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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.
Speaker 2:Today is Thursday, 08/14/2025. We are live from the TVPN Ultra Dome, the temple of technology.
Speaker 3:The fortress of finance.
Speaker 2:The capital of capital. Jordy, why are you bearish today? Did you not see that a company named bullish went public and the stock popped 85%?
Speaker 3:Top signal. Why? Why? Why?
Speaker 2:Aren't yes. Gross margins are negative, but is that not a green flag? Is that not a good thing? What does AI have to say about negative gross margins? Is it that bad?
Speaker 2:Break it down for me.
Speaker 3:I asked one of the smartest models in the world, ChatGPT five. Negative gross margins are fine. Right? We shouldn't worry about negative gross margin companies selling to negative gross margin companies. Right?
Speaker 3:Chad GPT says, no. Negative gross margins are generally not fine. When you you have one negative gross margin company selling to another, that's usually usually a flashing red flag rather than a don't worry situation. Very rough. If you can't clearly explain how gross margins will turn positive and the plan relies on we'll make it up in volume, that's not strategy.
Speaker 3:That's financial quicksand.
Speaker 2:Financial quicksand. It does seem like they solved alignment by default with this. It's great that it's pushing back. During the glaze gate era, it would have been like, yeah, absolutely. Like
Speaker 3:Well, they're not fine for most companies.
Speaker 2:But you're built different. You're different. You're the conversation. Anyway, if you want to fix your gross margins, if you wanna dial in your finances, go to ramp.com. Time is money.
Speaker 2:Save both. Easy use corporate cards, bill payments, accounting, and a whole lot more all in one place. Now more important than ever, there is a weird trend shaping up, and it's a question that's on the top of my mind. It's the it's a question that be should be on the top of most venture capitalists mind right now, I think. So the question is Change losses.
Speaker 2:Bad. Yeah. How bad are AI startup unit economics? Also, good morning to the chat. Good morning, John Exley.
Speaker 2:Good morning, Sean.
Speaker 3:Good morning,
Speaker 2:Matt, techno chief is here. We got Goldrock.
Speaker 3:A lot of big dogs.
Speaker 2:Lot of lot of names. Lot of lot of names I recognize. So, nice see
Speaker 3:you guys. To see you.
Speaker 2:So, here's an example of how the AI startup economy works right now. You, the user, the purchaser of the AI application, you pay a company, an application layer company, $1. Seems pretty like a good deal. You're getting a nice little tool for a dollar. Then let's trace what happens.
Speaker 2:That company, that application layer company, they go to a foundation model company. They give that company $5. Then that foundation model company goes to a hyperscaler. They give that hyperscaler for cloud hosting, they give them $7. And in turn, that hyperscaler goes to a GPU maker and they give them $13.
Speaker 2:And so it's it's giving house of cards.
Speaker 3:It's giving chained losses.
Speaker 2:It's giving chained losses. But the question is how fast can inference fall? If fixed performance inference falls at the moment Inference,
Speaker 3:Come down.
Speaker 2:Come down in price.
Speaker 3:I need you to come down.
Speaker 2:So, if if fixed performance inference falls at the rate of Moore's law Moore's law, for those who have been living under a data center, is the idea that the cost of compute on a dollar per flop basis, cuts in half every two years. It used to be every year to eighteen months, and then it kinda stretched out, but we are still making gains in just, more advanced semiconductors, better performance on a per dollar per unit of energy cost. The chips are getting better and that's happening every two years. But if fixed performance inference, like inference at a certain level of intelligence is only getting cheaper by 50% every other year, that's probably not that great for your gross margins. Because if you're if you're negative 500 gross percent gross margins, it's like, okay.
Speaker 2:In two years, you're still gonna be negative two fifty, then you're gonna be negative one twenty five. It's gonna take you a long time to to kinda dig out of that hole, but there is cause for optimism. So algorithmic improvements in inference efficiency do seem to be moving quicker than Moore's Law. We saw this with DeepSeq. DeepSeq r one, the the reasoning model, is dramatically cheaper on a per million token basis than ChatGPT.
Speaker 2:And so we know it's possible. A lot of those algorithmic improvements are getting ported back to models right now. We see this with with the Pareto frontier and all the labs are in in the Rumor. Incredible competition. The rumor,
Speaker 3:by the way, Yes. DeepSeek is planning to launch r two on the day of NVIDIA's earnings.
Speaker 2:Really?
Speaker 3:Probably just random.
Speaker 2:I mean, is how it solid is this rumor? Like, would
Speaker 3:you I just wouldn't Okay. I wouldn't lean on it too hard, but I think it's a possibility.
Speaker 2:Okay. So basically, we're getting the Moore's Law improvements like almost certainly. That's kind of just assumed to be true. There should be some algorithmic improvements that will end up. We should see cost of inference halving every six to twelve months, maybe five months on the on the really fast to fast horizon.
Speaker 2:So I think we're not quite on a knife's edge here, but it's definitely something to keep an eye on. And we need to make sure that we're actually hitting all of those all of those different algorithmic improvements as fast as possible.
Speaker 3:Or just 5x prices.
Speaker 2:Yeah. That is the question. Is that I'd if you had told me
Speaker 3:in And and Girly's point has broadly been, if they're they're if you're if you're selling, you know, some application layer software Mhmm. At negative gross margins, you are effectively subsidizing demand
Speaker 2:Yes.
Speaker 3:And and creating more demand Yeah. Than if you're just
Speaker 2:Which makes sense because these businesses often trade on a revenue multiple and revenue growth multiple. So revenue growth going from having the the the the steepest line to the $100,000,000, that's the most important thing. People don't care. This is the shooting stars.
Speaker 3:We were joking around earlier. You were saying
Speaker 2:Supernero, there might be shooting stars.
Speaker 3:Well, no. You you Earlier today, were saying you you were potentially interested in investing in some companies that don't have to pay for inference. Yes. Maybe software companies with little to no inference.
Speaker 2:Maybe no inference cost.
Speaker 3:Could be something there. Maybe traditional SaaS.
Speaker 2:Traditional enterprise SaaS might be making a comeback.
Speaker 3:There's been a yard sale in SaaS broadly.
Speaker 2:Seriously. Seriously. So there Maybe
Speaker 3:there's something there.
Speaker 2:I mean, it is it is a it is a it is a bull case if you if you're running a company that is growing but doesn't have upside down unit economics and is doing well on gross margins. You might you know, even if there is some sort of market correction or pullback, like, you're gonna be in a strong position. So, certainly, treat the r and d AI agent stuff that you bolt on as incremental, as experimental. See how it can improve your workflow. But you should make sure that the demand is actually there.
Speaker 3:Somebody should build AI agents to help negative gross margin AI companies Yep. Achieve positive Yep. Economics.
Speaker 2:I mean, at the same time, if you told me that as basically a prosumer, I would be paying $200 a month for ChatGPT and feeling that that's a steal, and I'd I'd pay that bill happily. And even $2.50 for Google, Gemini, just to get access to Vio, I'm happy with that one. I almost hit Grok three Ultra Pro plan, which is $300 a month yesterday, but I was like, I don't think I need Grok four heavy as well, but I wanna test these models. It's also kind of my job. But still, just the idea of spending $500 on effectively consumer software is somewhat remarkable.
Speaker 2:And so I do wonder what the elasticity of demand is. And if these AI companies that are selling AI enabled SaaS products were to quintuple prices, what their churn would look like.
Speaker 3:Yeah. Also a coastal elite living in a bubble
Speaker 2:Yep.
Speaker 3:In a technology bubble Yep. And you'll happily pay hundreds of dollars a month
Speaker 2:Yeah. It is it is rare. For
Speaker 3:leading edge models.
Speaker 2:Just like I would pay hundreds of dollars a month for restream because it's what powers this stream, one livestream, 30 plus destinations, multi stream and reach your audience wherever they are, you can sign up for free and restream. And
Speaker 3:restream lets us aggregate all the chats so we see Yeah.
Speaker 2:We see everything on X
Speaker 3:and YouTube.
Speaker 2:YouTube. But YouTube seems to be I where it's would recommend the YouTube chat. John Exley is there greeting everyone, hanging
Speaker 3:Chat room general.
Speaker 2:I recommend John Exley in the YouTube chat. But we have our first guest of the show live in person, Aaron Ginn. Let's bring him in from Hydrohost. He's been on the show three, four, five times. Too many times to count.
Speaker 2:He is. To TBPN. Welcome to the Ultra Dome. Aaron, how are you doing?
Speaker 3:Very good, Aaron. Good to
Speaker 2:see you. Did you bring a present? What'd you bring?
Speaker 4:Got a mask. This is the gong, man. This is the gong. The topic is China.
Speaker 2:Take a seat. Take a seat. Tell us how you're doing. Tell us how long you're in town. And then I wanna go through the NVIDIA h 20 export.
Speaker 2:Yeah. And we have some pros and cons. We're gonna debate it live on
Speaker 5:the show.
Speaker 4:Mean, we should we need to discuss the fortune
Speaker 2:Please.
Speaker 4:In terms of like who's favorite to win as well.
Speaker 2:So you brought us some fortune cookies. What's the story on the fortune cookies?
Speaker 4:Well, actually the fortune cookie is, so I'm Hapa. It's called half Asian, half Asian Pacific Islander. This is actually not Chinese at all. It's a fortune cookie store in San Francisco. Like bar
Speaker 2:box and open one. Yeah. I mean is for the show.
Speaker 4:Yeah. See, we should see who is actually gonna win this AI war.
Speaker 3:So Yes. Yes. Let's open some Are these rigged by the way?
Speaker 4:These rigged? No. I wish they were funny ones.
Speaker 3:No. They're not.
Speaker 2:There's a company that sells ads in fortune cookies. They give the fortune cookies away from for for free. But then when you, when you open the fortune cookie, you get an ad. So I am, opening my fortune cookie. It says, your careful nature will bring you financial success.
Speaker 2:He's pretty accurate. Jordy, wasn't I just talking about this? We need to dial back the CapEx at TVPN. Careful nature will bring you financial success. What was I telling you earlier?
Speaker 2:I was telling you. We need to dial back the CapEx, less super cars.
Speaker 3:We don't need that incremental rack.
Speaker 2:Exactly. Exactly. You
Speaker 3:are next in line for promotion. Wow.
Speaker 2:Okay. And mine is a gold
Speaker 4:is in your oaks. Excuse me. My dad came out there for a second. Gold is in your future.
Speaker 2:Gold is in Jensen will get you a gold plated rack.
Speaker 4:Used to
Speaker 2:do that. Right? He used to deliver gold plated racks to all the different
Speaker 4:think Sam has like probably 20 of those.
Speaker 2:Right? Sam has 20. Yeah.
Speaker 4:And then whenever you need to talk about China, you can you can just pull out these whenever
Speaker 2:you want. We do need we do need some different hats.
Speaker 4:I know Jordy loves the hats.
Speaker 2:These are
Speaker 3:These are cool. I might actually take this home for the weekend.
Speaker 2:This is a pretty sweet hat.
Speaker 4:I like this. Me and my dad has one. That's what he uses the garden in so.
Speaker 2:Okay. So
Speaker 3:I mean it's highly practical, highly functional.
Speaker 4:It is, right.
Speaker 2:It does seem to be creating some sort echo in my ears but I'm down. Looks terrible for the lighting. We need a whole new set of cinematography lights in here if we're gonna we're gonna make this work. Anyway, good to have you in the studio. We've been talking about h twenties.
Speaker 2:We we we talked to you about the export ban on Monday, but I wanted to run through kind of now that the story has developed a little bit more. Most recently, the Financial Times reported Beijing presses local chips on check on tech giants.
Speaker 4:Yeah.
Speaker 2:Alibaba and ByteDance are told to justify orders for US made semiconductors. So I wanna run through all of the pros and cons Mhmm. Of an export ban. And we've written some on the whiteboard. And so if you two can go to the whiteboard, we can run through these each one at a time and try and get your reaction to them Sure.
Speaker 2:Step by step. Okay. Let's start with the case for allowing exports of NVIDIA h twenties to China. So the first the first the first pro camp, if I want NVIDIA to be allowed to export h twenties, is it will increase China's dependency on The United States. Aaron, do you agree with that?
Speaker 2:Is that a good reason to allow exports? Okay. Why?
Speaker 4:America always wins when we excel at soft power.
Speaker 2:How how does it increase soft power? Like, walk me through that.
Speaker 4:Because the way that the architecture actually works, it's not just a hunk of metal. Okay. That's what people assume. Yeah. Yeah.
Speaker 4:So it's a combination of software and as well as and Jensen is pushing this with the direction with Grace and Ruben and basically ARM. Yep. The future direction of GPUs is essentially like NVIDIA is an Apple like software platform.
Speaker 3:Okay. So completely fixated on making sure they aren't dependent on Nvidia generally? Right?
Speaker 4:But but the only way do that is to build off of Nvidia. And they're doing that? With Huawei. Yeah. Yeah.
Speaker 4:Yeah. So that's why we need more there.
Speaker 2:So if we export, we hurt Huawei?
Speaker 4:Yes. Essentially. Okay. Take money from them.
Speaker 2:What about just the the libertarian free market capitalism
Speaker 3:argument? Underrated.
Speaker 2:Potentially underrated. Like Oh, yeah. No. Should should should the US government control exports broadly? Where should they draw the line?
Speaker 2:You know, the the famous example is like, you know, you make an f 35 Mhmm. And we're not gonna let you sell that to a near peer adversary. But why aren't GPUs in that category?
Speaker 4:Because you could have a GPU in here and it's not gonna launch and kill somebody. Mhmm. So as well as the future, the past Biden AI diffusion rule, you could have an F-thirty five, you could not have an hopper. Mhmm. So there's not a consistency in the theory of the so called expert class.
Speaker 2:Yeah.
Speaker 4:I so much so that Yeah. So so much so that, like, you know, like, we I think there was 78 or 77 f 30 fives sold to Portugal. Okay. Portugal was on the banned list or the bad boy list.
Speaker 2:Oh, interesting. How did that happen? It just like I
Speaker 4:mean, literally asked the people author and they're like, we didn't know they were on the list. So so like, you know, it it it says it's over exaggeration of like, you know, that's why it's the purity test of like Yeah. Well, what about this, what about this, what about this. And the reality is like, we can be reasonable about this Yep. And say that like, if the goal is to create dependency on The US because, you know, I like less war Mhmm.
Speaker 4:I know I like less people going to war. If we can increase China dependency on our platforms, therefore, less likely to go to war in Taiwan.
Speaker 2:Okay.
Speaker 4:And that's kind of the idea, and we actually can be very successful at that because we're really good at being platforms.
Speaker 2:Okay. What about the the case for just pumping our bags? Lots of people are logging in video right now. The largest company in America, largest company in the world, $4,000,000,000,000. Mhmm.
Speaker 2:Well beyond. Well beyond 4,000,000,000,000 now?
Speaker 3:Isn't that like 4.4?
Speaker 4:Yeah. I think
Speaker 5:so much that idea.
Speaker 2:They had another 400,000,000 market, 400,000,000,000 in market cap without me even paying attention. So, yeah, how how good is the export? Is the export, like, allowing h 20 exports for NVIDIA? It feels like they already took a write down. Yeah.
Speaker 2:Is this actually a material piece of their business? Is this important to NVIDIA shareholders?
Speaker 4:It probably have a very minimal impact. If not it's it's barely anything.
Speaker 2:Yeah. What about this idea? I I was talking to somebody who was who was very anti NVIDIA export into China just because of there's there's no reason to be because there's plenty of GPU demand in The United States. So Yeah. NVIDIA could essentially sell 100% of the chips that they fab at TSMC to American companies.
Speaker 2:Mhmm. So they so anything that they sell to China is just pulling away from American GPU demand. It's making American Yeah. GPU farms, like, more GPU poor. It's
Speaker 4:Has a dude ever talked to anyone outside of America?
Speaker 2:Yeah, probably.
Speaker 4:Yeah. Because they would say, we're not interested in
Speaker 2:Wait.
Speaker 4:Why not? So if you talk to anyone who's like, one, is that most of this technology yeah, cool. It's like fun. Yeah. Y'all use the AI to edit videos, use ChatTipedia search.
Speaker 4:The way in which AI is viewed by everyone outside of America Yeah. Is it's basically inherently connected to the sovereignty of the nation.
Speaker 2:Sure. Sure. Sure.
Speaker 4:Go and try go telling Saudi Arabia, like, hey, just give that stuff to to Bezos. Yeah. Yeah.
Speaker 2:No. I I I just mean, like, there's that famous story of Larry Ellison and Elon Musk sitting down at dinner with Jensen Wong and saying, Jensen, we will pay any amount of money. Give us as many GPUs as you can possibly give us. We need a 100,000 h one hundreds. We need as many as we can.
Speaker 2:We're trying to build super clusters. Like, excess capacity, any excess supply you have, we will soak up Mhmm. For sure. Yeah. And so isn't there a decent argument just for, hey, American companies should be at the top of the buyers list for what American companies produce?
Speaker 4:But they are right now. So so like but but but the real thing is that that if you assume this Yeah. Which is what Jensen's doing Yeah. Like he's basically pushing everyone to him. He is the apple of silicon.
Speaker 4:Yep. Are there Apple stores in other countries?
Speaker 2:Yes. But iPhones but but but iPhones were out of stock in New York City Mhmm. Like, someone would make the make the argument that Apple should prioritize fulfilling orders in in America before they expanded internationally.
Speaker 4:And and I think NVIDIA does it because Amig is American company, but
Speaker 2:at the same time 20 could have been an h 100. Correct? No. It's the same one time.
Speaker 4:It's just because one is that you have to remember, like, Nvidia is a found foundryless organization. Mean, it has Yeah. 700 or 70,000,000,000 in free cash
Speaker 6:flow last quarter.
Speaker 2:Yep.
Speaker 4:So it its CapEx is, I think, like a couple billion dollars. Yeah. Yeah. So you can't just go to your supplier and be like, hey, just do this. Like, that's not the way foundries work.
Speaker 2:Because TSMC is also fabbing for Apple and Google Yeah. And
Speaker 4:Yeah. Mean, NVIDIA is the bulk of that. Okay. As well as like they removed all the h 20 from the production line and most of what is remaining is like what's in the inventory. Mhmm.
Speaker 4:And as well as like people confuse, conflate constantly. Especially with these like NVIDIA bears where they assume that NVIDIA is actually making the lithography, assuming that they are the ones that control control the four nanometer process. Yeah. They're not. Like, they hire someone else to do that.
Speaker 4:That's why I said last time
Speaker 3:You wanna put this on while you're playing the bear?
Speaker 2:I'm just gonna get a panda, man. Was gonna get panda. Panda. If you put that on, you will not be able to see anything. Can you even hear me?
Speaker 2:But but he's not the
Speaker 3:He's just role playing. Yeah.
Speaker 4:Role play? I mean, we're in Hollywood.
Speaker 5:So the You
Speaker 6:can just throw it
Speaker 4:down. Yeah. But the Most of the NVIDIA bears, they they, one, they don't understand the segmentation of actually how the space
Speaker 5:is made.
Speaker 4:Two, they underappreciate the platform that is associated with NVIDIA. And three, go look at the list of the Super Intelligence team.
Speaker 2:Okay. You know? Are are you Am I hearing you correctly when you're saying NVIDIA instead of NVIDIA? Is that correct?
Speaker 4:It it's yeah. It's like NVIDIA.
Speaker 2:Okay. I was wondering if there's like a a pronunciation that I'm getting wrong. Yeah. Visibility and leverage. Mhmm.
Speaker 2:One of the reasons we want to be able to export to China is that it gives us more visibility into where the chips actually end up. Whereas Sure. If there's a diversion regime where they're all going to Malaysia and then flying wherever Yeah. They could be going to North Korea. Whereas, at least if we are licensing to send them to China, we know it's going to Alibaba.
Speaker 2:It's going to ByteDance, and that's not that's not the worst possible place that they could go. Yeah. What do
Speaker 5:you think
Speaker 2:about that?
Speaker 4:I think it's reasonable.
Speaker 2:Is that a reasonable argument? Yeah.
Speaker 4:That's reasonable.
Speaker 2:Okay. Yeah. What about just 15% for the big guy, Uncle Sam? Is that a good reason to export?
Speaker 4:The funny thing is you remember by the Biden thing. Right?
Speaker 2:What was that?
Speaker 4:Remember the Biden? No. The Ukraine, it's called the big guy. Leave aside for the big guy.
Speaker 2:Okay. Oh, yeah.
Speaker 4:Yeah. The the backdoor payments.
Speaker 2:Okay. So this is as American as pot.
Speaker 3:That's That's where I that.
Speaker 4:Oh, okay. So it's homage to Biden. Right?
Speaker 2:Okay. Well
Speaker 4:well, if you know, if he was sentient,
Speaker 5:he would be he would be appreciated.
Speaker 4:Shots fired. So the I mean, so export taxes are are illegal Yep. By the constitution. Yep. That's that's an immutable fact.
Speaker 4:Yep. They in some respects, like, I'm very happy about reshoring to our shores. I'm very happy all this. This is voluntary as far as I could find out, completely voluntary. Yep.
