. This is the obvious thing with with Niros. Right? Yeah. Soren was a drone racing pilot.
Speaker 2:Yep. I imagine he wants to, you know, save the world and then get back
Speaker 1:Yeah.
Speaker 2:Into his original passion of racing drones.
Speaker 1:Yeah. So Yeah. Yeah.
Speaker 2:You can imagine Niros doing something in consumer.
Speaker 1:Totally. And it's just like a it's just the nature of the market that if Soren and Niros had said, hey. I'm this fantastic drone pilot. I'm going to build a consumer drone FPV product. People would be like, that's too capital intensive.
Speaker 1:You'll never beat DJI, blah blah blah blah blah. There's million reasons why this won't work. He wouldn't be able to get funding. You know, let let let's let's bring about world peace and then get back to having fun with some drones, making some cinematic videos. That's what I want.
Speaker 1:Anyway, any other posts you wanna close out on? Or I think we're good.
Speaker 2:I think we're good.
Speaker 1:Think we're This is a fantastic show. Thanks for watching, everyone. Don't forget to leave us five stars on Apple Podcasts and Spotify and stay tuned
Speaker 2:for the next Just do it.
Speaker 1:We will talk to soon.
Speaker 3:Looking forward
Speaker 2:to tomorrow. Bye. Cheers.