Speaker 4:He's he's not gonna increase the price to China. I guess what some people have been saying that it's a guy, oh, like, as if it's just weird, like, some of the the Nvidia hawks or or AI doomers are like, well, now NVIDIA is gonna be more expensive than Huawei. I mean, one, Huawei is already cheaper. Yep. But two, like, now you
Speaker 2:want NVIDIA makes more money? Is Huawei cheaper on a, like, dollar per kilowatt basis, like unit energy?
Speaker 4:No. No. For, like, a or Huawei is cheaper as, like, a whole holistic solution.
Speaker 2:Okay. Got it. Yeah. Yeah.
Speaker 4:Yeah. It's it's more expensive to run, but they don't care.
Speaker 2:I mean, I I heard a a take from Dylan Patel at Semi Analysis that with this 15% tax Mhmm. The h 20 is already less profitable than the h 100. Mhmm. And so this could potentially put them in a nightmare scenario of having similar gross margins to AMD. Mhmm.
Speaker 2:Yeah. Because AMD is is is is way, way lower. So I think they will be fine.
Speaker 4:Yeah. They
Speaker 2:will be fine. So so maybe that's a good maybe that's a good reason. Yeah. It does seem like tariff revenue is going through the roof for The United States and
Speaker 4:Yeah. That 300,000,000,000 is projection or something like that?
Speaker 2:Yeah. Yeah. Like, it does seem like money is flowing into the government at some level that's higher than previous years. Right.
Speaker 4:You know, and so far, the way that
Speaker 3:Check the PPI though. Well,
Speaker 4:so far, it's not really coming from our pocket. Right? So the Yeah. About 80% is absorbed by companies. Okay.
Speaker 2:So yeah. Okay. Sustain chip leadership. If we export the h 20 to China, this allows this puts more dollars in American companies' pockets to fuel future versions of CUDA, future learning curve step downs in chip dominance, and it will ultimately unlock the American ability to produce the the one nanometer chip, the zero nanometer chip, the negative one nanometer the negative one nanometer chip, which is what we're all hoping for, to bring down
Speaker 3:gross margins, then negative nanometer chips.
Speaker 2:That's the future.
Speaker 3:Something there.
Speaker 2:That's the future.
Speaker 4:This is, I think I think it's indifferent to to NVIDIA. I think this matters more to like the Indie cards. Okay. So the Crocs, the positrons, the Etches of the world, like, I would apply that to there, but in terms of because people forget that every rule that applies in NVIDIA applies to them too.
Speaker 2:Yeah. Yeah.
Speaker 4:Yeah. And and cutting off half of all AI developers. Okay. To to NVIDIA, like, I think it would have, like I said earlier about profit like, profit side. I think it's kind of
Speaker 6:Two blue percent.
Speaker 4:Yeah. Yeah. But to an AMD Yeah. Could be a much bigger deal.
Speaker 2:Okay. What wait. You mentioned the the the new chip companies, Etched, Cerberus Grok. Grok, etcetera. Yeah.
Speaker 2:Bazadrilla. Yeah. Mhmm. Do do any of those chips I mean, I imagine that they all fall under the chip restrictions because they are they were never designed to be nerfed. Correct.
Speaker 2:But if the nerf is around, like, memory, some of them don't even do HBM, for example. So are are any of them sneaking through currently? Do you have any insight into what's going on with those new chip companies and exports?
Speaker 4:I mean, as far as I know, every deployment I've heard about with the Indy cards, they all required a an export license.
Speaker 2:An export license? Okay. So they might be paying 15% going forward.
Speaker 4:Possibly. Mean, I think this really applies to NVIDIA and But again, this is where going back to I am a free marketer where
Speaker 2:Yep.
Speaker 4:I give props to the president for being creative. At the same time, it does open up weird doors.
Speaker 5:Okay.
Speaker 2:What about this idea that it forces China to subsidize their domestic chip manufacturing supply chain more aggressively? And that takes money out of the pocket of the CCP. Mhmm. Because if they wanna stay competitive, if they wanna keep Huawei competitive, if they wanna keep SMIC and SME competitive Mhmm. They need to tax their population and spend more money to make those chips happen.
Speaker 3:The history of China subsidizing various industries, it's gone fairly well for them. Mhmm. So I don't necessarily
Speaker 2:Yeah. This might be marginal, but what's your take?
Speaker 4:Yeah. Generally speaking, the Chinese customer wants Nvidia. Mhmm. They they do not want Huawei, which is why the financial town is reporting as
Speaker 2:it And that's purely because of CUDA or just pricing or everything?
Speaker 4:It was because the goal of the CCP regime is stability. And Nvidia reintroduces a new vector that they can't control, As well as, like, many of these rules, people have to understand that, yes, the standing committee and the central committee has the ability to influence what the original governors do. Mhmm. But many of these things that are being reported are coming from the governors. Mhmm.
Speaker 4:And governors have really like, China's very, very federalized.
Speaker 2:Okay. Now we're now we're in meme territory. But important. Important. So, one of the benefits of exporting age twenties to China is that, they will become addicted to AI girlfriends and AI boyfriends, and this will hasten population collapse.
Speaker 3:So, theory, we should give them as many chips as they want?
Speaker 2:Yes. If AI is bad, an AI will lead to an AI girlfriend Is
Speaker 4:this yours?
Speaker 3:Mean, this has been an ongoing discussion.
Speaker 2:No. Everyone's worried about this. Everyone's worried this. This is this is this is on the timeline. So if you think if you think that deployment of a frontier AI is is bad for
Speaker 3:the population doomers, the one shot crowd should be heavily in favor of giving them as many chips as we can get.
Speaker 2:Imagine imagine think of this. Imagine Xi Jinping is thinking about invading Taiwan. He fires up some h twenties. He's like, I've gotten to the frontier of warfare. I've I've I've discovered new warfare techniques.
Speaker 2:Yeah. And he's completely delusional. And everyone realizes that he's been one shot by AI psychosis. And it creates upheaval in the country, which would be net beneficial for America, maybe.
Speaker 4:That is flipping around the doomers
Speaker 2:culture. It's more of a
Speaker 4:small Yeah.
Speaker 3:Yeah. More traditional form.
Speaker 2:Okay. What about, what about this last one? One of the benefits of exporting the h 20 to China will be it will force China to invest in negative gross margin businesses. And they will and they will get over their skis and they will fund a whole bunch of companies with negative gross margins and it will
Speaker 3:chain of losses with negative gross margin companies selling to negative gross margin companies and just destroying value.
Speaker 2:Exactly.
Speaker 4:What about that? Well, as a positive gross margin company, yes. Yeah. They they they love doing stuff like that.
Speaker 2:They do? Yeah. Oh, yeah. They kind of I
Speaker 3:didn't know you had positive gross margins.
Speaker 2:Get out
Speaker 3:of here.
Speaker 2:Yeah. See
Speaker 4:you. How
Speaker 5:dare How
Speaker 4:How dare dare you?
Speaker 3:In this economy, how dare you? Yeah. Exactly. How
Speaker 2:dare you? Let's flip over to the reasons for the ban. Mhmm. You're gonna need to debunk these. Alright.
Speaker 2:I'm I will play I will play the the role of the pro h 20 ban. Let's keep Hawk. Yeah. Keep age twenties in America.
Speaker 3:Kugen the hawk.
Speaker 2:And the first yeah. Yeah. The faux hawk. I'll I'll style my hair in a faux hawk. The the the true China hawk who wants to ban NVIDIA H20s would say that that by exporting Mhmm.
Speaker 2:We will wind up with increased capabilities for China. We want to keep AI. We want to keep anything that is that is valuable to their economy, valuable to their military capabilities, anything like that out of their hands. Why should I not be worried about that?
Speaker 4:I I think it's one that the fact of going back to what Jensen said, which is accurate that over half of the super intelligence team is actually Chinese nationals Mhmm. And then add in the people who are Chinese descent, it's like 75%. Mhmm. So we can't really control that.
Speaker 2:Okay.
Speaker 4:Math is universal. Yes. Like engineering is universal. So saying that it's like saying we're gonna we're gonna really control the way French make croissants. And we're gonna really get after them and
Speaker 2:say, Let you
Speaker 1:cannot use that much
Speaker 2:me let me steal man this more. Let me steal man this more because because, yeah, math is universal. E equals m c squared is universal. Yeah. Basic physics is rocket science is universal, and yet we might not want to export rocket motors because then you can just build up extra capability.
Speaker 2:Mhmm. There is a difference between having the weights of a model and being able to it a trillion times a day Mhmm. Across your entire population. That might be a strategic advantage.
Speaker 4:Yeah. Yeah. Again, I go back to the fact of that China's gonna China. Mhmm. And and there there are very limited things we actually can do and the things we can do going back to this idea of like, we can make them more dependent.
Speaker 2:Sure. Sure.
Speaker 4:Right? Because one of the things I believe about trade, one of things I believe about free markets is like I'm, as a universal, I'm against war. Mhmm. I think conflict is bad.
Speaker 6:I agree.
Speaker 4:And and at times it's just Mhmm. Just war theory. But when you kind of just hyper focus on this, you overextend what we think we actually can do.
Speaker 5:Mhmm.
Speaker 4:And and this is where America as the Yeah.
Speaker 3:But the China hawks are gonna say
Speaker 4:This will
Speaker 3:you know, have a a potential conflict with Taiwan. They're gonna
Speaker 7:But this
Speaker 4:increases So that's the funny thing about the all these China hawks things, is like they're creating the scenario for war. Mhmm. Like all of these things, many of them we can't control, many of them we can't Mhmm. And then we let's say
Speaker 3:they are gearing up to try to take Taiwan, don't we want them to have less compute?
Speaker 4:No. This, like, this basically include increasing the dependency on us decreases the
Speaker 3:they're gonna they're already focused on decreasing their dependency on American companies, Taiwan itself. Mhmm.
Speaker 6:It's already happening. No. No. I
Speaker 4:I think you're, one, you're overestimating the, one, the power that the actual the central committee actually has. And two, many of these things, you have to delineate between what is bloviating and propaganda and actual reality. The Chinese companies operate very differently than what actually happens in the committee. So it's it's Yes. The the committee has a lot of power, but it's it's more of like structured socialism than it is communism.
Speaker 4:Mhmm. That that all of the ingenuity around deep seek came from just Chinese engineers trying something. Yeah. Yeah. It was not the committee was like, go be better at this.
Speaker 4:And I think there there's many things Don't make where this they think that we can impact it because we view it as a state by state actor action. When in reality, it's like it's like almost like China's coming to y'all and saying, hey, you gotta, you know, do the less Gong stuff. And he goes to the president. He goes, hey, Jordan John, they they hit the Gong too much. And Joe Trump's gonna be like
Speaker 3:They've already tried.
Speaker 4:I I was like, what am I, you know, what am I gonna do about that? Right? It's like like, John Jordy, the great, the
Speaker 2:beautiful, beautiful human beings. Right? Yeah. So I mean, there's a lot of dynamic in in China that I think is maybe underrated, is that even though Beijing is pressing Alibaba and ByteDance to not buy age twenties, Alibaba and ByteDance are independent companies. They don't want to be GPU poor.
Speaker 2:They want NVIDIA chips.
Speaker 4:Yeah. Like like like they'll they'll, you know, placate. Of course. Yeah.
Speaker 2:They'll be compliant, but but if it was up to them, they would buy the best and they would buy the most.
Speaker 4:And this is why leaning into our strings
Speaker 2:Yep.
Speaker 4:Which is like we are the best at making chips. Yep. Let's draw them
Speaker 2:Yep.
Speaker 4:Create maybe a division in the ranks Yep. Right? Rather than just being here being like, China. Right? It's like many of these are are one, are failed neocons.
Speaker 4:Right? Who make up these kind of like reasons and excuses and got us into all these like wars that didn't go anywhere. Mhmm. But then you actually like read into, okay, so let's say we did all this stuff. It actually creates a scenario for war.
Speaker 4:Yeah. This actually creates a scenario for less war. Yeah. This creates a scenario of maybe division in the ranks. Yep.
Speaker 4:Right? Because we increase the dependency, we increase trade, and therefore, lowers the threshold. Yep. But but this creates isolation, which therefore increases likelihood of an invasion of Taiwan.
Speaker 2:About the risk of of short term leverage Mhmm. Over, you know, China dependency, over long term independence? I'm thinking of that IP leakage point, the idea that Yeah. Maybe cloning the Kuta Eros it
Speaker 3:to you, brother. The IP's leaking.
Speaker 2:It is true that, obviously, they can get their hands on one h 20, tear it down, reverse engineer it. But there might be gains to be had from running a true h 20 cluster, the lessons that you learned from that, and then porting that back to Huawei Ascend clusters. And so is there any is there any risk of of of setting up a, you know, a series of large h 20 clusters that actually allows that actually accelerates Huawei?
Speaker 4:So this is what's different about the Trump One of the differences between Trump administration and Biden administration. Yep. Biden administration was actually not that focused on this Mhmm. Because they basically targeted the ability to buy chips Mhmm. But they didn't really have as much restrictions on the ability to make chips.
Speaker 4:Mhmm. Trump is targeting the ability to make chips
Speaker 5:Sure.
Speaker 4:And having less restrictions on the ability to buy
Speaker 2:Okay.
Speaker 4:Because if you can't have the ability to make, it's
Speaker 3:like But NVIDIA has an R and D center in Shanghai. Yeah. But they but
Speaker 4:they don't they don't
Speaker 8:Yeah.
Speaker 5:Make anything.
Speaker 2:Right? That's different than ASML and and TSMC. Correct. And so and so Yeah. What we're hearing is
Speaker 3:from an IP leakage standpoint. I'm just saying it's not being it doesn't get solved by the ban, but it's happening recurrent.
Speaker 4:The software is made the software is made in America, but but again, it's it's one is like most of that stuff is open source because again, it's it's a combination of hardware and software.
Speaker 2:Yeah.
Speaker 4:But the IP leakage you should be concerned about relates to foundry equipment. Does not relate to NVIDIA. That that is a very, very low threshold
Speaker 2:Like Zeiss and Trump, like those companies.
Speaker 4:Yeah. They
Speaker 2:make the mirrors that go inside
Speaker 9:the The
Speaker 4:EDA like the EDA software stuff that like just, you know, basically came out about. Like, that stuff relates to the ability that's the IPLaggage support.
Speaker 2:And I'm not seeing anything in the news about Trump moving on allowing ASML to
Speaker 6:to send direction of Biden administration.
Speaker 2:He went the options.
Speaker 4:Yeah. Yeah. Okay. So if because if you control the ability to produce then all this good stuff starts happening.
Speaker 2:Sure. Sure.
Speaker 4:Sure. But if you're like which is what happened in the previous administration was they inverted it. They thought that because the as I said last time on your show, that they associate GPUs with AI dimerism. Yep. And if you remove the, like, AI is a god and we don't want a Chinese god
Speaker 2:Yep.
Speaker 4:Then all this stuff kinda just doesn't make any sense.
Speaker 2:Okay. Let's get into the meme ones. The meme ones. One of the reasons one of the reasons to ban exports at age twenties Mhmm. To China is that it will result in higher employment for Chinese thumbnail artists.
Speaker 5:So the
Speaker 2:Chinese thumbnail artists are obviously going to be put out of business by generative AI models. If your if your job is is creating a ton of slop content on Uh-huh. Listicle websites, you're having a rough time with the rollout of GPT five, of course.
Speaker 4:Sure.
Speaker 2:Right? Large language models. And so if we if we hobble the ability for China to run LLMs Mhmm. That will result in higher employment for thumbnail artists. What about that?
Speaker 4:I mean, China is not the lowest cost manufacturer or producer of content or or in tablet. Like, it's The Philippines, Malaysia, Mexico.
Speaker 2:That's true. They actually do a lot of work in the factory that's less displaceable. They Yeah. They should be worried about robotics potentially. Yes.
Speaker 2:Humanoid robotics.
Speaker 4:Yes. But but, you know, maybe that does what where was that thing?
Speaker 7:Yeah. Right there.
Speaker 2:Yeah. Yeah.
Speaker 4:Yeah. Yeah. Yeah.
Speaker 2:Yeah. About incentivizing AI researchers to leave so they can be GPU rich? You're a top AI researcher in China, and and and and you can't get any h twenties, and you're sick and tired of working at a GPU poor company like Alibaba
Speaker 5:Sure.
Speaker 2:Or ByteDance, and you say, you know what? I'm going to MSL. I'm going to Meta. Going to OpenAI. I'm going to Anthropic.
Speaker 2:I'm hopping a flight to San Francisco.
Speaker 1:Isn't that a positive?
Speaker 2:Yes. Yes. So that's why we should ban it because if they're GPU rich over there, they'll stay. Oh, if they're GPU poor, they will say, I got Zuck is setting up 100,000 h one hundreds in tents. I wanna train on that.
Speaker 2:I gotta get to Palo Alto.
Speaker 4:Yeah. But as well as like Alibaba isn't gonna pay them a $100,000,000.
Speaker 2:Exactly.
Speaker 4:Yeah. No. No. No. No.
Speaker 4:It's like if it's independent.
Speaker 2:Yeah. But but they both they both have factors. Right? And so if you keep the the the Chinese AI company's GPU poor, it will be an incentive for AI researchers to come to America.
Speaker 4:I mean,
Speaker 6:it's it's
Speaker 2:It's a good argument. Right?
Speaker 4:I mean, on the edges, maybe.
Speaker 2:Yeah. But Marginal. Marginal.
Speaker 4:Yeah. Yeah. Yeah. Like, it requires lots of confounding factors that, Yes, like
Speaker 2:yes, yes.
Speaker 4:Make it an unpredictable sort of thing. But, I mean, again, like, I I don't think I think the desire to be on the superintelligence team, I mean, you know, would you want to go be on it for a billion? That sounds pretty nice. Right? A billion dollar
Speaker 2:Yeah.
Speaker 4:Cash out. So like I'm happy right here. You're happy right here. I don't know. Mean, look at the car outside.
Speaker 4:I don't know. A billion dollars. Right? But but that is completely independent of GPU capacity. Yeah.
Speaker 4:So that that's where this is much more of a and actually, let me maybe inverse this argument because I think a lot of the constraints as we've seen on the recent frontier models are heavily driven by talent. Mhmm. So if we keep the talent over there Yeah. And they're basically provide artificial constraints because we give them these things
Speaker 2:SPEAKER Yep.
Speaker 4:Then actually, they're gonna make more progress SPEAKER Yep. SPEAKER on making it more efficient
Speaker 8:SPEAKER Yep.
Speaker 4:SPEAKER and become more skilled at things that we're not skilled at.
Speaker 2:SPEAKER Is there a risk that they go close source and we don't actually we're not actually able to port back the the inference savings that we're seeing from DeepSea?
Speaker 4:No. Because I think they're real I mean, they don't care about open source. They get they're they're very clearly
Speaker 3:They care about soft power.
Speaker 4:Yes. Yeah. And so that that's why they're doing everything they're doing, which is kind of counter us.
Speaker 5:Mhmm.
Speaker 4:That that I would I'd say that China generally behaves as a very ingenious population. Mhmm. But in terms of being they're much more reactive Mhmm. To us than we than we presuppose. Mhmm.
Speaker 4:But there is an there is an innate desire in the population to have soft power. That's why they did the Belt and Road Initiative. Mhmm. This is like the basically renewed effort. So I'd rather basically starve them of any capability to actually project power externally by creating an export nation, and that we can basically become the dominant export nation.
Speaker 4:And that where like something like this is that in reality is that they just have millions and millions more engineers than we do. Mhmm. And and so we want those people to come to America if they, you know, basically want to betray the regime.
Speaker 5:Yeah. And
Speaker 4:we wanna make sure they advance that IP. But if we continue to isolate them, that basically they're just gonna make advancements Mhmm. Even though they are GPU poor. Mhmm. Because that that goes to an overprotectionism on our side Mhmm.
Speaker 4:Where we create a more GPU slop. Because we have way more high performance computing and we just don't care to make it efficient. Sure. So I'd rather have that be to where all that stuff is just happening on our stuff. So in some respects, by giving them more, we actually decrease the incentive for them to make innovations because they actually will have more GPUs.
Speaker 2:So this is the this is solution focus on efficiency. This is the solution to negative gross margins. This is what will save venture capital. It all comes back. Anyway, I wanna go to a post that you put up.
Speaker 2:We can wrap up with the the board. If you want to design if you wanna take that board and design it into a beautiful graphic, do it on figma.com. Think bigger. Build faster. Figma helps design and development teams build great products together, and you can get started for free.
Speaker 2:You posted, this is really a race between America and the world Uh-huh. And you have the generative AI startups ranking OpenAI, DeepSeek, Anthropic, xAI. What was your takeaway from this chart of gen AI startups?
Speaker 4:I Oh, that one. Yeah. They I think it's a Yeah. China's obviously listed listed the most out of out of America. Mhmm.
Speaker 4:But I think one is that it's our ability as a nation to invest in stuff that we think is revolutionary
Speaker 5:Mhmm.
Speaker 4:And become again the default nation. We wanna be the standard, wanna be the exporter. But in reality is that seeing When have we ever seen a great wave of new infrastructure development that has occurred this fast that's international?
Speaker 5:Mhmm.
Speaker 4:So that goes back to whatever China shocking person that you're talking about.
Speaker 2:Yeah.
Speaker 4:That's where he does it. That's why I make a little bit of a jess of a joke of has he talked to anyone who doesn't live in America? Yeah. Because we haven't ever seen that in Silicon Valley to where
Speaker 6:there's a
Speaker 4:big motion in Silicon Valley to do this investment, know, social media, mobile, web three, and what we see now is the fact of like all these countries are doing sovereign
Speaker 6:AI projects. Mhmm.
Speaker 4:That's where the roll up effect, the ability for us to control this is it's way more like bitcoin Mhmm. Where it's something accessible to everybody. Mhmm. And and that's what leaning in on that side is kind of accepting the escape velocity that we're in Mhmm. Versus the other side wants to live I think in a little bit of a fairy tale being like, wouldn't it be nice if we control those things?
Speaker 4:If it's it's like if you have children, you're like, well, wouldn't it be nice if you stop hitting your sister Mhmm. And you're the kids gonna be like, right? And it's Yeah. It's like it's like you can only you can really only extend yourself so far when you are a world occupied by multiple free agents, multiple sovereign nations. Yeah.
Speaker 4:And so I'd rather lean into our strengths where we can actually execute control.
Speaker 2:Yeah.
Speaker 4:The more that we are a platform, the more soft power we have. Therefore, I believe more peace and more prosperity, less starvation, good or greater things for humanity and we can still control things.
Speaker 2:Yeah.
Speaker 4:But if we're in this other side where we think that we can just hit people with sticks, like they're just gonna be like, alright, I don't wanna play this game
Speaker 2:anymore. Would you go further? Would you allow the export of the b 200?
Speaker 4:The the I I I think some version of Blackwell should be in there. I I don't have much of opinion on how much nerfed it should be or anything
Speaker 2:Gavin Baker had a good post that you reposted. He said any journalist describing NVIDIA h 20 as an advanced chip is not a serious person. They're either ignorant or ideological. The h 20 is is sir is circa four years behind the actually advanced b 200 that NVIDIA sells to America and our allies. The b 200 has 30 x more compute, two x the memory bandwidth, two x the memory of the h 20 sold in China.
Speaker 2:Arguably, a 100 x more usable compute. Selling h twenties to China is good policy as they are slightly 1.5 x better than domestic Chinese accelerators. Selling the h 20 thus effectively slows down the development of a robust domestic Chinese AI accelerator ecosystem, which would be good for China long term. In the event of conflict, we would simply stop selling h twenties to China, and that would be and they would be left with inferior domestic alternatives and America would have a five to six year technology advantage over those domestic alternatives. Conversely, if we do not sell the h 20 to China during peacetime, they would absolutely build effective domestic alternatives over time.
Speaker 2:These alternatives would almost certainly be less powerful of less power efficient than NVIDIA. See the Huawei Cloud Matrix three eighty four with its super fast but but power hungry optical scale up fabric. But China has way more power available for AI than The United States due to their embrace of solar. Selling h twenties selling h twenties to China during peacetime is also good for the world and America because it means their AI ecosystem is comparable to the American AI ecosystem and we can easily adopt the impressive algorithmic innovation seen in their open source models like Deepsea. Mhmm.
Speaker 2:And the world benefits from a robust Chinese open source ecosystem that remains well behind American closed source frontier models. The fact that the Chinese government is discouraging the use of h twenties in favor of domestic alternatives should tell a rational dispassionate observer that all they need to know about which country benefits from the sale of h twenties in China. Mhmm.
Speaker 4:Sound power.
Speaker 2:Yeah. My my my question is is is there something structural going on where where China has to remain open source because of their position in the market?
Speaker 4:Yeah. Like, I think what's what Gavin is reflecting, which is more of my disposition
Speaker 5:Mhmm.
Speaker 4:Is if we're gonna make a strategic decision around because we we want to still want to be the dominant superpower in the world, we have to be realistic and pragmatic about where we are. Like, the fact is that we have I don't know how how high is the debt, 30,000,000,000,000. Right?
Speaker 3:And It's
Speaker 2:it's it's in the age of AGI. Well, once we get a fast take off, it's
Speaker 3:all good. Fix assist.
Speaker 4:Yeah. Yeah.
Speaker 2:If we just grow GDP at 5000% a year, we're fine.
Speaker 4:Yeah. Yeah. Five yeah. So so the, or just like fudge the numbers. Right?
Speaker 4:The That would if we're gonna make a decision about any sort of policy Mhmm. Trajectory, we have to understand like what we actually are. Like, we generally have a quite hostile politics. We have many states that are essentially bankrupt. And we have a military that is still the strongest but is kind of lacking on the asymmetric capabilities which is why we have Androle being created.
Speaker 4:So, if we're gonna say, hey, we're gonna go to basically to soft war with somebody Mhmm. We should really understand what's what's going on. And and I think there's many people who occupy the China hawk policy who, like as Gavin said, who don't even understand this technology. Yeah. Or they commingle TSMC with Nvidia.
Speaker 4:And so, if they if they're if they're constructing an argument based on bad priors, then it's really hard to take anything else they say seriously Yeah. Because it and that's why I go back to the AI. If you remove the AI doomerism, many of the people who are China hawks are just actually AI doomers. They think that Terminator is coming. It's gonna kill us all.
Speaker 4:We're just robots. A very old Do disproving
Speaker 2:that's you the flow? I I thought it might be the opposite. It's like you're a China hawk and you need to justify your policy and so you you wrap it in paper clipping.
Speaker 4:Yeah. I mean, I can go like either way. Yeah. I can say going either way. Yeah.
Speaker 4:But but I just don't believe that. And and if you have any for for example, the number of genes you have is like basically hundreds of The number of cells you have is in is in the billions. The number of neuron synapses you have is about 500,000,000,000,000. The number of basically spaces in the model that like Open Open AI uses is 500 times less.
Speaker 2:Yeah.
Speaker 4:Right? And even in the fact even in the fact of like the way that we construct LLMs a day, if you did that in a human brain, that's called a seizure. Right? So so like we have to we have to realize that that it doesn't mean Don't
Speaker 2:make mistakes and don't have a seizure. Like it doesn't
Speaker 4:mean AI AI can be amazing. Like it doesn't mean any of these things. But it's very different than from from intelligence. There's enough in
Speaker 2:Back on the Kurzweil timelines. It's back on Kurzweil. It's this argument that, you know, the the singularity will occur when the the total amount of flops Mhmm. In computing is is greater than the total amount of flops equivalent in the in the human brain. And we're we're orders of magnitude away from that.
Speaker 2:Yeah. So you really have to you really
Speaker 4:Within one human being, it will encompass all the can be can be competing power
Speaker 2:Yep.
Speaker 4:In that lifetime of eighty ish years a person lived Yep. Than anything we have on planet Earth.
Speaker 2:Yep.
Speaker 4:So so like, just sit down and be humble. Like, because when you're humble, you can like basically appreciate. Because because even the fact of like what the the way elements work are very directive.
Speaker 2:Yep.
Speaker 4:But that's not even the way attention works and perception works.
Speaker 10:Mhmm.
Speaker 4:Like, do you recognize you're sitting in a chair? Like, do you feel that? Yeah. But your body does, but your brain doesn't acknowledge it. Right?
Speaker 4:So like even that differentiation between that there is so much computing happen in your body that you're not even aware of, which makes this such an effective species. And LLMs, again, they're great. Like it it but you're overextending yourself to thinking that because you have all of this power and all this energy being being able to generate T Flops that you're gonna say like, oh, you're a person now or you have sentience. Yep. And that's just not the way the brain works.
Speaker 4:Yeah. And that's not even the way intelligence works. Yeah.
Speaker 2:I like that there's some I think it's a Wilmanitis post where he's saying like when they invented the steam engine there were people that were saying like the brain is just like a steam engine. And then when they invented the the gasoline powered engine they're like it's just like the the human brain is just like a gas powered engine. Mhmm. And then when they invent the the CPU they're like the brain is just like a CPU and GPU. The brain is just like a GPU.
Speaker 2:And then People want to like bring their their their current technology understanding into like the human
Speaker 4:And and and maybe we have Go ahead.
Speaker 3:Cars, 10 horsepower.
Speaker 2:Yeah. It's the same yeah.
Speaker 5:There's 10 horses
Speaker 4:in neighborhood. They And and and it's like one of the things I I love about the the brain so much is like it's it's it's very for example, the its ability to be plastic, right, being able to mold itself Yeah. Which LMs can't do. Yeah. Because they see novel information and they basically just like, bleh.
Speaker 4:Right? They they kinda like freak But but even even now we understand neuromodulators like acetylcholine, dopamine, like, neorephrin, even though we understand that, whenever you see something, you know, you're you're y'all have kids, when you see your kids, Your body releases these neuromodulators that creates basically the attachment to synapses and forms memories. And the way that we even understand that cocktail, we just know it just gets released. We don't know the percentages. We have no freaking clue.
Speaker 4:And and as well as like if I take your brain and then release it the same amount, right, just like take electrons there and just boom. Mhmm. Right? That you don't have the same effect. Right?
Speaker 4:That that how does directive and focus impact cells? We have no idea. Like like like you can you can, for example, like hold this gong or hold that. Right?
Speaker 3:You're Diet Coke.
Speaker 4:Yeah. Like like even these two things. Right?
Speaker 3:When you have a fridge cigarette.
Speaker 4:There you're how how does like information affect this Diet Coke and this, like translate from cell information Yeah. To the fact of me and eliminating caffeine. And and science has no clue like how that works.
Speaker 2:Yeah.
Speaker 4:But we know it works.
Speaker 2:Yeah.
Speaker 4:And and so So
Speaker 3:I expect podcasters to figure it out. Right?
Speaker 4:I mean, the the do you all watch Tim Dillon?
Speaker 2:Of
Speaker 4:course. He has a
Speaker 2:He doesn't watch anything.
Speaker 4:Yeah. Has a great thing on like podcasters. Blank slate. He's a blank Yes. Exactly.
Speaker 2:Of the alpha.
Speaker 3:Every show. Every show.
Speaker 4:All the alpha.
Speaker 3:I have a three hour context window.
Speaker 2:That's true. Anyway, Aaron Gin, thank you so much for stopping by.
Speaker 3:It's great to see you.
Speaker 2:Great to see you. Thanks for coming in person.
Speaker 4:Thanks, Mike.
Speaker 2:Fantastic. Let me tell you about Vanta. Automate compliance, manage risk, prove trust continuously. Vanta's trust management platform takes the manual work out of your security and compliance process and replaces it with continuous automation whether you're pursuing your first framework or managing a complex program.
Speaker 3:Let's take it over to Mark Gurman himself.
Speaker 2:Mark Gurman.
Speaker 3:He has some new reporting. Apple plots expansion into AI robots home security and smart displays. Apple Inc is plotting its artificial intelligence comeback. Don't call it a comeback. Actually you can call it a comeback.
Speaker 3:I'll give you
Speaker 2:It makes sense. They've been they've had they've they've gotten a lot of hate over the last few years for the role just particularly the rollout of Apple intelligence. Very hyped. A lot of features on display at WWDC that didn't ship when the new iPhone launched. They sold the new iPhone against Yeah.
Speaker 2:Exactly. And so I I think that there were there were high expectations because of Apple's position with on device inference I being very
Speaker 3:gave you Genmoji. Are you not entertained?
Speaker 2:They shipped a few things. I think that I I would love to see the Genmoji actual usage data because I feel like even though it's not popular in teapot and on x and in the tech the technoradi, It might actually be seeing, like, decent adoption and joy. I mean, I've seen people share generative imagery from Microsoft Copilot, which I had no idea was a popular image generation platform.
Speaker 3:What's Facebook crowd.
Speaker 2:Exactly. So so I I I wouldn't be so sure that Genmoji is is producing zero value. But at the same time, it's clearly been a tumultuous time for the company. They've been kind of on defense in terms of public relations. But Mark Gurman is still scooping every single day.
Speaker 3:Apple's plotting its AI comeback with an ambitious slate of new devices including robots, a lifelike version of Siri, a smart speaker with a display and home security cameras, a tabletop robot that serves as a virtual companion targeted for 2027 is the centerpiece of the AI strategy according to people with knowledge of the matter. The smart speaker with a display meanwhile is slated to arrive next year part of a push into entry level smart home products.
Speaker 2:Entry
Speaker 3:level. Tabletop robot that's a virtual companion. Yep. That's big.
Speaker 2:Lot of lot of software they got a right to make that work. They gotta get on graphite dot dev code review for the age of AI. Graphite helps teams on ship on GitHub ship higher quality software faster. Tim Cook, if you're listening, get on Graphite. Get on Graphite.
Speaker 3:So this is big too. Home security is seen as another big growth opportunity. New cameras will anchor an Apple security system that can automate household functions. The approach should help make Apple's product ecosystem stickier with consumers so the people who ask not to be identified because the initiatives haven't been announced.
Speaker 2:I mean, this seems like something that they could knock out of the park. Just True. The smart thermostat. Like, these these patterns have been defined for a decade. And that's, like, the sweet spot for Apple to come in and like, the Sonos home speaker where we were saying, like, it they're just the like, the speak everyone knows what they want out of a connected speaker system.
Speaker 2:They just want it at the level of Apple execution. It doesn't require going zero to one in some new territory. And so I feel like they could be very successful in in the home video monitoring, home thermostat, home speaker. So I I I think I like this overall. The robot is where it gets funny because this feels crazy.
Speaker 2:But I'll I'll let
Speaker 3:you Going into companionship feels interesting.
Speaker 2:I don't think it's companionship. I I I I don't I don't think of it like that
Speaker 3:top robot that serves as a virtual companion is the centerpiece of the AI strategy.
Speaker 2:I mean, so let let's read what the actual report is on this robot. The tabletop robot resembles an iPad mounted on a movable limb that can swivel and reposition itself to follow users in a room like a human head. It can turn toward a person who is speaking or summoning it and even seek to draw the attention of someone not facing it. The hope is to bring AI into life. I don't think of this as, like, companion necessarily.
Speaker 2:This could just be
Speaker 3:Jarvis.
Speaker 2:Assistant. Yeah. Jarvis. Exactly. I mean, I guess Jarvis isn't a companion, but companion has a bad flavor to it right now, a bad a bad vibe because people are saying like, I married my companion, and that feels very Black Mirror.
Speaker 2:I do think that there is a serious Black Mirror risk, but I'll I'll go into that in a second. But what were you about to say?
Speaker 3:Yeah. I'm I'm not going out and saying this this feels like a competitor to friend.com or any other players that are actually focused on companionship.
Speaker 5:Mhmm.
Speaker 3:But this does feel like giving Siri Yeah. A presence in the home. Yeah. Like an always on presence in the home.
Speaker 2:It will be interesting to see how they solve it. A partnership with OpenAI or Anthropic seems logical, but Apple Siri partnership with OpenAI and Anthropic before September on Polymarket is a 6% chance. By December, it's at a 44% chance, though. So but this is a very low volume market, but still, it feels like we haven't seen a lot of messaging from Tim Cook that they're gonna be building a huge data center, going to be training foundation model. It feels like they're going to need to partner on some of the underlying infrastructure for that because I would not I would not want Siri hanging out in my kitchen talking to me.
Speaker 2:Like Yeah. Siri is just not reliable enough, but I would I would welcome Claude or or Chatty PT into my house. So Tim Cook. But I I would treat it specifically as a like an Alexa. What's the weather like?
Speaker 2:What's on my calendar? Look up the history of the Roman Empire. I I would ask it questions like that, and I would use it as a knowledge retrieval tool. I would I might start to trust it in some agentic context.
Speaker 3:And the question is, do you want do we want a robot iPad with an arm swinging around your kitchen and so and and hopefully, you want to know the weather, it's you're you're within earshot.
Speaker 2:I think I think this could be really cool. I think it could be really cool. I mean, they say
Speaker 3:FaceTime They're way to still competing with their own
Speaker 2:Yeah. But if you're in the kitchen, like, this is an example. So FaceTime calls will be a key function of the device. During video conferencing, the display will able will will be able to shift to lock on to people around a room. And so as you're walking around, the FaceTime is just following you.
Speaker 2:That actually feels more social. I remember during COVID, I I bought Facebook's camera. They had some sort of device that you would mount on your TV, and it would act as a as a video conferencing system. Yeah. And I used it a few times.
Speaker 2:I ultimately churned but it was but it was it had a really wide angle lens and it would like zoom in on the people. It had really good face detection. And so it would center you no matter where you were in the room. But as soon as you walked to the other side of the room, it wouldn't be able to follow you because didn't have any motors in it. I feel like
Speaker 3:this could be Interesting. Link in the chat. The whole This all reminds me of the meta portal.
Speaker 2:Yep. That's the one I'm talking about. The portal. Yeah. Basically, I
Speaker 5:didn't
Speaker 3:market it as a robot but it would sit on a table and it would sort of follow And you around the Meta is no longer selling Meta portal. Wow. Because they wound it down. So anyways, Tim Cook told employees I in all
Speaker 2:gifted some of these and they were pretty well received. Most of them wound up being used as like digital digital photo frames though. Yeah. And they weren't actually used that often for calls. I don't know if putting it on a robotic arm is enough to make it useful.
Speaker 2:I think you do have to nail the underlying speech recognition and and the and the and the conversational nature. Like, it has to be powered by a Frontier LLM.
Speaker 3:You know what's funny? What? Is I feel like the product I I I could imagine them having a mood board internally with the Pixar lamp hopping around.
Speaker 2:That's literally listed here as like one of their inspirations apparently.
Speaker 3:So Tim Cook told employees in all hands meeting this month that Apple must win in AI and hinted at the upcoming devices. The quote, the product pipeline which I can't talk about thankfully, Mark Gurman has his malls in Apple that are talking. Tim Cook says, it's amazing guys. It's amazing. Some of it you'll see soon.
Speaker 3:Some of it will come later but there's a lot to see. Yeah. So Apple obviously always is cooking on moonshots. Very little of it surfaces to Mark Gurman and even less actually surfaces you know, publicly via Apple's own channels.
Speaker 2:Mark Gurman, if you have a little extra time, you should leak Julius' user numbers because Julius has over 2,000,000 users now. They're trusted by folks at Princeton, BCG, Zapier. What analysis do you wanna run? It's the AI data analyst that works for you. Connect your data, ask questions in plain English, and get insights in seconds.
Speaker 2:No coding required.
Speaker 3:We need to get our logo up there. Yeah. The fourth logo.
Speaker 2:For sure. There's a lot more. So Apple is planning to put Siri at the center of the device operating system and give it a visual personality to make it feel lifelike. The approach dubbed bubbles is vaguely represents reminiscent of Clippy, which we are super bullish on, and we think Microsoft should totally bring back Clippy, an animated paper clip from the nineties that served as a virtual assistant in Microsoft Office. Apple has tested making Siri look like an animated version of the Finder logo, the iconic smiley face representing the Mac's file management system.
Speaker 2:The final decision on its appearance hasn't been made with designers considering ideas that veer closer to Memoji, the player the playful characters that represent Apple user accounts. Device prototypes use a roughly seven inch horizontal display approaching the size of an iPad mini. The motorized arm can extend the display away from the base roughly half a foot in any direction. So that's not was really hoping I
Speaker 3:was really hoping Seven feet.
Speaker 2:The room, it reaches across and pins you against the against the fridge. Yeah. I think Apple should be able to nail delivering this in a way that doesn't feel Black Mirror in dystopia.
Speaker 3:Oh, that's funny. Sorry. Sorry. Actually didn't see this, but there's a quote in here. Some people familiar with the product call it the Pixar lamp.
Speaker 2:Yep. Exactly. I I I I think it could work really, really well. Now, they have to be cognizant of black mirror but that I don't know. Would be very cool.
Speaker 2:Because that
Speaker 3:If it could hop off
Speaker 2:If you definitely have table. Around, that's Nat Friedman core. This is this is this is this is doable with modern technology. But the risk is that they they botch it because Apple's had a rough go with the recent marketing, and they've had a couple real, like, backlashes. They had that one where they smashed all the pianos in the press.
Speaker 2:Do you remember this? So they had a huge hydraulic press and they and they pressed like an easel with paints and a bunch of paint buckets and pianos and violins and all this stuff. They get a bunch of blowback. They got a ton of blowback from this. We can we can try and pull it up.
Speaker 2:Do you remember this?
Speaker 3:You remember
Speaker 5:that? People were saying that they're, like, destroying these timeless pieces.
Speaker 2:Yeah. And it's just like the things that I
Speaker 5:instruments and stuff like that.
Speaker 2:Yeah. The thing that I love, you're literally you're destroying it for this particular shots fired. Bill Bishop from the Substack stream. You need better guests to talk about China and chips, not just Nvidia partners who are regurgitating Nvidia's talking points. Bill Bishop, get on the stream.
Speaker 2:Call in. We'd love to have you. Bill. Bill. You're welcome.
Speaker 2:Hop on.
Speaker 3:Of course, Aaron is riding with Jensen.
Speaker 2:Yeah. He is the Jensen surrogate. He's he's he's a surrogate for Jensen the juggler. He has to juggle both United States and Nvidia and China's interest and Taiwan's interest and all of them.
Speaker 3:I'm on the show, Bill.
Speaker 2:Miles Fisher wants to see the production team. He says show the off camera voices. Let's get the production team up on the screen.
Speaker 3:Bill, call into the show right now. We'll send you the Zoom link.
Speaker 2:Yep. Call in. You're welcome. Can we pull up the Apple ad of them crushing the videos? Is is that even available anymore?
Speaker 2:They might have just taken it off the Internet. But there was
Speaker 3:I think I found it.
Speaker 2:But there was
Speaker 3:This is it. Right?
Speaker 2:Yeah. I think yeah. Yeah. Yeah. This is it.
Speaker 2:So it's a record player. Like, destroying I mean, is a beautiful shot. Like this is a crazy Apple,
Speaker 3:the company that built itself empowering
Speaker 2:I know.
Speaker 3:Creative talent globally.
Speaker 2:Yep. They they crushed the Pixar lamp and the Angry Bird. Oh, it's brutal. The TV blows up. They this is such an incredible production though.
Speaker 2:The fact that they actually shot this. It is it is a remarkable ad. Oh, and then the poor the poor emoji. The poor emoji gets crushed. And then of course it it it is revealed after everything blows up that all of that fits in your iPad which is super thin.
Speaker 2:A reasonable message. You get all of that in the context of an iPad. You get games, you get an arcade machine, you get an easel, you get a piano, you get all of those things. At the time, Tor did do well.
Speaker 3:Myron said our goal is always to celebrate the myriad of ways users express themselves and bring their ideas to life through iPad. We missed the mark with this video Yeah. And we're sorry. Absolutely brutal.
Speaker 2:Well, really quickly, let me tell you about ProFound. Get your brand mentioned on ChatGPT. Reach millions of consumers who are using AI to discover your new new products and brands. Check out ProFound. So, the other the other ad that didn't go as viral and and result in major backlash was the launch of the Apple Vision Pro.
Speaker 2:So when the Apple Vision Pro launched, one of the videos that they showed was of a middle aged man looking at VR video of his kids, but he was alone in a dark room. And it and and Ben Thompson was like, it feels like he's divorced or something or maybe like the kids died.
Speaker 3:You're about?
Speaker 2:It felt like Minority Report, which is a movie you I know you haven't seen. But in Minority Report, Tom Cruise's son goes missing from the pool one day and he has a he has a virtual three d video that he plays back and gets very emotional about. And the the imagery was very similar in the Apple Vision Pro, but it wasn't an optimistic scenario. It was like, yeah. Like, I guess if my son passed away or got kidnapped, like, would want to relive that, but that's not, like, you're gonna inspire me to to buy an Apple Vision Pro.
Speaker 2:And so with with this, like, Pixar lamp, this this this robot in your in your kitchen or in your house, like, they really I think they have to lean into to light mode, not dark mode. They have to really be aware and and reality check themselves on the black mirror effect because, the the idea of of someone hanging out in their kitchen, being lonely, and having this be the only companion that they ever talk to, that's a lot less fun than, hey. We're all cooking together in the kitchen, and this is helping us keep track of the ingredients. Or, my idea was, teach it to teach it to pour some beers and get it at the fraternity. This thing needs to be tending barre at a frat house and inspiring dancing silhouettes like the original iPod commercial in order to be successful.
Speaker 2:Get the iRobot a stack of red solo cups ASAP.
Speaker 3:Apple's canceled for fraternity coded marketing.
Speaker 2:I think I think that would be amazing. If this thing could if this thing could pour a beer without without foam, I think they got a winner because it needs to inject itself into social even the iPod. Like, yes, you could put it in the headphones and you could and you could tune out the world and be that dancing silhouette during the iPod commercial. But also, you could say, pass me the aux cord. I wanna play a song for my iPod that everyone can enjoy, and it's a social experience.
Speaker 2:And so it's important to show both of those sides now more than ever. And in in ChatGPT demos, in any AI product demo, there's always going to be the user who who uses the product to be more isolating, but the marketing should always be aspirational and pro social just like social media. Social media, it's at its best when we're highlighting the fact that, like, I have so many friends that just send me a random Instagram reel every single day. And, like, that's our interaction. And it's and for me, it's a way to, like, check-in with a friend and and like
Speaker 3:Share a laugh.
Speaker 2:And share a laugh. And and and it's a heart and it's a laugh.
Speaker 3:Can imagine the ad creative for the Apple Pixar lamp, you know, it's sitting on the center of a kitchen island, the family's hanging out they're FaceTiming somebody. Exactly.
Speaker 2:Yeah. So one of the family members that
Speaker 3:I imagine us having a Pixar lamp here on the table.
Speaker 2:Really really it's like, yeah. It's like you wanna be connecting two families or two two two sides of the family. The East Coast side of the family, the West Coast side of the family, they're both having Thanksgiving and they're able to connect but there's everyone's being extremely social. Do not film this thing with the lonely the lonely person you know, having the Pixar lamp be the only thing to keep it company. Anyway, that's my advice
Speaker 3:for Adam.
Speaker 2:What else is
Speaker 3:The projects coated Linwood and Glenwood Mhmm. Core to the new home devices or current products like and current products like iPhones and iPads is an overhaul to the underpinnings of Siri. Engineers are working on a version code named Linwood with an entirely new brain built around LLMs, the foundation of Gen AI. The goal is to tap into personal data to fulfill queries and ability that was delayed due to hiccups with the current version.
Speaker 2:It should be able to do
Speaker 3:it. Hopefully
Speaker 2:Skillish. This
Speaker 3:they they should have a a moonshot division just trying to solve iMessage search. They could probably
Speaker 2:start there. Every tech company is that. Amazon search is rough. Google Gmail search is rough. Their search has gotten so like dominated.
Speaker 3:There's a billion dollar business in figuring out
Speaker 2:search. I mean, that would be the killer that might be a killer app for Comet and some of the browsers is just like actually being able to search my Gmail inbox better. That would be pretty fantastic.
Speaker 3:I feel like it should be at the app layer.
Speaker 2:Anyway, whatever they're building, they're building products. They gotta get on linear. Linear is a purpose built tool for planning and building products. Meet the system for modern software development, streamline issues, projects, and product roadmaps.
Speaker 3:OpenAI is on linear. Let's get Apple on linear. Let's get the Siri team on linear. They they very well might be already. So somebody, Craig Federighi, who you all know, says the work we've done on this end to end revamp of Siri has given us the result we needed.
Speaker 3:He added that this has put us in a position to not just deliver what we announced but to deliver a much bigger upgrade than we envisioned. He said there is no project people are taking more seriously, so that is very positive. A final decision hasn't been made on which models will be used, but Apple has been testing Anthropic PBC's Claude for this purpose. Mike Rockwell, the former VisionPro chief who was put in charge of Siri earlier this year, is overseeing both the Linwood and Glenwood efforts. Apparently, so during the development of the tabletop robot, Apple engineers have made heavy use of chat GPT and Google Gemini to build and test features within Apple AI and Siri teams as a whole.
Speaker 3:Software developers are increasingly using third party systems as part of their development process. Getting into a ring competitor here, Apple's working on a camera code named j four fifty designed for home security detecting people and automating tasks. The device will be battery powered and could last for several months to a year on a single charge.
Speaker 2:Cool.
Speaker 3:That's interesting. If they can do this for they they can they can do this for a random home security camera. They can't do it for your So they have you're telling me they have the capability to have an always on camera.
Speaker 2:Put the tinfoil hat on.
Speaker 3:We need the tinfoil hat. The device has facial recognition and infrared sensors to determine who is in a room. Apple believes users will replace will place cameras throughout their home to help with automation. That can mean turning lights off when someone leaves a room or automatically playing music. So Apple, you're telling me that you can make a home security camera of which I will port purchase multiple and put them around my house.
Speaker 3:And it will be able to have a single battery that could last for several months to a year on a single charge and you can't make an iPhone?
Speaker 5:It's a little
Speaker 2:bit The screen's pretty bright. The The
Speaker 3:screen's bright.
Speaker 2:Yeah. But it's
Speaker 3:always on camera. How long do you think your phone battery would last if you just constantly had the camera?
Speaker 2:I I actually think I actually think running the camera sensor is a lot less power intensive than running a screen
Speaker 9:for
Speaker 3:sure. And obviously, a bunch of different applications. So But still Yeah. Pretty powerful, pretty exciting
Speaker 2:don't know people want an always on iPhone. They want the thrill of charging the iPhone every night. If you're an adrenaline junkie, there's nothing like being on 1% trying to fire off that last iMessage, trying
Speaker 3:to I search actually had a moment yesterday. My my one year old is starting to walk. I had this moment yesterday where I was I was I was I'd filmed a video Yep. Of her walking Yep. About ten seconds.
Speaker 2:Mhmm.
Speaker 3:Everyone's in in the house is like laughing, enjoying the moment, and then my battery died and completely lost the video. Didn't see. Because I didn't hit I didn't hit like end of video. Wow. So the battery died right in the middle of this memory gone forever.
Speaker 2:There is actually that that has something to do with the encoder. There is a certain, file type that you can use when you're filming on one of these cameras that if the battery dies, it will actually save the last of the file. But there's certain there's certain codex where if you don't hit finish recording, the whole thing will be corrupted. It's very annoying. Anyway, get on the Merle HQ, sales tax on autopilot.
Speaker 2:Spend less than five minutes per month on sales tax compliance. Tyler, what do you think about the the Apple robot? Would you buy this thing? Would you do a challenge for it and then churn in two weeks?
Speaker 5:That's probably that's most likely.
Speaker 2:Would probably guess.
Speaker 5:Depends on how much it is. I'm like, you know.
Speaker 2:What what have you adopted this summer that you still daily drive? You've churned from the vision You've churned from the VR headset. You've churned from clearly.
Speaker 5:My new phone.
Speaker 2:Your your phone. You have not gone back to the old phone.
Speaker 5:It's Yeah.
Speaker 2:Extremely bullish for Apple. Yeah. Let's hear it. Let's hear it for new phones. You know, you talk a lot of trash, Jordy.
Speaker 2:The latest iPhone doesn't have an all day battery. Tyler's still using the latest and greatest phone. Still a good business. IPhone sales are ripping.
Speaker 3:Well
Speaker 2:Apple still got it.
Speaker 3:News. Emily Choi announced we just closed the biggest deal in crypto history. Derabit is the number one crypto options exchange by volume and open interest and now it's officially part of Coinbase. So of course, Coinbase just completed their 2,900,000,000.0 cash and stock acquisition of Derabit. This had been announced previously.
Speaker 3:Yeah. Derabit launched in 2016 and reportedly notched over 1,000,000,000,000 in annual trading volume in 2024. So let's give it up for.
Speaker 2:Let's give it up. In in in other in other, crypto news, bullish, but this is one of the greatest headlines I've ever seen
Speaker 3:in the market. Determinism
Speaker 2:of of I don't know if can see. Maybe I should just put it here. We we we need, like, the printer came back. But the the business and finance section of the Wall Street Journal says bullish's IPO lives up to name. Price of crypto exchanges shares jumped 84% on their first day of trading.
Speaker 2:Shares of bullish soared in the IPO, highlighting the challenge of pricing an IPO in today's exuberant market. Just last month, shares of software company Figma jumped 250% in their debut. That prompted whispers about the risks of a company underpricing an IPO and potentially leaving billions of dollars on the table. The ideal first day gains are typically around 20 to 30%, many bankers who work on deals say. Bullish had more had a market capitalization of more than $13,000,000,000 as of Wednesday afternoon.
Speaker 2:Its stock, which trades under the symbol BLSH, was temporarily paused after it began trading. All eyes were on bullish's large debut largely because the company is led by Tom Farley, the former president of the New York Stock Exchange.
Speaker 3:Wow.
Speaker 2:Farley in the role guided some of the biggest IPOs including those of Alibaba and Snap. Bullish's debut was a chance for him to show his own ability to nail an IPO's pricing to both maximize for company proceeds because when you're going public, you are selling stock. You wanna sell it at the fair it's a fundraising event. You wanna sell it at the fairest price. If if the stock pops, you could have sold a lot more potentially and gotten with the same amount of dilution, essentially.
Speaker 2:So they could've so they raised 1,100,000,000.0, but because it jumped 84%, they could have raised $2,000,000,000 for the same dilution. And so that's, in theory, the in theory, the problem here. And so, you know, people people kinda go back and forth. But it but it it gets to
Speaker 3:this Every point I mean, you're making a gamble. Right? Yep. Even the Facebook the Facebook IPO didn't didn't decline.
Speaker 2:Tanked. Tanked. It was, like, one of the worst IPOs in tech history. It was it was very, very rough, and it took a it took over a year, I think, for them to build back up. But that that was due to a few things.
Speaker 2:There was a technical error. There was mispricing. There was a lot of, like, the I think the numbers or something. There was, like, the the mobile risk. There were a few different factors where people were like, oh, maybe this isn't the best, like, a true, like, compounder.
Speaker 2:I don't know. It was very odd in in in Yeah. In hindsight. But, yes, this all gets to the point of how will individual investors react to public to public debuts? Because if they go out and it's a hot company, it becomes a meme stock, or there's just, you know, too much latent demand, the stock will pop insanely.
Speaker 2:And so that's what a lot of companies that are going public are dealing with these days. But it's sort of a champagne problem because it's good to have a high valued stock that you can go out and acquire stuff.
Speaker 3:Billion dollar public company now.
Speaker 2:Yeah. It's great. Pin dot a I, the number one AI agent for customer service. Number one in performance benchmarks. Number one in competitive bake offs.
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Speaker 3:Brad Pitt says his Ford versus Ferrari movie with Tom Cruise never happened because Cruise found out he would not be driving much in
Speaker 5:a movie.
Speaker 2:I didn't know I did this with him.
Speaker 3:We both wanted to drive. Tom realized that Shelby would not be driving much so it didn't come through. Some lore
Speaker 2:Who wound up starring in Ford versus Ferrari? Who plays Shelby? I forget. It's it's someone else. Right?
Speaker 2:Ford versus Ferrari. Oh, it's
Speaker 3:Christian Bale. Right?
Speaker 2:Christian Bale. That's right. Christian Bale and Matt Damon. Although Matt Damon does not play who does he play? Matt Damon, Ken Miles, Donald Frey.
Speaker 2:Anyway, Adio, customer relationship magic. Adio is an AI native CRM that builds scales and grows your company to the next level. You can get started for free at Adio.
Speaker 3:Well, in other news, OpenAI and Sam Altman are investing a quarter of a billion dollars in Merge Labs at an $850,000,000 valuation.
Speaker 2:That's a big Financial
Speaker 3:Times is reporting. Yeah. So Sam Altman wants to put a chip in your brain. That's kind of
Speaker 2:the I think everyone wants to put a chip in your brain.
Speaker 3:Everyone, even Roy Lee wants to put a chip in
Speaker 6:Roy
Speaker 2:Lee wants to
Speaker 3:You're gonna have
Speaker 2:Mark Zuckerberg's You're gonna have options. You are if you're not wearing Metairie bands, you'll be at a cognitive disability or something like that, didn't you say? Or cognitive disadvantage And because having AI hopes
Speaker 3:hopes revenge said, good. I'm used to it.
Speaker 2:It was great.
Speaker 3:So the Financial Times
Speaker 2:Altman's co founding company. Wow.
Speaker 3:Yep. Open AI Crazy. Its and co founder Sam Altman are preparing to back a company that will compete with Elon Musk's Neuralink by connecting human brains with computers. Heightening I'm sure wants the rivalry to between be
Speaker 2:one over this.
Speaker 3:The two billionaire entrepreneurs. The new venture called Merge Labs is raising funds at $850,000,000 with much of the new capital expected to come from OpenAI's ventures team according to three people with direct knowledge of the plans. Altman has encouraged the investment and will help launch the project alongside Alex Blania who runs World, an eyeball scanning digital ID also backed by Sam Altman. Altman will cofound the company but not have a day to day role in the new project they added. Merge is one of a slate of young companies looking to take advantage of recent advances in artificial intelligence to build more useful BCIs.
Speaker 3:Its name comes from what many in Silicon Valley describe as the merge, a moment when humans and machines come together.
Speaker 2:Yeah. It's a good, it's a good
Speaker 3:The tumors are I'm gonna love this sure. Altman wrote a lengthy blog post on the topic in 2017 speculating the moment would come as soon as 2025. This year he suggested in another blog post that he could he could soon have high bandwidth brain computer interfaces as a result of recent technological advances. I'm gonna reference back to this blog post from Sam Altman Yeah. Called The Merge.
Speaker 3:He posted this eight years ago Oh, interesting. 12/07/2017. Yeah.
Speaker 2:Read some of this.
Speaker 3:A popular topic in Silicon Valley is talking about what your humans and machines will merge or if not, what year humans will get surpassed by rapidly improving AI or genetically enhanced species. Most guesses seem to be between 2025 and 2075. People used to call this the singularity. Now it feels uncomfortable and real enough that many seem to avoid naming it at all. Perhaps another reason people stopped using the word singularity is that it implies a single moment in time, and it now looks like the merge is gonna be a gradual process, and gradual processes are hard to notice.
Speaker 3:I believe the merge has already started and we are a few years in. Our phones control us and tell us what to do. Social media feeds determine how we feel. Search engines decide what we think. The algorithms that make all this happen are no longer understood by any one person.
Speaker 3:They optimize for what their creators tell them to optimize for, but in ways that no human could figure out. They're what today seems like sophisticated AI and tomorrow will seem like child's play. And they're extremely effective, at least speaking for myself. I have a very hard time resisting what the algorithms want me to do. Mhmm.
Speaker 3:Until I made a real effort to combat it, I found myself getting extremely addicted to the Internet. We are already in the phase of coevolution. The AI's effect, effect and infect us, and then we improve the AI. We build more computing power to run the AI on it, and it figures out how to build even better chips. This probably cannot be stopped.
Speaker 3:As we have learned, scientific advancement eventually happens if the laws of physics do not prevent it. More important than that, unless we destroy ourselves first, superhuman AI is going to happen. Genetic enhancement is going to happen and brain machine interfaces are going to happen. It is a failure of human imagination and human arrogance to assume that we will never build things smarter than ourselves. Our self worth is so based on our intelligence that we believe it must be singular and not slightly higher than all the other animals on a continuum.
Speaker 3:Perhaps the AI will feel the same way and note the differences between us and bonobos are barely worth discussing. Mhmm. The merge can take a lot of forms. We could plug electrodes into our brains or we could all just become really close friends with a chatbot.
Speaker 2:Wow. Eight years ago he said that?
Speaker 3:Eight years ago.
Speaker 2:That's crazy.
Speaker 3:ChatGBT of course
Speaker 2:Called it.
Speaker 3:Wouldn't exist for years. I think emerge is probably our best case scenario. If two different species want, both want the same thing and only one can have it. In this case, to be the dominant species on the planet and beyond. They're going to have a conflict.
Speaker 3:We should all want one team where all members care about the well-being of everyone else.
Speaker 2:Mhmm.
Speaker 3:Although the merge has already begun, it's going to get a lot weirder. We will be the first species ever to design our own descendants. My guess is that we can either be a biological bootloader for digital intelligence and then fade into an evolutionary tree branch, or we can figure out what a successful merge looks like. It's probably going to happen sooner than most people think. Hardware is improving at an exponential rate.
Speaker 3:The most surprising thing I've learned working on OpenAI is just how correlated increasing computing power and AI breakthroughs are, and the number of smart people working on AI is increasing exponentially as well. Double exponential functions get away from you fast. It would be good for the entire world to start taking this a lot more seriously now. Worldwide coordination doesn't happen quickly and we need it for this.
Speaker 2:It's a wild post. Is that still up or did you have to go to the archive?
Speaker 3:Still up.
Speaker 2:Still up. Interesting. That's a that's a hot take. Tyler, would you put a chip in your brain?
Speaker 5:Yeah. I I want I want four o piped straight in.
Speaker 2:Yeah. You're down.
Speaker 5:I'd do it. Yeah.
Speaker 3:You're sick of fancy maxing.
Speaker 2:Yeah. Chat is not super into it. Gabe says he just wants salt and vinegar chips, not brain chips. John actually says he's gotta be honest. I don't think it's for me ever.
Speaker 2:I can already picture the contagion of peer pressure.
Speaker 3:Reading that blog post made me wanna touch some grass. We should actually get some grass here in the studio.
Speaker 2:We should get some grass in the studio.
Speaker 4:Or even
Speaker 2:on the table. We can touch you on
Speaker 6:the so we
Speaker 3:could just have one hand on the grass.
Speaker 2:It relates lot to this cold healing post. Twenty forty population distribution predictions. 90 brainless content zombies who are functionally illiterate cannot write a paragraph. 5% neo Amish flip phone users, 5% elites and super elites at algorithmic war with each other to steer the 90% to their whims. And then, Crab says always has been.
Speaker 2:I I do, I I I think this I think the case of the neo Amish is fascinating because the the non Amish the Amish are doing fantastically. They they have adopted flip phones, believe, and they've adopted some technology. But in general, they've accumulated a lot of real estate and they're by all accounts
Speaker 3:increasing rapidly.
Speaker 2:They're by all accounts, they are flourishing. And so, what's interesting is that the the coastal elites have not gone to war with the Amish. They've not said like, what they are doing is unacceptable and we must like eradicate them. Yeah. I don't know if they'll ever be threatened by it.
Speaker 2:I think they might be fine with it forever. I think everyone might be fine with it forever. And so I think you do
Speaker 3:They can build barns like they're they're in the game of
Speaker 2:Oh, you're threatened? You're threatened by that?
Speaker 3:Mean, if they can build a barn, what else could they build?
Speaker 2:I think I I think that like you even though there will be
Speaker 3:You've seen the videos, right, of them like assembling a barn in
Speaker 2:It's amazing.
Speaker 3:Twelve hours. Yeah. It truly is some of the greatest.
Speaker 2:Some of the greatest grass
Speaker 3:touching you can do. The
Speaker 5:the Amateur population doubles every twenty years.
Speaker 2:Amazing.
Speaker 5:Yeah. What a
Speaker 2:Yeah. And if America like double ever. Chart that out. Yeah. Oh, that's a fast takeoff there.
Speaker 2:Yeah. Yeah. Yeah. Yeah. Project the next 10,000.
Speaker 2:What will the Amish
Speaker 3:population be? Work on that.
Speaker 5:Amish that. Intelligence.
Speaker 2:How many Amish people will there be in ten thousand years if they keep doubling every twenty years? That's what I wanna know. I bet it's a big number. Mark has a good one. He says AI equals Amish intelligence.
Speaker 2:How to build a barn in twenty hours. I love it. Thank you, Mark. This is so funny. I I I but but but I think my takeaway is like the the so Sam is painting this picture of like you get left in the evolution tree and you get like dropped off and it's a dead end.
Speaker 2:I don't know that it's necessarily a dead end. Like you could like, monkeys are still around. You you could you could still just be a monkey, and you could be an Amish and, like, the super intelligence brain computer merged people could go off and do their own thing, and you could just be vibing as an Amish for thousands and thousands of years. Like, there's not necessarily an incentive to eradicate
Speaker 3:intelligence you. Comes and says, hey, I'm gonna need you guys to come and ride SoulCycle bikes to power my data center.
Speaker 2:I I think that I think that people are just are just people like people like animals. People people are nice by default. Like the default state of of most living things is not this like vicious battle to dominate everything constantly. Like, yes, like the animal kingdom is extremely metal and there are insane battles constantly. But it doesn't it doesn't necessarily be that way.
Speaker 2:Yeah. I don't think it necessarily needs to be that way. I think the I think the Amish can coexist. Tyler, do you have the final number? How many Amish people will there be in the year In October.
Speaker 2:Thousand 10 12/2025. 12/2025.
Speaker 5:Yes. I think it'd be 1.3 times 10 to the 150
Speaker 2:Can you turn that into like words?
Speaker 3:Is it
Speaker 2:quintillion, octillion, septillion? I wanna I wanna know. Like convert it into convert it
Speaker 5:10 to the one fifty six is like
Speaker 2:Is that past a Google? I guess 10 to 100. So there will be more than a Google Amish. Yeah. That's fantastic.
Speaker 2:I'm rooting for the Amish. Think That's you gotta go long Amish.
Speaker 3:How do we make money on
Speaker 2:this? Someone asked what about the absent minded destruction of parking lots? I don't get that. I'm confused. I don't know about the Amish market.
Speaker 3:Amish reference.
Speaker 2:Are are are the Amish destroying parking lots? I think they're building parking lots for all those barns they're putting up. Anyway, the Amish are missing out on Eight Sleep, or maybe that's a loophole that they can do. We should definitely get the, the Amish on Eight Sleep. Get a pod five if you're Amish and you're listening to the stream and you're in the chat right now.
Speaker 2:They got a five year warranty, thirty day risk free trial, free returns, free shipping. So
Speaker 3:That would be
Speaker 2:the Amish?
Speaker 3:Imagine the the First
Speaker 2:thing you put in the barn, pod five.
Speaker 3:They could imagine if we find out that the Amish can build barns so quickly because they're they've all been secretly sleeping
Speaker 2:Maybe on eight that's the secret. Maybe that's the secret.
Speaker 3:They got an Amish version from Matteo that's that's like cooled by the earth.
Speaker 2:Oh. The the farm to table Eight Sleep. That's nice. Taylor says I for one welcome our Amish Borg overlords and Gabe says Long Home Depot. Depot.
Speaker 2:Going long Home Depot to Did did the Amish shop at Home Depot or do they chop their own trees down? I don't know. We need to do a deep dive on the Amish. Anyway, should we debate whether or not TV is dead or magazine's dead? One of our strongest stans, Adam Fey's, I believe he's a part of Fey's clan.
Speaker 2:Adam Fey said, Emily Sundberg asked me for my anonymous hot take, which I guess he immediately dean deanonymized. On the state of media right now, I'll out myself because I think I don't think mine's that anonymous. Magazines are dead. TV is dead. Hollywood is dead.
Speaker 2:TBPN is more important than CNBC. Emily Sundberg is more important than Vanity Fair. Nick Fuentes is more important than Fox News, and x is unfortunately the center of the universe. Interesting take, very spicy. Alex
Speaker 3:Very Heath spicy.
Speaker 2:From the birds says half is true, half is not. We'll never know which half. And Max Tani says, I think you could make the argument that none of this is true. Yeah. Who knows?
Speaker 2:What is relevancy? What is importance? Who knows? All I know is we're having fun on this stream. We're having fun with you in the chat.
Speaker 3:I just wanna say you're keeping magazines in business, John.
Speaker 2:I am. I mean, yeah. Oh, the newspaper's dead? Why do I read it every single day then?
Speaker 3:Well, he didn't say the newspaper was dead.
Speaker 2:No. The newspapers, Lindy. I think I think
Speaker 3:I actually think true journalism is more important than ever.
Speaker 2:As long as TBPN is alive, Hollywood cannot be dead because we are live from Hollywood and we are joined by someone We got it on live far from Hollywood. Deli and Asperu have partnered Founders Fund, cofounder of Varda Space. What can we do to second office for Varda? Let's move it to Hollywood. Hollywood is the new Silicon Valley.
Speaker 3:Well, if they get tasked
Speaker 2:that a lot of warehouse space?
Speaker 3:Wait. Think about this. So if you guys task get tasked with a moon landing and we, you know, we need to
Speaker 2:Oh, yeah. Yeah. Yeah. Yeah. We got you covered.
Speaker 2:If if you're going out for for series j and you need to, you know, make a moon landing appear like it happened, we got the cameras for you. We're good. We'll make
Speaker 6:it happen. You know, somewhat controversial take is the moon landing did happen. Yeah. The footage wasn't looking that good. Oh.
Speaker 6:And so they did livestream from Hollywood for the footage so that they had some sort of great years of takes.
Speaker 2:So both are true. That's great.
Speaker 3:Had to reshoot it. They had to reshoot it.
Speaker 2:That's yeah. Reshoots happen all the time. I I don't have a problem with it. I I I say let it let it happen.
Speaker 3:Fair. Fair play.
Speaker 2:Yeah. Anyway, what is new in your world? There's a bunch of stuff going on DC. We can talk about chips in China. We can talk about I wanna talk about negative gross margins in AI companies.
Speaker 2:What's going on venture? There's a bunch of stuff. But what's what's happening
Speaker 3:Why we start there? Let's start there. A fun one. Okay. So Because All has been been getting, you know Notoriously chirped at
Speaker 2:for years. Years about this.
Speaker 3:Margin profiles. Yeah.
Speaker 2:Oh, yeah. Yeah. That's true.
Speaker 3:That's Everett, baby. Yeah.
Speaker 4:Hey. Let's make
Speaker 6:it just an effort to, you know, say hey.
Speaker 3:Somebody somebody tell Everett to somebody tell Everett to come on right now.
Speaker 2:Yeah. Yeah. Have the gross margins today. So so here's my take to kick it off. Here's an example of how the AI startup economy works.
Speaker 2:I've anonymized the companies, but this was relayed to me in a group chat, I believe it to be roughly true. You, the user, gives an application layer company $1. They turn around and give $5 to a foundation model company that gives $7 to a hyperscaler who in turn gives $13 to a GPU maker, and it's giving house of cards. And so the question is how fast can inference costs fall? Are we is this are we so over?
Speaker 2:Will we solve this? Is is Moore's Law enough to save us? What else needs to change? What's your take on negative gross margins in now software businesses and the end of zero fixed costs?
Speaker 6:I saw this, you know, graph that was NVIDIA's free cash flow by quarter, and they're, like, CapEx by quarter. The first was, like, today's spent, I think and I forgot if it was quarterly. Maybe it was yearly. But they're, you know, spending something on the order of, like, you know, 4.5, you know, sort of billion in, you know, sort of CapEx on, you know, sort of scale up of, you know, production lines. And their free cash flow is something on the of, like, 35, 40, you know, sort of billion dollars.
Speaker 6:And so this is something, like, funnily ironic where, like, you take the whole, like, February mantra of, like, you know, software's eating the world, marginal cost of distribution is zero, so your margins are phenomenal. Then And it's just, like, it's all just completely wrong. Right? Like, you know, SaaS companies end up having, like, crazy high sales and marketing spend in order to actually, like, grow the revenues at all, so the margins don't look anywhere near what they look like. Alex Clayton from, you know, sort of Meritech had this tweet where now the just publicly reported AI Labs' revenue company sorry.
Speaker 6:The publicly reported revenues of AI Labs now surpass the entire public SaaS, you know, publicly traded SaaS AWS. So it's just like you have this entire, like, decade of companies, things that people, you know, sort of worked on, revenues, etcetera. And then it turns out, like, it was all just completely wrong both on, like, those companies actually having durability, margins, etcetera. And there's replaced by something that is somehow bigger and potentially also has all those, you know, sort of same, like, risks and concerns of durability, margin center, and who's the winner. It still ends up being the people that have the fundamental, like, hardware, you know, infrastructure.
Speaker 6:Like, if you look at, like, where all their, like, free cash flow is ending up, it's somehow ending up in, like, Oracle running data centers, Microsoft running data centers, and, you know, NVIDIA basically building the chips that, you know, sort of goes into those and, like, the energy companies that are providing the energy for it. But, like, the end, like, application layer and, like, software companies end up capturing, like, none of the, you know, sort of margins or cash flows from all of this. And so I don't know. As the guy that's always loved bits and atoms rather than pure bits alone, I continue to feel very validated. And I admit that I enjoy studying, you know, some of these AI companies' gross margin profiles and then realizing that, like, the fucking space factory company has better gross margins than me.
Speaker 2:That's wild. I I do you think that there's any hope for inference costs to fall off a cliff and and and the gross margins to to kind of get, right side up very quickly? Because that is the the bull case. Like, we saw this with DeepSeek. Like, the inference cost, even for reasoning models, dropped, like, you know, 20 x very quickly.
Speaker 2:And you just don't see that in you know, I'm a, you know, I'm a home I'm a homemaker, and all of a sudden, like like, the price of lumber just dropped 10 x. That just doesn't happen. It only happens in in software and algorithms where a more elegant implementation of the algorithm can actually drive same results, 10 x savings and cost. And that feels like everything's like everyone's kinda hoping from for a bailout maybe, but, and I'm, like, cautiously optimistic that it could happen. We're gonna
Speaker 3:we're gonna we're gonna get a a government bailout to artificial intelligence industry within the next three hundred and sixty five days. We need a we need a we need a federal backstop.
Speaker 2:Yeah. Universal tokens. Everyone gets a everyone gets a thousand dollars in in NVIDIA credits or something.
Speaker 6:The other, like, interesting, you know, sort of macro lens on this is if you look at the amount of CapEx that is going into setting up, you know, basically, you know, buying chips, setting up use of data centers, basically, all things that they're, you know, sort of hyperscalers and foundation labs are contributing towards. It's actually the highest single, you know, sort of industry investment line item as a percentage of GDP since basically, you know, the fiber rollout in, you know, sort of the, you know, late nineties. And then before that, the last time that we had an equivalent was basically the railroad boom in the late eighteen nineties, right, I wanna say.
Speaker 2:And the railroad boom was significantly higher. I think it was, like, almost 9% of GDP. I know the chart you're thinking of. And I think fiber and and, like, the Internet rollout was, like, 1.2, and we're at, like, 1.3% of GDP, something like that. So we're not we're not we're not, like, insane 10% of GDP, which is kind of what, like, the the fast takeoff folks, the, you know, the the the the Dwarkash Patel crowd talking with Satya Nadella talking about, like, this could be 50% of GDP if if scaling really, really works like we think it will.
Speaker 6:The the the thing that's unique, though, to those, you know, relative to those, like, prior booms is fiber companies were dependent on their fiber revenue in order to keep justifying rolling out fiber. And they obviously did a big wrong. You thought that fiber was gonna be everywhere. There's gonna be infinite Internet. And then it turns out you set up, like, a basic backbone for the Internet.
Speaker 6:And then after that, you actually didn't need fiber everywhere. And so there was, like, projected to be semi infinite demand for fiber. And now the biggest, you know, sort of company that was rolling that out in, like, the late nineties Corning, literally only, like, finally last year reached their original, like, peak, you know,
Speaker 2:02/2001,
Speaker 6:you know, sort of market cap. Took, you know, whatever, twenty four years. And most of that now has nothing to do with fiber. It's like the Gorilla Glass that they make for, you know, iPhone, all these other, like, special glass applications. Yeah.
Speaker 6:But, you know, shows how long it can take to, you know, get back to your prior peak. The railroad companies obviously were highly dependent on their, like, you know, rail revenue in order to be able to continue to invest into railroads. Mhmm. What's crazy about the, like, you know, CapEx that's going into these data centers is, like, a significant chunk of it is funded from companies that have free cash flow and revenues from completely unrelated to the AI business. Right?
Speaker 6:Like, Meta's funding all this stuff from, like, their social media and targeted ads. Yep. You know, Microsoft is, know, feeding all of this off of their, like, know, sort of SaaS, you know, revenues. You know, Amazon, obviously, from their, like, you know, marketplace, etcetera. It's like the only companies that are actually dependent on the AI revenues to fund this CapEx are, like, basically the foundation, you know, sort of model companies.
Speaker 6:And then Google from their, like, monopoly, you know, basically on, you know, sort of search. And so when you think about, like, how long they could potentially sustain that, like, you know, 1.3 or you get up to, like, 2% of GDP, it could potentially take a significantly longer time if there is any type of, you know, sort of bubble here for there to be eventual, you know, sort of decrease in the percent of GDP because they're not actually that reliant on, you know, the you know, you know, that that CapEx rollout actually immediately contributing to, you know, revenues. And then the crazy part is, like, you still have Apple, you know, sort of mostly sitting on a huge chunk of chat cash and hasn't really participated in all this other than the fact that actually they're, like you know, revenues have now been flat for, like, five and a half years straight. And then they're, like, know, balance sheet has basically only decreased linearly, you know, quarter over quarter for the last five years straight. So it's like, man, if you were, like, a a more brilliant version of Tim Cook five years ago, should've just bought, like, $90,000,000,000 of GPUs and, like, he started building, you know, some data centers and instead he, like, I don't know, rolled out to, like, iPhone, like, you know, 400.
Speaker 6:Same features in the last one.
Speaker 2:Which iPhone
Speaker 3:400 would actually go
Speaker 2:pretty To be fair, has good margins and low churn. We gave our intern a new iPhone and he has he's still using it.
Speaker 4:He hasn't tried.
Speaker 2:And we can't say that about some of the SaaS that we've had him try.
Speaker 4:Happy to hear you.
Speaker 2:There there is a there is a wrinkle with the Apple thing. A lot of the the balance sheet decline is because of dividends. They're paying shareholders out, but I agree with you. The other thing that
Speaker 6:still shows they don't know what to do with the cash. You know I mean? Like Zuckerberg
Speaker 3:They're creating their they're creating the Pixar lamp.
Speaker 2:Yeah. Yeah. They're gonna create Pixar lamp. Literally create
Speaker 3:this? Pixar lamp that will sit on your your
Speaker 2:It's gonna be an iPad on a robotic arm, and it will be able to, like, move around and follow you around the room. So if you're FaceTiming with someone in the kitchen and you walk over to the stove or the refrigerator, it'll follow you around.
Speaker 3:And they're gonna compete with Ring. Think they'll be very know what to do with their cap. I think they got plenty of world changing ideas.
Speaker 2:Yeah. Yeah. They're gonna go steamroll a $2,000,000,000 company.
Speaker 6:It sounds like a shitty, like, 02/2013, like, y c, like, start up, you know, sort of pitch, like, on the order of, like, Juicero, basically.
Speaker 2:Yeah. Yeah. Who knows? I wanna talk about yeah. The the the fractures in the in the financial world around AI do feel like the foundation's a little more solid because coming off of cash flow from these hyperscaler balance sheets.
Speaker 2:There's also
Speaker 3:the Yeah. And that's and that's the the bull case for the the hyperscalers in AI and just being competitive even if they're behind the ball on code assistance and things like that is that they're just gonna be able to sustain this pace and investment level before
Speaker 2:other kind of source of capital that people are discussing now is private credit. And people are wondering if there's this private credit bubble, but then also private credit isn't mark to market as much. And can you give me kind of, like, the the venture capitalist one zero one on how venture capitalists are interfacing with private credit these days because it feels like there was usually, like, a handoff where you invest in a company, and then at a certain point, it goes public and then, you know, or goes into private equity. And then you're kind of out of the game, but it feels like there's a little bit more interface between the VC world and the private credit world now. Like, do you have any insight into what's going on there?
Speaker 2:Have you followed that at all?
Speaker 6:A bit. You know, the
Speaker 2:place very deal by deal.
Speaker 6:Right? Study this stuff is like the upstream, which is like the, you know, sort of equity side of things. Sure. I'm forgetting the, you know, sort of exact stat that I'm thinking of, but there was basically this crossover point in the last year, which I wanna say was it it wasn't IPO equity raise, but it was it was something like, you know, sort of capital deployed into, like, sub $200,000,000,000 market cap companies. And, basically, for the first time ever, the private capital market was actually as large, you know, and had crossed over to the public, you know, basically capital markets in terms of, you know, sort of fundraising, in terms of, like, issuing a primary and fundraising.
Speaker 5:Mhmm.
Speaker 6:And so the strategies that some of these, like, major asset managers on the equity user side of things, these are obviously like the Fidelitys, the BlackRocks, etcetera, the ones that are like, you know, the, you know, Vanguard. All of those groups at this point have clearly, you know, sort of admitted to themselves that the, you sort of prototypical, you know, IPO when you're between 5 and $25,000,000,000 market cap is just a world that is not coming back anytime soon. Not to say there won't be some companies that do that. Obviously, Figma has done, you know, sort of phenomenally well, and so that may tempt some companies to go back to it. But all these asset managers have realized that, you know, so much of the returns are now being, you know, sort of held up in the private markets that they need to use to go enter those.
Speaker 6:And so you're seeing the equivalent on the, you know, sort of private credit side of things. I don't think I can, you share the logo of the company, but there was a company in our portfolio that recently, you know, raised hundreds of millions of dollars in private, you know, sort of credit from tier one, you know, basically, you know, sort of bank, you know you know, top, you know, sort of foreign in The United States. The cost of credit that they had on it was effectively, like, LIBOR plus 25 bps, which is just, the equivalent of, like, cost of capital for a, $50,000,000,000 publicly, you know, sort of company. Like, know,
Speaker 2:what I mean? Different than, like, venture debt, which is, like, something people like, oh, yeah. I raised $10,000,000. I got a $1,000,000 credit line or something like that. This is a completely different Yeah.
Speaker 3:If you have a bad quarter, we're we're gonna
Speaker 2:We run the company.
Speaker 3:The asset.
Speaker 6:Yeah. Exactly. These are totally different. This is, you know you know, you know, you know, backing physical assets that these, you know, sort of companies are going and buying and, you know, sort of rolling out. And so I remember watching the deal happen and being like, wow.
Speaker 6:Like, I mean, first, as the, like, equity investor, I'm like, oh my god. This cost of capital, super easy for this company to, like, you know, cover the, like, you know, CapEx, you know, sort of roll out based off their, you know, sort of margins, etcetera. And so they're, Mhmm. Return on equity now that you can see as the private investor is, like, insane where it's, why go public where this company doesn't even need to raise that much equity? And they, like one of the like, there's a lot of value proposition for being public, but one of them is that your, like, general cost of capital on the debt side just goes down significantly typically when you're, you know, sort of a, you know, a public company.
Speaker 6:And that was what people thought of on the cost of equity side for a long time. That was the whole purpose of going public was, you know, in 02/2013, you couldn't raise $5,000,000,000 in the private markets. And so if you wanted to scale to that level, you had to basically go public. Private credit was much more laggard to catch up, but it's now actually starting to catch up where then the second was, okay. I was, like, trying to think about it from, like, the lender perspective.
Speaker 6:I was like, in what world, you know, are they giving this, like, you know, private company the, like, equivalent cost of capital of, like, you know, publicly traded.
Speaker 2:With Apple.
Speaker 3:And It couldn't it couldn't be that they've just raised so much money and they need to deploy it at all costs. Right? Couldn't be that.
Speaker 6:Yeah. Yeah. I mean maybe there's a part
Speaker 2:of that. That
Speaker 3:That couldn't be it. Right? Like why would we It raised a lot of money. We have a lot of AUM. We gotta take some huge risk right here.
Speaker 3:We gotta deploy. We can't we can't generate fees unless we're slugging around Maybe. Huge check.
Speaker 2:But what yeah. What's the other reason?
Speaker 6:I I think the other reason is like there's these certain like super cycle macro trends that sort of feel unstoppable. And if your company is related to that, the banks are willing to underwrite it because they believe that, like, look. This piece of infrastructure that you're building, if you don't utilize it, there will be a fast fall or they quickly, you know, sort of jams it up. So you build out x y z data center with all these GPUs.
Speaker 2:Yep. For some
Speaker 6:reason, if your model, your, like, particular consumer application doesn't work, somebody else is basically going to go snap that up. Yeah. And so they clearly are treating, like, a part of underwriting, you know you know, CapEx as a, you know, infrastructure, like, debt provider is thinking about, like, if the, like, equity holder of this, you know, basically goes belly up, is this does this asset actually have secondary liquidity? Right? That's that's why, you know, you know, companies that have super esoteric pieces of equipment or technology, a little harder to have debt.
Speaker 6:If you're buying something, say, like, you know, you know, at But
Speaker 2:even like that warehouse I I mean, the warehouse space. Like, if you were to I don't know. You're probably leasing it, but, like, if you were to say, I want a mortgage and I wanna buy a warehouse, like, that's hyper liquid, and you can sell that to somebody else who needs a warehouse very easily. You're in El Segundo. It's pretty simple.
Speaker 2:But, yeah, like, if it's r and d and if the r and d doesn't produce fruits, like, that needs to be equity backed. That needs to be paid for with equity. And so, yeah, it is interesting that, yeah, there's this, like, super cycle, and there's certain technologies, certain pieces of equipment, certain pieces of hardware that you can just underwrite way way differently because somebody's gonna pick
Speaker 6:them up. There's three high quality hectares at GPU actually put out an executive order last yesterday. That was one of their, you know, sort of first, you know, broader orders on basically maintaining commercial space leadership in The United States that I kinda wanted to Yeah.
Speaker 2:Please bring it down.
Speaker 6:Since, you
Speaker 7:know, a little bit of,
Speaker 6:you know, delta v, you know, space topic.
Speaker 3:Break it down, space man. Down, space man.
Speaker 6:Breaking it down. It was something I I hope I don't butcher you know, apologies, Michael Kratios, if I butcher the name of the order, but it was something like, you know, you know, America maintaining making space great again, you know, maintaining American leadership I'm sure. In space. There were a couple different aspects of it, you know, that I enjoyed, you know, reading through. I think the first primary, like, lens that I put on it is it was just the clearest language that I've ever seen from a government official talking about just making so much of space activity far more regular.
Speaker 6:It was everything from just, like, you know, sort of rethinking the regulations around both launch and reentry to think of these things as, like, much more, you know, sort of regular activities. Mhmm. You know, the example that I always like to provide in relation to, you know, sort of VARTA was, you know, if you've studied the airspace around Cape Canaveral over the past, you know, decade, it's had a, you know, sort of, you know, shift in that there used to just be the occasional rocket launch that would do a, basically, like, temporary, basically, shutdown of airspace. You know, flights would get, you know, sort of rerouted, you know, across Florida in order to, you know, sort of accommodate that. And it was always sort of like a one off operation.
Speaker 6:At this point, if you actually look at, like, the commercials, you know, plane traffic patterns around Florida, most of it has basically largely shifted. Like, they used to typically actually, like, fly along the coast. If you think about that in New York to, you know, Miami flight, it would actually sort of cut along the, you know, sort of coast to basically, you know, sort of reduce a little bit the distance. Now because there's just such consistent operations, the airspace is basically, you know, predicted to be effectively closed off at basically all times. Sure.
Speaker 6:And so all of the commercial airline traffic basically just goes along the, like, central line of Florida. It sounds like a, you know, sort of simple thing, but it's interesting to think about, like, how day to day, you know, you know, activities and commercial activities are shaped when something is seen as, like, a regular activity rather than, like, a, you know, sort of special occasion. And so you've seen that, you know, built out in around Cape Canaveral where you knew now do you have this, like, rocket flight corridor that is basically just, like Mhmm. Permanently, you know, sort of cordoned off. It's really the only place that we have that in The United States at that regular event activity where, like, it's thought of as something that need to be cordoned off.
Speaker 6:You obviously have Vandenberg, you know, sort of space force base, but still, their things are still occasional enough that you don't have the equivalent. There's also a little bit less, like, you know, sort of commercial, you know, flight traffic that, you know, sort of goes around there. It's just a little bit, you know, less in, like, a, you know, sort of dense urban population. But a part of the, you know, sort of executive order from the president was both, you know, sort of rethinking and reshaping, you know, basically launch and reentry regulation, but also clearly pushing for, you know, an establishing of a bunch of spaceports around America that are meant to have, basically, you know, sort of regular both reentry and, you know, and launch activity and then thinking through how much burden should there be put on reentry vehicles that are coming back from space if those reentry vehicles have, basically, what's known as a flight termination system on board. Basically, it's like, hey.
Speaker 6:If something's going wrong, just explode the damn thing so we don't accidentally, like, land in the wrong place. And so should you allow for basically, like, looser, you know, regulations when you know that there is that type of, you know, sort of termination system on board that can basically self terminate if you're in an off, you know, off nominal scenario. And so it was just great to see leadership from, you know, the administration and the president in such a, like, pointed direction of, hey. This type of activity needs to be thought of as, like, day to day and as common as, like, commercial, you know, sort of flight. The example that I like to give is, you know, we are now approaching the point of the amount of orbital rocket launches from The United States per year is about the same number of commercial airliners landing and taking off in LAX every day.
Speaker 6:Wow. So that is becoming, you know, regular. Mean, it's still 365, you know you know, off of, you know, truly, you know, the daily equivalent of LAX. It's like, you know, it's in the orders of magnitude now of, like, you know, some of our busiest airports. And so Sure.
Speaker 4:We need to
Speaker 6:think of these things not as, like, rocket launch pads, but, like, space space ports. And I like the executive order had, like, the word space port in it, like, 15 times, not, like, esoteric crazy rocket launch pad thing. It's like, no. Yeah. Yeah.
Speaker 6:Yeah. Yeah. Airports is
Speaker 2:space ports. Yeah. Yeah. We kinda do that with the commercial flights. I I I think, like, when commercial airliners are flying east to west, they fly at, like, 35,000 feet.
Speaker 2:And when you're flying west to east, you fly at 32,000 feet. So there's just always a gap and, you know, you you don't even have to think about, like, am I gonna run into someone? Because you're just you know, everyone's just codified.
Speaker 6:The default pattern of operation makes it so don't have to think about that. And so we need the equivalent for space ports where it's like, yeah, there's this corridor that allows, you know, for reentry, you know, so regularly and just like it's not like it's the one off rerouting of planes but the planes just don't go there because they know that that's where things reenter.
Speaker 2:Yep. Anything
Speaker 3:on Let's see.
Speaker 2:Go here.
Speaker 3:What's the update on Firefly Aerospace? They went
Speaker 2:out They went public
Speaker 3:on August 7 at 60 down 18 ish percent since then.
Speaker 4:But this
Speaker 3:is the company that had the the rover Moon landing.
Speaker 1:Moon landing.
Speaker 3:Yeah. What's the general update on the
Speaker 4:company
Speaker 3:and yet yeah.
Speaker 2:Would Like how like how do they fit in the ecosystem?
Speaker 6:Yeah. I've been spending a bunch of time with some of the investment bankers that you know sort of led that you know deal and then some of the the, like, long, you know, hedge funds that did it. It was exciting to see that of the, call it, like, top eight, you know, mega IPO allocators that are, like, the long only, you know, sort of public equity types. Think I something like seven out of the eight did, like, meaningful, you know, sort of positions in that Firefly Mhmm. IPO round.
Speaker 6:And so I I think this kinda goes back to, like, the, you know, sort of super cycle stuff that we were talking about where I do think that this stuff starts to become a little bit of, like, a self fulfilling prophecy where, like, you have the president and administration really leaning in and leaning forward. Obviously, is, like, Jared Isaacman, no longer administrator, secretary Duffy stepping in. They're trying to find, you know, interims. You know, there's obviously things that they're still sorting out on, like, our space leadership. But clearly, you know, sort of leaning forward in a way that is, you know, sort of marching towards, you know, wanting more launch providers, more activity, you know, both military and civil in space, and then obviously towards the moon and Mars.
Speaker 6:Firefly, you know, has had a, you know, somewhat, you know, sort of complicated history. It's no longer the original founding CEO. They've had a swap out CEO a few times. But I do think in this, you know, sort of category of aerospace company, it's really important to focus on just, like, ultimate, like, flights and, you know, success in those. And for what it's worth, Firefly has accomplished two things that I think are quite, you know, phenomenal.
Speaker 6:They are the only rocket launch company that basically had this contract with the DOD where the DOD basically had them on guard, and then they were only given twenty four hours notice they had to launch a satellite. And so it wasn't like a, oh, preplanned, etcetera. It was, like, basically, like, responsive, you know, sort of launches, think the, you know, sort of term that the air force gave it. I think it was air force. And so very impressive to have done that.
Speaker 6:And then, obviously, you know, they've managed to actually, you know, sort of land on the moon and not tip over. Intuitive Machines is still working on that, you know, sort of second part. So they've clearly accomplished some things. Financial profile of the business, I admit, is, you know, it's a lot of CapEx, a lot of burn. It's not super repeatable, you know, sort of yet.
Speaker 6:But the fact that, like, know, these public, you know, long, you know, equity folks are, you know, buying in at such scale, again, improves their balance sheet, reduces their cost of capital, clearly shows some signaling from the equity markets at least that they really do believe that this type of, like, lunar infrastructure or launch infrastructure is something that has such macro tailwinds behind it that, you know, even though they're still, you know, choppy in terms of operations, etcetera, that there's, you know, sort of clear potential there. And you're seeing that with Rocket Lab. Mean, look at the company. Like, you know, it was, you know, I think a year ago, probably trading, like, three and a half, you know, sort of 4,000,000,000 in market cap. It's something like a $22,000,000,000, you know, sort of market cap company today as, you know, amongst the, you know, sort of higher, you know, sort of, you know, rev multiple, you know, sort of ratios, you know, in all things, you know, a and d.
Speaker 3:Let's give it up for high revenue multiples.
Speaker 2:We love them here. We love them.
Speaker 6:Love them. Give them to the rocket companies, babies.
Speaker 3:We don't have enough of them.
Speaker 6:Yeah. Not saying parties going public anytime soon but encouraging to see, you know, all the interest and activity.
Speaker 3:Well, you're one who said you were talking with investment bankers.
Speaker 2:Yeah. Oh, you know, the
Speaker 6:job of a capital allocator or, you know Right.
Speaker 3:So I I posted earlier somewhat of a joke, somewhat real breaking group chat sentiment flips bearish investor confidence confidence dips to the lowest level since late twenty twenty three source my phone. How are you feeling about general sentiment right now in private markets? There's
Speaker 5:been That's a
Speaker 2:lot people being greedy.
Speaker 3:Exuberance. A lot of people
Speaker 2:Should we be fearful?
Speaker 3:Yeah. A lot of people being greedy. Should we be is is there any alpha in being fearful?
Speaker 6:Yeah. We always, yeah, try to, you know, you know, zig when others are zagging at FF, obviously. So when we see this level of exuberance, I think that always makes us a little more hesitant. But, yeah, it's been wild to see just the, you know, sort of depth of interest. In this, like, sort of k shaped, you know, sort of dynamic, right, where, you know, the equivalent of, like I I forget who tweeted this today.
Speaker 6:Some relative problem with venture capitalists, but or maybe a reporter that was basically saying that, like, private capital markets are basically replicating the, like, mag seven strategy, but, you know, in the private markets where it's like, you know, basically, if you look at the, like, mag seven versus the, like, s and p four ninety three Crazy.
Speaker 5:S and
Speaker 6:p four ninety three, basically flat, mag seven or up, you kind of have the equivalent dynamic in private capital markets, both literally with, like, the individual logos of, like, SpaceX, OpenAI, and or etcetera, where it's, like, you know, representing the biggest chunk of, you know, you know, capital allocated, you know, ever in the history of private capital markets. But I think it's also generally true in, like, the categories where it's, if you're not A and D and if you're not AI, oh my god. Like, there's, like, you know, basically no interest and nobody, you know, wants to, you know, to talk to you. And then if you're in those categories, the rounds get done in, a, you know, sort of week and are done at, like, the, you know, sort of craziest, you know, prices. Yeah.
Speaker 6:I think we always stick to our general strategy of, like, you know, ignore the noise, focus on the things that we think are in the long term. And so, you know, my
Speaker 3:Well, it's just it's it's it's worth it's worth remembering because we just had, you know, we we you know, Figma IPO was, you know, this amazing moment. But if you look back, it's like Andrew Reed did the c at 400,000,000 post and you look at the the you look at the companies that are doing rounds at 400 post right now and they were not they they were not anywhere near that kind of profile.
Speaker 6:In those categories, you know, this is where, you know, again, you know, obviously there's lots of benefits to doing the hot category where your, like, downstream, you know, financings typically are much less risky, but there's also the, you know, know, you know, return, you know, compression there. So my, you know, sort of pithy joke on it is, like, while everybody else is focused on, you know, a and d and, like, AI, I'm just doing the series a's of, like, fish killing robot companies where, you nobody's really thinking.
Speaker 2:We tasted Shinkay on the stream. Was a lot of fun. What what what does A and D stand for?
Speaker 6:Oh oh, aerospace and defense.
Speaker 2:Aerospace and defense.
Speaker 6:Sorry. I'm spending too much time with capital out here.
Speaker 2:Lots jargon. Jargon. What else what else needs to be clarified in space? Obviously, the the space port, the actual path the rockets travel along is important. But is there is there, you know, appetite for more clear regulation around LEO, Middle Earth orbit, Geo orbit?
Speaker 2:Are there even just like reentry of the pods that Vardis ends up? Like, what else what's the next thing that we need to kind of standardize around?
Speaker 6:I like that in my head now. Have Middle Earth orbit going.
Speaker 2:Middle Earth orbit. What's it actually called?
Speaker 6:Medium Earth orbit.
Speaker 2:Medium earth orbit. I like middle
Speaker 6:earth I like middle earth orbit better. Take
Speaker 2:it back. Let's coin it.
Speaker 6:Exactly. Exactly. Yeah. Mean, has been, you know, I've heard some, like, you know, sort of light rumblings, you know, sort of around this. Right now, when you look at your sort of general space policy, it is kind of split up in a bunch of different areas.
Speaker 6:You basically have FAA responsible for all launch and reentry licensing, so basically, like, when you're in the air. Then once you're in orbit, you have everything from if you wanna take photos of other things in orbit, that's all regulated by NOAA. Kind of crazy because it's like, you know, NOAA stands for, like, ocean whatever administration, etcetera. So it's like, why are they regulating pictures? But it's because they're responsible for all things OSINT, you know, in in, you know, photography land.
Speaker 6:Mhmm. And then if you wanna communicate with your satellite, you know, it's the radio spectrum from the FCC, and they even govern, like so, for example, you know, one of the, you know, some recent back and forth, you know, more in the prior administration around Varda was they were trying to debate whether or not ISAM, so in space assembly manufacturing, needed to live in its own specific, you know, sort of spectrum, and everybody had to communicate in there rather than getting to be in, like, the general, you know, sort of space, you know, sort of spectrum. And so you have all these, like, sort of split, you know, sort of regulators. And as a space company, it's very burdensome relative to, like, okay. If you're, a pharmaceutical company, you kinda know that, like, your only regulator is the, you know, sort of FDA, and that's all that you're, you know, sort of working with.
Speaker 6:And so, yeah, I think, you know, probably when I think about what needs to, you know, should happen next beyond just the space ports, it's just, like, make it so that there's sort of more of a single point of contact if you're a space company rather than having to establish, like, four different use of regulatory, you know, relationships, which, by the way, none of them talk to one another. Right?
Speaker 3:Yeah. Yeah.
Speaker 6:So that and then probably, like, a space traffic coordinator. Like, there isn't the equivalent of, like, we have air traffic control here. There's regulations on, like, how you need to report your position, how you communicate, etcetera. Space traffic control, they, like, kinda started something actually in the first Trump administration. It worked through Biden administration, and then oddly enough, the Trump administration actually shut down their own project.
Speaker 6:And so now we're kinda back to, like, Wild Wild West again on all things space traffic. So it's mostly just, literal, like, the companies, like, individually email each other, and there's, like, this one, like, nonprofit foundation that, like, collects everybody's space traffic data. And then it's, and by the way, there's no rules. And, like by the way, if, like, you're gonna be intersecting with a Chinese satellite and then, like, the nonprofit introduces you and the Chinese company over email, It's not obvious, like, who's gonna
Speaker 3:maneuver or what like, there's no
Speaker 6:there's no rule.
Speaker 2:It's game of chicken.
Speaker 6:It's still just cow. Mostly helps that it's mostly just pretty empty up there, so there's not any, you know, incursions.
Speaker 3:We're gonna need regulation around drunk space.
Speaker 2:We're gonna need pilots who live their life one mile at a time.
Speaker 3:I have a sort of an odd
Speaker 6:14,000 miles an hour. Yeah. Give me 14,000 miles at a time.
Speaker 3:What are you what's what's your read on the the future of the the sort of pilot career path? It seems like, obviously, we like many many different types of planes have like great autonomous systems yet we obviously still want pilots in the cabin. How do you how do you when you kind of look at the progress happening on the on the autonomous side, where do you think human pilots will fit in?
Speaker 6:Man, there's clearly some things that are moving forward. Like, you know, secretary Duffy, you know, secretary of transportation, you know, has really pushed forward more aggressively than I would have expected on all things like eVTOL, you know, beyond visual line of sight, either sort of drones, you know, on, like, the small scale, you know, sort of vehicle autonomy side of things. When you think about, like, a Boeing seven forty seven, you know, sort of getting actually fully automated, man, the the commercial airline or, you know, commercial passenger stuff is just it feels so hard, and a part of it is other than obviously a recent whole set of events, you know, DCA crash obviously included. Generally, The United States has such a flawless safety profile. I think we've talked about this in, like, you know, other
Speaker 2:Yeah.
Speaker 6:To, like, get things changed because you have, you know, so much, you know, such a, you know, such a great safety record. So, yeah, I I think, you know, jobs Yeah.
Speaker 3:When you I mean, when you think about if you have, you know, hundreds of people in a single metal tube flying through the air, is it worth having a couple more people to be in there?
Speaker 2:There's also an economic dynamic where I believe the cost of labor for an Uber is about 70% born by human labor whereas the cost of a seven forty seven flight is like 7% pilot fees even though the pilot No. No. It's like 50% fuel. 70% fuel. That's what I'm saying.
Speaker 2:Yeah. Yeah. Exactly. Whereas the gas in the Uber is like 10% of the cost of the ride. 70% is is the actual human.
Speaker 2:And so there's a lot there's a diff very different economic dynamic there. But we're actually gonna talk to Merlin Labs today that are and and Merlin is going public. They work on autonomous flights for planes, autonomous pilots for planes. So we'll dig in with Matthew George. My
Speaker 6:last comment for this afternoon is this is my you know sort of favorite one where I didn't realize I was gonna be on TBPN until the TBPN account tweeted and it was like Dell's on today and I was like I didn't know that. Well lo and behold look at it I am.
Speaker 2:That's amazing. We should just communicate purely over x.com. It is the everything app after all. Anyway this always a great time. Thanks so much for hopping on.
Speaker 7:Later boys.
Speaker 2:We'll talk to later. Bye. And whether we talked to Deleon about the markets, whether you're long, whether you're short, whether you think it's top or a local bottom, head over to public.com. Investing for those who take it seriously. They got multi asset investing, industry leading yields, and they're trusted by millions, folks.
Speaker 2:We are joined next by some folks at Anderol. Today, Anderol posted they are waiting in the restream waiting room, I believe. We will bring them in in just a second. Anderol Industries said introducing the Anderol two fifty, the first ever NASCAR race on an active military base. So welcome to the stream.
Speaker 2:I believe we have Jeff and Jen joining. So welcome to the stream from the WeStream waiting room. Woah. Okay. Hey.
Speaker 2:We got can we flip them? Can they flip their camera? We're seeing you horizontal or flipped somehow but good to meet you. Good to see you. Actually I met both of you online.
Speaker 2:Jen's been on the show before. Let's try and rotate the camera 90 degrees if possible. There we go. There we go. Looking good.
Speaker 2:And I see some vehicle in Looks the
Speaker 3:pretty stunning. Both are
Speaker 7:How
Speaker 2:are you doing today?
Speaker 9:Hi, everyone. My name is Jeff Miller. I'm great. It's good to see you, John. Good to see you, Jordy.
Speaker 9:We're here in the hangar in Mooresville, North Carolina.
Speaker 6:So we
Speaker 9:wanna leave you guys a little bit of a window into our big announcement around the annual two fifty.
Speaker 2:Why North Carolina? Isn't this happening in San Diego?
Speaker 9:Well, NASCAR headquarters Daytona Makes and in Charlotte. So we've been here this week, not only working with the NASCAR team to make sure we show up into the sport in an authentic way, But we've also been meeting with several of the teams themselves, because you might be seeing an andoril stock car with a paint scheme come 06/21/1926. So getting to learn the sport as we make the announcement.
Speaker 2:Yeah. What is the anterol colorway? I think when I think of anterol, I think of, like
Speaker 3:Slate gray.
Speaker 2:All the muted the slate gray, but then I also think of all the anime colors. And so there's a little bit of both. Is is yellow and gray gonna be a brand pattern going forward?
Speaker 11:Well, black is their primary color. We
Speaker 2:are not getting a lot of audio from you. I don't know if there's is there one microphone? What's going on here? Can we hear you, Jen?
Speaker 3:Yeah. We can hear we can hear
Speaker 9:Jen What Jen is saying is that okay, great. So I'm just saying that black is in not only one of our core colors or not a color as
Speaker 2:she likes
Speaker 9:to say, but our accent tone there is safety yellow.
Speaker 4:Oh, there we go.
Speaker 9:Anything that you see whether it's in incredible products that Jen and team are designing, the the finish, you're gonna see that safety yellow. So in the paint scheme here, we like to call it using the language that they use here at NASCAR versus what you'll hear more in f one called a livery, what we call livery on our aircraft. For our paint scheme here, we really lead into that black and that safety yellow.
Speaker 3:The car looks incredible. You guys cooked as usual. Can you can you give us a tour of the livery? I gotta I I wanna see a close-up.
Speaker 2:Is that yeah. Can the camera move around? Can you show us the car up you
Speaker 11:hear me at all?
Speaker 2:A little bit. I can hear you like loosely on his microphone, I think. But if it's a shared pair of AirPods it's probably switching back and forth. Let's see if we can get a tour of the car.
Speaker 11:Okay. I'm gonna take you around the car.
Speaker 2:Okay. Very cool. Alright.
Speaker 11:That's a
Speaker 2:huge annual logo on the front. Really dominated this. Yeah. Safety safety yellow.
Speaker 11:Primary color is black. Right? Okay. Safety yellow comes from our livery scheme on our actual products where we're calling out high vis, critical warnings and markings. Sure.
Speaker 11:And, you know, as we think about bringing these two worlds together, I really thought there was a lot of symmetry, a lot of kinship between our two identities. Right? I think I love also spending time here getting to know the NASCAR brand, like bringing, the they're leaning really hard into their legacy and their heritage, but then they pair that with such contemporary, you know, bold graphics and high, you know, visibility colors, which is, you know, there's a lot of synergy between our identity and their identity.
Speaker 2:We're gonna get some Mustang GTDs in the Anderle parking lot after the next tender. Have you seen the Mustang GTD? It's beautiful. It's like a $100,000 Mustang. It's beautiful.
Speaker 2:Oh, wow. Is that a Fury in the background too?
Speaker 11:Yeah. That's right.
Speaker 3:It's hard That's to amazing.
Speaker 11:Jeff Jeff can Jeff can walk you around the Fury.
Speaker 2:That's all. Yeah. Yeah. That's awesome. Talk to me about the actual race.
Speaker 2:Would this race have existed without Andoril stepping in? It is like, it's not just the logo on a car. It's not just the logo on the entire car. It's the logo and the name Anderle on the actual race.
Speaker 3:And a whole new race.
Speaker 2:And a whole new race.
Speaker 9:Yeah. What I'd like to say is that this race first
Speaker 4:and
Speaker 9:foremost is the brainchild of national leadership and the US Navy. So it's our privilege to to be a part of it. Ben Kennedy, we were gonna have the opportunity to to speak with. He's got such incredible vision along with Amy, the race director. And so we came on in April.
Speaker 9:Jen and I had a chance to go on the Navy base. And the second you stepped foot on naval Base Coronado, and this is, you know, where the films Top Gun and Top Gun Maverick, that scene's film, that famous high bar is there. And you stepped on an air a US aircraft carrier, and you feel the power. You feel like you are you're there and with people who are doing work that really matters. So, this race would absolutely work without us, but I think what NASCAR saw in Antaroll was a company that was so deeply committed to our American values and our warfighter and wanted to celebrate that story that it was a perfect fit.
Speaker 2:Very cool. Well, we're gonna hop on with Ben Kennedy from NASCAR. Thank you so much for taking the time to chat with us. When is the actual race? Can people buy tickets now?
Speaker 2:Is it on sale? What what's the next step?
Speaker 3:And how do we get some merch? People are usually asking us that.
Speaker 2:People are
Speaker 3:definitely not. Now we're asking you that.
Speaker 2:Definitely gonna want
Speaker 3:some merch. Talk We offline. But but, yeah, when when is the When is the race?
Speaker 9:The race is 06/21/2026. You can go ahead and get your place your deposits now. We'll definitely be having merch. I'm expecting a live broadcast from TBPM.
Speaker 2:We will be there. I will be percent. I can't wait.
Speaker 9:So, yeah, Can't wait to run this back with you guys in about eleven months.
Speaker 2:Fantastic. Incredible. Thank you so much and congratulations on the partnership. We're very excited to
Speaker 3:Beautifully execute.
Speaker 2:Keep tracking it. Can't wait for the race. We'll talk to you soon.
Speaker 3:Cheers. Thank you all. Thanks for coming on.
Speaker 2:Andrew, also notorious for running snarky billboard ads on 101. If you wanna run an ad, go to adquick.com. Out of home advertising made easy and measurable. Say goodbye to the headaches of out of home advertising. Only AdQuick combines technology, out of home expertise, and data to enable efficient seamless ad buying across the globe.
Speaker 2:Did you see the the billboard that they actually dropped on the
Speaker 3:On the one
Speaker 2:zero one? Yeah. Talked about this where Jeff Miller who we just talked to put up a billboard of the fury saying like no more enterprise SaaS because every single I think Trey Stevens got sick of seeing another another enterprise SaaS billboard and he said, I need an Andrew billboard up there. And so they did it.
Speaker 7:They did it.
Speaker 2:And so we will be hopping on with Ben Kennedy from NASCAR in just a few minutes. But in the meantime, let's tell you about Bezel. Get bezel.com. Your Bezel Concierge is available now to source you any watch on the planet. Seriously, any watch.
Speaker 2:Jordy, where where would you like to go in the post? We got a
Speaker 3:I have a post here from Ian Rountree, friend of the show. He says, a friend hadn't heard of TBPN and another described it as follows. TBPN is a very popular ramp infomercial in the style of ESPN. Instead of rankings tied to sport leagues, they are tied to how early and how much you invested in ramp or how close you are to someone who did. I said fact check true.
Speaker 2:We love it. We love it.
Speaker 3:Daniel Tenenrero says happy Core Weave lockup
Speaker 2:Expiry day.
Speaker 3:Expiry day. Basically the Super Bowl for guys like Escrowar, we've down 10%
Speaker 2:Some folks sell I'm not sure I'm not sure how the actual lock up So now,
Speaker 3:15%.
Speaker 2:15%.
Speaker 3:Still a $48,000,000,000 company and
Speaker 2:Not bad, Ron.
Speaker 3:Shout out Nick Carter.
Speaker 2:They also Angel
Speaker 3:investor in the
Speaker 2:Oh, yeah. That's right.
Speaker 3:What was it? Seed round?
Speaker 2:Seed round.
Speaker 3:Yeah. So You can run the numbers on
Speaker 2:Core we've most recently beat on top line, missed on bottom line. They are burning something around 300 something million dollars a quarter, but making a lot of revenue and so
Speaker 3:Who hasn't burned? They're investing. Billion.
Speaker 2:Investing.
Speaker 3:300,000,000 a quarter.
Speaker 2:Yeah.
Speaker 3:It happens. Parag Agrawal says he's just setting up his Twitter again. Heads down building parallel with some of the best people he's ever worked with creating infrastructure for AIs to search and use the web. He will be on the show in not too long. Very excited for that.
Speaker 3:Buck says, Staas, s t a a s Mhmm. Subsidized tokens as a service I e most of the VC backed AI app layer. And on that note, a Chris Pike post has hit the timeline.
Speaker 2:Oh, yeah?
Speaker 3:A Google doc has hit the timeline. I repeat a Google doc has hit the timeline. It's called cursor's problem. Mhmm. Product market fit is the story founders love to tell.
Speaker 3:Business model product market fit is a part they often skip. Product market fit is users repeatedly choose your product business model product fit. The extraction of value is sustainably in excess and proportional to the cost of delivering value. Cursor has relied on a subscription model that historically allowed for unlimited use. That's a fixed revenue variable cost setup.
Speaker 3:Insurance companies are the canonical example, and they employ actuaries to accurately price risk and segment users. Hyper growth startups rarely have that muscle. When variable costs scale with intensity of usage, but revenue doesn't, you're not selling software, you're underwriting risk. Without actuaries, actuaries, pricing, segmentation, caps, exclusions, these models drift in to the same ditch that killed MoviePass, Oyster, and forced ClassPass to retire quote unquote unlimited. Cohorts invert your most profitable user churn because they use the product the least and get the least value.
Speaker 3:Oftentimes, they can get better value from a competitor who prices them more accurately or with less breakage. The remaining users are those who extract more value than they pay. Over time, older cohorts morph into deeply negative gross margin. Top line mass rot, new larger cohorts can briefly offset the drag, hiding the deterioration in earlier revenue grows, margin quality quietly declay decays. A large cause of this problem in fast growing companies is the conflation of subsidies and marketing.
Speaker 3:They're both expensive growth strategies but they do very different things. Mhmm. Marketing buys attention. It changes who hears about you, not what the product is worth in equilibrium. Subsidies buy behavior.
Speaker 3:They put economic value on the product scale distorting the read unwillingness to pay. Mhmm. The fifteen minute delivery boom made this vivid. PMF seemed strong when prices were artificially low. When prices rose to true cost, demand snapped back.
Speaker 3:The quote unquote fit was with the discount, not the service. Venture lore points to Uber and DoorDash as counter examples. The lesson isn't negative gross margins are fine. The lesson is if there's an operational path to positive margins, I e density, batching, or utilization, and future pricing power, quote, moats, the temporary subsidies can be a bridge. Indeed venture capital is precisely the right instrument to facilitate these kinds of companies, but most businesses don't have such a bridge.
Speaker 3:Does this bridge exist for Cursor? Cursor's users expect the best coding performance which is currently delivered by the frontier models. That pins cursor's cogs to open AI and tropic price cards. Cursor doesn't control two critical dials. One, model performance frontier which is what users demand and model input output pricing, what cursor pays.
Speaker 3:If cursor steps down to cheaper weaker models, the users who care about performance will notice and churn. Those who can tolerate weaker models can get them cheaper elsewhere. If it stays at the frontier while keeping price flat, the variable real cost to service their heaviest users will explode. In an effort to combat this cursor has been forced to raise prices and institute usage caps leading to user outrage and churn. Anytime Unlimited shows up in variable cost businesses, PMF becomes a permanently open question.
Speaker 3:Are users here for the product or for the subsidy? Would they still use it as much or at all at true marginal cost? Until cursor prices consumption in proportion to cost, it cannot know. Last couple So interesting
Speaker 2:that we're going into we're we're leaving the world of zero marginal costs. Like this is the Ben Thompson intellectual like aggregation theory regime of the past two decades. Like since, you know, if you're trying to understand Google, you had to understand the what it meant to serve an incremental user at zero marginal cost, and it was something that Wall Street and retail and lots of folks, even a lot of VCs like could not wrap their minds around for a long long time and there was huge alpha in that. And now it's become consensus right when the the economic, like, equation is now flipping. I just wonder how long how long we'll be in this in this regime if it's here to stay, if we plateau and reasoning models are always expensive.
Speaker 2:And then I wonder I I do wonder how how bad the gross margins are at various companies, how bad this subsidization subsidized tokens problem is. And I also wonder if there are any companies like, there have been plenty previously leg like like, previous era SaaS companies that have said have gone out and said, hey. We're an AI company now. And I wonder if that's hurt their gross margins. I've been picking at that with a few founders that have come on and said like, so like, is your inference bill growing or is it material at all?
Speaker 2:And basically what I'm getting at is like, is it affecting your gross margins?
Speaker 3:Yeah. We we were asking Rahul from Julius about this and and he said that it's it's it's a thing but it's not Yeah. Incredibly material.
Speaker 2:There's going to need you just have to find a way with with the application layer company that you build to deliver enough value that the actual inference is under the hood very efficient. And then I do wonder if Cruiser's in a unique unique position because it's such a raw interface to to Yeah. To the frontier coding model and the quality really matters. But, yeah, could they could they swap out DeepSeekAR2, save 10 times as much money and then,
Speaker 3:know, and then also to break Chris's post, he says Kershell will have to choose what it wants to know. If it keeps subsidizing the heaviest usage, it can keep growing but it cannot claim unambiguous PMF if it starts charging in proportion to cost some usage will fall and what remains will be the market. The burning question that should nag founders, do I have demand for my product or for my subsidies? So seems Cursors without a doubt, Yeah. A beloved
Speaker 2:And it seems very reasonable to subsidize for a while and really get people installed and hooked on the product and then raise prices to to the point where you are delivering value. Like, when you think about what the value of an AI software engineer, that could be justified in the $50,000 a year, $100,000 a year territory. That doesn't seem that crazy to me if you're actually getting that leverage out of the system. But the idea of saying, oh, yeah. My my my my IDE bill is 10 k a month is crazy.
Speaker 2:Well But it could be. I don't
Speaker 3:know. Anyway. Before we get into our next guest, Ben Yep. We have some news breaking. Coher just raised 500,000,000 Oh.
Speaker 3:At six
Speaker 2:Go for
Speaker 3:Aiden Billion. Mezz. Yeah.
Speaker 2:On the transformer paper, one of the greatest to ever do it.
Speaker 3:Nick on x says, we are so back.
Speaker 2:We are so back. Congratulations to the folks I feel it.
Speaker 3:Cohere. Well, let's bring in Ben from the restream waiting room.
Speaker 2:Ben Kennedy from NASCAR. How are you doing? Ben, good to meet you. Happening?
Speaker 7:Good. How are you guys doing? Thanks for having me on today.
Speaker 2:Of course. Of course. Why don't you kick me off with an introduction on yourself and how you fit in the Orton NASCAR organization?
Speaker 7:Yeah. So my name is Ben Kennedy. I am EVP here at NASCAR, but we get the opportunity to wear a bunch of different hats. So, we're responsible for the NASCAR owned track properties, NASCAR regional team, emissions team, people, making improvements to our racetracks. And then importantly, what we're talking about today is schedule.
Speaker 7:So dreaming up the next year's schedule, and we're getting ready to announce our 2026 schedule here pretty soon. But, you know, one of our big projects, which I know we're talking about today, is the race on the base next year.
Speaker 2:Yep. We're
Speaker 7:bringing our NASCAR Cup Series, our Xfinity series, and our Crossman Truck series to San Diego for the first time and for the first time ever on a military base. So really excited about it.
Speaker 2:Take me through the shape of, like, all of the different NASCAR events because there's, like, you know, the there's the tent pole events that people kind of know and love and then there's a whole bunch of other different, properties, activations, events, races. Kinda give me the shape of what NASCAR is today.
Speaker 7:Yeah. So we compete across 38 race weekends throughout the year. 36 of those are points races, and then we have two exhibition races.
Speaker 5:Mhmm.
Speaker 7:And, our season, it starts in February with the biggest race of the year, the Daytona five hundred. So we're a little bit different in the sense that we start with our Super Bowl, and then we will go pretty much straight through the entire year. We'll have one or two weeks off to the first week in November where we'll have our championship race, which will be in in Phoenix this year. So we we're competing every single season. We have three different national series.
Speaker 7:So, you know, you can almost think of it like high school or or college that kind of leads to the pros. But we have our cup series, our Xfinity series, which is our last step for a lot of drivers before they go up to the premier series. And then our craftsman truck series, which are a little bit different style of of vehicle. It's more of a pickup truck style. Mhmm.
Speaker 7:And that's where a lot of drivers will start their national series career as they they begin touring with us. So
Speaker 2:And then how does the race on the base fit into that, structure?
Speaker 7:Yeah. So the race on the base will be, it'll be in the middle of our season. So Amazon Prime will cover it for the cup series.
Speaker 5:Mhmm.
Speaker 3:And a lot
Speaker 7:of the Xfinity series and truck series, which will be on Saturday and Friday that weekend, but it's June 19 to the twenty first. And, essentially, what we're gonna do at Naval Base Coronado is we're gonna build a temporary three mile circuit that will go around the base. So anyone that comes out, we're gonna create kind of these different neighborhoods of experiences that fans can go and see. So you have the start finish line where you'll have, you know, a lot of the hospitality, the garage area, people will be able to get down and and see and hear the cars. They'll go out towards the Bay Side Of San Diego where they'll go past an aircraft carrier or two, and then eventually, we'll come out onto the tarmac where they'll be weaving their way through f eighteens and Ospreys and all sorts of fun stuff.
Speaker 7:So That's good.
Speaker 6:Don't have the
Speaker 7:the course design finalized yet, but around a three mile course, we're gonna build temporary on the base.
Speaker 3:Yeah. Talk about What do think the, expected lap time will be for for a course of that size?
Speaker 7:It's a good question. Would say, you know, we've run a couple models on it. We do a lot of our sim work virtual before we we commit to anything. It's around a minute and a half, a minute forty seconds or so. It's it's a pretty high speed track.
Speaker 2:120 miles an hour on average, something like that, I imagine. That's that's wild. That'll be a lot of fun to watch. Talk about partnering with Anderol, who they are trying to, to reach. They have customers.
Speaker 2:They have employees. They have they have fans of the merch. Why was it a good partnership? What are you excited to, like, deliver to them on the marketing side? And what did they bring to the table other than, you know, just money?
Speaker 7:Yeah. We couldn't ask for a better partner than Andoril. And and we if we approach them or they approach us, I think we reached out to them Mhmm. You know, through the grapevine. And we had some conversations earlier this year, you know, probably five or six months ago with them, and, they had a ton of energy around the event.
Speaker 7:And, you know, for us, we wanna find partners and and companies that we can do business with that are both strategic in the sense that we're gonna add value to them, and, they'll add value to the weekend, which I know they're going to do. Yeah. But partners that are organic as well. And you couldn't think of a more natural fit than a partner like Anderrill. You know, you look at all the different types of technology that they're creating, both on the software side and the hardware side.
Speaker 7:It's incredible. And you think about precision, speed, and innovations in technology, that's what our sport is all about. So couldn't ask for a better partner than Andrew. Really fired up about the announcement today. This has been a a long one coming.
Speaker 7:We had a couple of Easter eggs that snuck out, about a month ago when we had the announcement, but glad to be able to be talking publicly today about it and, you know, excited to see. There's a lot of elements that they're gonna be bringing to the table over the next eleven months, And then especially on that weekend that that fans will get to to go out and experience as a part of it.
Speaker 3:What's the path a lot of our audience are founders and executives at tech various technology companies. What's the path into partnering with NASCAR itself or various teams and events?
Speaker 7:Yeah. I would say if anyone's interested, reach out to us. We can I'm sure we could find a way to provide contact info and whatnot. But, you know, typically, we'll have conversations with whoever might be interested. I think the good news is there's a lot of interest around this event.
Speaker 7:And whether it's NASCAR, as a sanctioning body or a team or a driver, we have connections to to everyone in the industry. So happy to put them in touch along the way.
Speaker 2:That's amazing. Thank you so much for hopping on the stream. Congratulations on the partnership.
Speaker 3:On the announcement. Well, I'm looking
Speaker 2:forward to it. We'll see you there.
Speaker 7:Yeah. I look forward to seeing you guys out there. It'd be a blast.
Speaker 2:This is gonna be great. Talk to you soon. Cheers, Ben. Bye. If you're looking to go to San Diego, you gotta book a wander.
Speaker 2:Find your happy place. Find your happy place. Book a wander with inspiring views, hotel grade amenities, dreamy beds, top tier cleaning, twenty four seven concierge service. It's a vacation home but better folks. Jordy, warm, gong.
Speaker 2:Can we I
Speaker 3:just wanna say
Speaker 2:We've just got waiting in the waiting room.
Speaker 3:Streaming from an aircraft carrier
Speaker 2:We can
Speaker 3:do for the race.
Speaker 2:We can do it. For sure. Sure.
Speaker 3:Well, let's bring Let's bring
Speaker 2:in Justin from the the stream waiting room. And from Solo. How you doing? What's Good.
Speaker 3:Welcome to the show.
Speaker 2:It's good. Would you mind kicking us off with an introduction on yourself and the company?
Speaker 12:Absolutely. I'm Jess. I'm co founder and CEO of Sola. We're an agentic process automation platform that helps businesses automate their most operational workflows, using AI by doing workflows the way that humans do.
Speaker 2:Name one process you've automated with an agentic workflow.
Speaker 12:Yeah. Absolutely. As an example, we we work with companies across a whole bunch of verticals. But Yeah. For example, for some of the logistics companies we work with, you can imagine they operate on internal portals, external systems, spreadsheets, everything in between.
Speaker 12:And to actually get a shipment out end to end, it requires a lot of manual work. And so SOLA will type data in, it will take down data, it will, you know, do all the coordination that gets the shipment end to end and work in that fashion.
Speaker 2:Give us the news today. Anything to share?
Speaker 12:Very exciting day. We just raised a 17,000,000 series a led by a 16 z. Congratulations.
Speaker 3:Don't leave out conviction.
Speaker 12:Was just about to get there. With continued support from our fleet lead conviction as well as Y Combinator.
Speaker 7:There he
Speaker 2:Total fantastic.
Speaker 3:Amazing. That's
Speaker 2:a one. Great lineup. Talk to me about what the state of the art is in actually building an agentic workflow on top of kind of an internal dashboard. We've been hearing a lot about, like, the big labs setting up reinforcement learning environments with verifiable rewards. They're cloning DoorDash.
Speaker 2:They're creating copies of amazon.com. Yeah. So the future version of Shout GPT will let me order headphones or Gongs or whatever I need for the show, just within that chat interface. I imagine that that if you're talking about some custom piece of logistics software, some internal portal, there's probably some things that you can get out of the box just by using Frontier reasoning models and and and web browsers and agentic browsers. But what what extra steps do you have to take to actually deliver a ton of value?
Speaker 12:Absolutely. Let me give a little context. A 100%, you know, everyone's talking about enterprise AI agents and computer use and VLMs, but there's a there's a gap between where those are at today and how that gets into productionized workflows, right, for enterprise companies at scale.
Speaker 2:Mhmm.
Speaker 12:You can imagine that, you know, for the first time, we have these models that can reason and they can act like humans. They can understand how these platforms are working and we don't need to, you know, build an integration or like an API connection into platforms in order to be able to do work on them. But instead, we can just mimic the way humans do. Now that said, if you've tried operator or computer use agents or any of these models, they're pretty unreliable for individual tasks. And then you can imagine if you're scaling this up to hundreds of thousands of hours of real world work, it's going to be really tough to do so.
Speaker 12:And so what Sola does is we take an approach where we use a combination of deterministic as well as more deterministic non non deterministic automation and sort of change the abstractions on which things are built so that, you know, you are able to, for example, send a shipment across five different platforms reliably and at scale. And so we use these models, but also a whole lot of different architectures on top of that to make things very accurate and be able to plan and, you know, build guardrails around the processes that people have.
Speaker 3:Did you start with a focus on logistics? Or is that somewhere you ended up after, you know, talking with a bunch of different companies and
Speaker 2:various After I demanded a single example to dig into.
Speaker 12:Yeah. Absolutely. I mean, today we we work, we have workflows across a lot of different verticals. So Sola does finance workflows and KYC. Sola does health care workflows and interest data into EMRs.
Speaker 12:Logistics is I a big part of would say that the two biggest verticals that Sola has a ton of done a ton of work in today is logistics and health care. It's by no means where we started, actually. Our early customers were in legal and in health care, I would say, mostly, and some insurance as well. But I think logistics just turned out to be an industry that we discovered a few months ago. Turns out there's a million perfect automations for Sola there.
Speaker 12:And today, we work with a whole bunch of really large companies in the industry who are using it for all kinds of different applications.
Speaker 3:What's been the employee reaction at companies that you guys work with? I imagine a lot of these employees are stressed out, overworked, kind of you know exhausted from managing all these different service areas. So my my sense would be that they they welcome a tool like this but but what's your read?
Speaker 12:Yeah. For sure. I I think that it really meaningfully changes the the way people work. Like for example, some of the companies that we operate at, you know, we're we're saving people from doing the very boring copy pasting, very manual repetitive work so that they can focus on sales and customer relationships and everything else that goes into their business. One of the customers that we work with, they do a few 100,000,000 in revenue.
Speaker 12:We started working with, about half a year ago, and their their kind of famous data point is that they haven't had to hire a single person at their company since bringing on Sola because they've just been able to do more with the same amount of people that they have on hand and they can kind of scale the revenue of their business without having to scale headcount.
Speaker 3:Yeah. I've heard that from a founder building in the AI roll up space. Mhmm. And he's buying companies and he's telling the management team we're not like a traditional private equity that's just gonna like
Speaker 2:Gut the
Speaker 3:company. Gut the company, reduce growth. We're gonna focus on growth but we don't to add a bunch of incremental headcount. We're just gonna make you more effective. Interesting.
Speaker 3:It's a great value prop.
Speaker 2:There's a big kind of discussion online today about gross margins at start ups. Can you walk me through the the the economic thinking of the of your buyer, your customer? How are they thinking about the value that you deliver and then your cost? Because obviously, I imagine that these workflows use reasoning models. The token bills are probably significant, but you're delivering hopefully a lot more value than that.
Speaker 2:So how are people responding to the idea that that, okay, there's there's a company that has real variable costs with the amount that I demand or the the amount that I'm using this tool? Are they receptive to a consumption model? Are they are they receptive to price increases? What's the what's the vibe been like from the from the AI buyer world?
Speaker 12:Yeah. Absolutely. I mean, I think the most direct way to justify value is just how many hours are you saving. Right? That's the the most straightforward way and the traditional way automation is justified.
Speaker 12:On top of that, for a lot of businesses, you actually see top line revenue lift. Like, if you start powering their core operations and they can just do more business. So it becomes a very different equation, and I think that's a lot of the ways customers see Sola on top of just time savings. In terms of model costs, it really doesn't make sense to, you know, paying a computer use agent at every single step that you're doing. You can imagine that will get super costly.
Speaker 12:It will be slow. It will be unreliable. And so we have a lot of infrastructure built on top of that so that the things that, you know, you don't necessarily need models for that are very straightforward, we can just, you know, apply more traditional automation. And then areas where you need reasoning, you need flexibility, you need workflows to adapt, then obviously we use more models there. And so costs aren't crazy, and I imagine those will keep going down over time.
Speaker 2:Fantastic. Well, congrats on the round and congrats on a lot of progress.
Speaker 12:Yes. Hiring. Hiring lots of engineers. We're based in New York. If you're interested, please reach out.
Speaker 12:We are growing very quickly.
Speaker 3:Fantastic. Amazing. Congratulations on the milestone and we'll see you back here soon, I'm sure.
Speaker 2:Yeah. Have a great rest of your day. Cheers. We'll talk to you soon. And we have Parag Agarwal, the former CEO of Twitter.
Speaker 3:The man, the myth,
Speaker 2:the stream waiting room. He is launching a new company today and we are pleased to have him join the show. Welcome to the stream.
Speaker 3:How are doing?
Speaker 1:Hey, everybody. Hey, John. Great to be here.
Speaker 3:Great to have So much
Speaker 2:to talk about. Let's start with the new company. I I mean I'd love your thoughts on on live streaming on on Twitter and X and all the things that we're doing but let's let let's stay focused on your company. What did you announce today? Should we ring this Gong for you?
Speaker 1:Let's do it.
Speaker 2:Give us a give us a breakdown. What what how how are you describing the new company?
Speaker 1:We're building parallel to build infrastructure for AIs using the web. Mhmm. Born out of this observation that the web was built for humans. We built Twitter. You're thinking about people in browsers and apps and you're designing stuff for humans.
Speaker 5:Mhmm.
Speaker 1:And two years ago, as I was thinking around, like, AIs are gonna use the web, and that's gonna be the primary user of the web. And it's gonna be at massive scale, like, thousand x, a million x of what we've ever done on the web. Mhmm. Like, that needs new infrastructure, new business models, and that's what this company is about. Today, the product we shipped is our deep research product.
Speaker 1:Now I'll tell you more about it.
Speaker 2:Yeah. How long when
Speaker 3:when did you actually start the company? It sounds like you've in stealth for a while.
Speaker 1:Yeah. A year and a half ago. Been building a lot of infrastructure in that time. Lot of infrastructure.
Speaker 3:So talk about talk about the the first product. Break it down.
Speaker 1:We shipped a deep research API today. Mhmm. So you're you're use you're users of JGPT and, I'm assuming, several deep research tools. Yep. We have an API product that any enterprise developer can integrate into their applications, into their workflows.
Speaker 5:Mhmm.
Speaker 1:Since we have reimagined the search stack as well as the technology for the web from the ground up, we can outperform OpenAI's deep research. We can outperform every leading model's deep research quality in terms of their benchmarks, others' benchmarks, and the real customers. And I think that's the product we've announced today.
Speaker 3:Mhmm. So break down some initial use cases for the product. Let's say I have a a SaaS comp like, vertical SaaS company. Is this and and I'm building or or or or something, you know, I could imagine somebody's building SaaS for sales reps or, you know, a CRM provider. Is this something they would be running, you know, deep research style queries within the product?
Speaker 1:Yeah. People do all kinds of things. So in the sales CRM context, right, there's a lot of people who have this massive current customer list, prospect list. They wanna go, I wish I knew this about this customer. I wish I knew this about this customer.
Speaker 1:So they just, like, add a bunch of data to have the CRM now have a lot of information that wasn't in there but was on the web. And now it's in their systems, in their CRM. They're ranking based on that. They're prioritizing based on that. They're able to go do meeting assist, right, before you meet someone.
Speaker 1:Pull everything from my internal information that I have about the customer and our interactions interactions with with them, them, but also pull everything that's happening with their business, what they're talking about, what they're doing, what they're shipping.
Speaker 2:Do you think about the Pareto frontier? I mean, Google's mean, I believe they have Gemini APIs, and they have and and they focused on kind of this this idea of the trade off between cost and quality of result and in in their in in intelligence is a function of of cost ultimately. Where do you see pockets of value? Do you just wanna go way further? Doesn't matter how much it costs companies are willing to pay, Or are there is there a different kind of angle on the Pareto frontier that you think is unexplored?
Speaker 1:Glad you mentioned the Pareto frontier. I think we obsess about the Pareto frontier, but I think both are important. Mhmm. One, at every price point, you gotta be the best. Mhmm.
Speaker 1:And then for someone who who has no price sensitivity, you gotta be the absolute best. Mhmm. Right? And I don't think you get to do the one without the other. Yeah.
Speaker 1:The way we push is we first push quality and accuracy for use cases as high as possible. And once you can do that, it actually you can do a lot of work to make it cheaper by trading off a little bit of quality out. Mhmm. And that's the motion you take on. But you gotta be on the Pareto frontier for every use case to be operating at the scale that we wanna operate at, which is like every application, every workflow, anytime, everything should use AI.
Speaker 2:Yeah. And it's kinda silly. So so
Speaker 5:who are you
Speaker 3:How do you think about competition in the category? Are you competing with OpenAI's API? Is that the wrong way to think about it?
Speaker 2:Yeah. I'm interested in in where do you see pockets of unexplored territory? Like, one of Google's advantages is that they have the TPU, but there are lots of, new chip companies that offer different trade offs for inference. And what are you excited about in terms of, like, differentiation?
Speaker 1:So one, we use models from OpenAI, Google, and we use several Okay. Tools in different places. Yeah. Yeah. We also in our own models, we build our own index, crawl, ranker, listener.
Speaker 1:And so what we are is a little bit of a complement to the best models if you're building AI applications.
Speaker 6:Mhmm.
Speaker 1:Now, of course, OpenAI does bundle a search tool with their API. Mhmm. And that we compete with and beat on quality.
Speaker 2:So Mhmm.
Speaker 1:We beat not just that tool, in fact, like the benchmarks for the products we ship today, we beat humans doing hours of work
Speaker 2:Yeah.
Speaker 1:Through our deep research product. Not just because we're cheaper or can do it faster, but we're more accurate for a bunch of workflows than hiring a bunch of people to do it. Right? And that, I think, is really exciting as we work with more and more customers. We're able to replicate that.
Speaker 1:And that's an amazing moment that we've found this year.
Speaker 2:Do think there's room for differentiation by finding a beachhead market that is a subcategory. I just imagine, like, we've seen this with Harvey and legal and they're obviously, you know, HIPAA compliance and medical. And, we just talked to, Jessica and she was saying that, like, were they a YC company. They tried a bunch of different things, did some healthcare, some legal, wound up in logistics and had a bunch of luck there. Are there any glimmers of beachhead markets on the horizon for you?
Speaker 1:Almost too many. So we we're seeing like a bunch, as you mentioned, like CRM, sales, sales intelligence, marketing.
Speaker 2:Mhmm.
Speaker 1:There's a bunch happening there. There's a lot of people innovating, and there are customers. Mhmm. So if you about our customers, our customers are often vertical people who are in various markets. We have people doing science research on, like, papers published or on sort of clinical trials that are happening or the data coming out of those.
Speaker 1:We've people we've, like, investors, like hedge funds to PE funds to venture funds
Speaker 5:Mhmm.
Speaker 1:Using us because, like, information on the web is what gives people alpha and people can be so creative and now can create like scaled programs for figuring out where to spend their time. Instead of doing one query at a time and chat GPT, you write a script, you do a thousand queries on our deep research system, you get better quality and you figure out where you want to spend your time. And we even have coding agents that use our search tools when they get stuck.
Speaker 2:Wow.
Speaker 1:So if you're an agent, like, it's just like so intro beachhead markets, think it all converges in the Right? Way I see It's all agents out there. You can have an agent for sales, you can have an agent for investing, you can have an agent for choose your favorite industry. Every agent needs
Speaker 2:to Writing. Let
Speaker 3:How's it been building, you know, quietly out of the public eye? Have you enjoyed it?
Speaker 1:A lot.
Speaker 2:A lot.
Speaker 1:Also, respect for founders. Like, I I don't know. This is ran a large company. Right? I was at Twitter eleven years.
Speaker 2:Yeah.
Speaker 1:Being a founder, taking something from like nothing to
Speaker 3:having like a bunch of startup?
Speaker 1:It's my first startup.
Speaker 2:Wow. Wow.
Speaker 1:Figuring it out, like I'm massively unqualified for the jobs. But those are only jobs you really want. Right?
Speaker 2:Yeah. Of course.
Speaker 1:Like, why do you want a job that you're qualified for?
Speaker 3:Just gotta figure it out.
Speaker 2:I wanna I wanna dig into a little bit more granularity. I obviously, it's launch week, but chat is asking us, what did you get done this week? Break it down for us.
Speaker 1:This week I got back on Twitter.
Speaker 2:Let's go. Ring gong. Ring the gong, Jordan.
Speaker 3:We're in the gong.
Speaker 2:Hitting the It's great to see
Speaker 3:you back on
Speaker 2:the We're seeing progress on the timeline. Congratulations on the launch.
Speaker 11:Think that's huge news.
Speaker 9:And I don't know if you caught this.
Speaker 1:I think I almost broke Twitter.
Speaker 2:Oh, really?
Speaker 9:As I was tweeting like
Speaker 1:this morning at like 8AM, I was, like, trying to get my tweets out for the first time, like,
Speaker 2:in Yeah. Yeah. Years. Yeah.
Speaker 1:Right? And Twitter is glitching.
Speaker 2:Oh, okay.
Speaker 1:Then I go on Dump Detector.
Speaker 2:Okay. It's like You might have brought it down. And
Speaker 1:I was like, what timing, man? Like
Speaker 2:Yeah. Yeah. Yeah. Timing launch on the timeline is is like one of the hardest dances you have to do. You can get steamrolled by a thing.
Speaker 2:This a
Speaker 3:was good
Speaker 2:a good day. Lunch. Yeah. And we're glad that you were
Speaker 3:able win at the show. Could have been like a surprise deep sea launch.
Speaker 2:Yeah. Yeah. Exactly. But I think you broke through and we're very excited for you. So congratulations on the launch.
Speaker 2:Thank you so much for stopping by and have a great rest of your week. We'll talk to you soon.
Speaker 3:Yeah. Great to catch up.
Speaker 2:Have a
Speaker 3:good one.
Speaker 2:Bye. Up next, we have Eric from bolt dot new in the restream waiting room. Let's bring in Eric. I'm very excited to talk to him because Bolt is launching a new business model. The margins on prompting will go to zero and the companies will make money from hosting websites and apps instead.
Speaker 2:I wanna talk about it. How are doing, Eric? Good to have you on the stream.
Speaker 3:What's happening?
Speaker 8:And good to be here, guys. Yeah. Long long time watcher. Good to be good to be on the show.
Speaker 2:Fantastic. It's good to have you. Introduce yourself. Give us a little background of the company, and then I wanna go into the business model questions because we've this has been top of mind for us all show.
Speaker 8:Yeah. For sure. Yeah. So, company's called Bolt dot New, formerly known as Stackless. We we're in the process of swapping the logo.
Speaker 2:Gotta get new merch printed.
Speaker 8:Well, we've been around for eight years now. We actually just hit the eight year mark two weeks ago. Over the next weeks. Success.
Speaker 2:Like a year ago.
Speaker 8:And so what ended up happening was we pivoted and launched Bolt. And in the first two months, we're in 20,000,000 of ARR and Wow. Was really one of the first text to app tools that that out.
Speaker 2:Okay. So is that Are you beating the allegations? 0 to 20,000,000. Very impressive. What were the gross margins?
Speaker 2:Can you give us any insight here? Because everyone on the timeline's saying anyone with a big revenue ramp, it's all suspicious. But give us give us a white pill.
Speaker 8:Yeah. So our margins have actually been really good. So like That's great. It's been around 40%. Okay.
Speaker 8:And a big part of that is that, you know, for for the text to app stuff
Speaker 2:Yeah.
Speaker 8:Part of it is the inference where you're having the cogen, you know, AI model spit out code. Yep. But you actually have to run it somewhere. And so that's like the technology we've been making for the past eight years. Basically, allows you to run full development environments in a browser using the end user CPU.
Speaker 8:So it doesn't cost us anything.
Speaker 2:Right? Got it.
Speaker 8:Because that's a big part of why our cogs are are a lot better.
Speaker 2:Sure.
Speaker 8:But but for us, it's like yeah. I think what seems to be inevitable is that margins are just gonna go to zero on this stuff. And so we're we're kinda skating to the where the puck is going because
Speaker 2:I'll unpack that because a lot of people are saying margins are gonna go to a 100 Margins are gonna go very high because inference is gonna get very cheap. You're saying margins are gonna go to zero. Break that down. Why would it go to zero? Is that just competitive dynamics from the competitors and the legacy companies and just all sorts of different competitive pressure?
Speaker 8:It I think it's yeah. Good question. So, I mean, it's really like like, we could go and use the previous generation of models, but and and charge users, you know, what we're charging for Frontier stuff. But the problem is, like, you're not gonna be able to build Mhmm. You know, quality apps.
Speaker 8:Right? Because the the the Frontier models and agents are incredible and they just keep getting better. And so the kind of if you're expecting to as a company reselling inference unless you're a model provider, your choice is you can either take a margin and give worse models than what are the frontier or you can or you're or you're saying, hey. We wanna always have the best, most capable stuff and and and not take a margin and instead and then but what that means for your business, though, is that you have to be going and making money in other ways than just reselling inference. And so if you kind of look at the previous generation of site builders and hosters as an analogy, if you go to like Wix and Squarespace, they don't charge you to like build a website.
Speaker 8:It's free. Of course, you don't have to pay for AI or whatever, but like you drag and drop. What what they bill you for is to host the thing. Right? And and that's how they have a very healthy LTV and average customer, you know, contract length, etcetera, is that you have your website host and that's ongoing value that's
Speaker 3:being Yeah. I and I Yep.
Speaker 2:This is true.
Speaker 3:People that
Speaker 2:have been
Speaker 3:kind of trying to track this market of of prompt to site or prompt to app have have the, you know, the critics critics have talked about churn. But my read on it has always been that it seems like there's been a fairly healthy market of just website builders for a long time. It hasn't been monopolistic. You've got the Wixes, the Squarespaces, the Webflows, the Framers. And, you know, all those companies have been able to carve out solid Mhmm.
Speaker 3:Solid businesses. And so, yeah, this launch makes a lot of sense which is, hey, come on the platform, generate whatever you want Yeah. But then if you're generating a site, a marketing site for your business, we'll host it for you indefinitely.
Speaker 8:Yeah. Exactly. And so it kind of you'd move like for us as a business, it moves the focus for us to having the best services and workflows for the customers we're serving. So, like, that's for people building hosting website. That's hosting services.
Speaker 8:We partnered with, like, Netlify and Superbase for powering the stuff that we've got today, and they've scaled this for, you know, some of the, you know, heaviest products like Uber and Twilio in the past. So you can you can build, like, you know, to millions of people now with Bold. And on the b to b side, we're selling to folks that are I mean, basically replacing, Figma with Bold for doing prototyping and rapid product development, And that's just very sticky because you're you're working on a team. And it's for the same reason that Figma is a collaborative product is sticky. And so that's where really where we're focusing because that's like, you know, the the retention is incredible, on those use cases from our numbers.
Speaker 8:Right?
Speaker 2:Are you feeling acceleration, deceleration from the Frontier Labs on coding products? Lots of people were kind of on the timeline at least disappointed in GPT five. It feels like it's more of a consumer product now. But in general, you know, it used to be, you know, every six months we got something that was completely breakthrough. And now, you know, the the the releases feel a little bit more incremental.
Speaker 2:But what are you feeling just from the Foundation Model Lab side? Because we are seeing a lot of progress there. The benchmarks are improving. The context windows are getting bigger. Are we accelerating, decelerating kind of in a in a rebuild mode, kind of rethink?
Speaker 2:You need to go back to the drawing board and do some AI research.
Speaker 8:Yeah. I I think I think in, you know, for all the the frontier labs, I mean, they they should all they're they need they need to keep hitting, you know, more and more breakthroughs. Right? Yeah. But from a from a on the ground perspective of a company like us looking at these models and running evals and measuring them, the models themselves may be seeing like maybe more incremental improvements.
Speaker 8:But what's really, I think, the big unlock is that not only are they getting better at just like coding, but they're getting better at being designed to be used as part of agent systems. Mhmm. And that's, like, a that's a huge thing because, I mean, if you think about how humans think like, if I asked you to, like, you know, rattle off, like, you know, the the latest financial numbers or something, it's like, you might be able to, like, pull that up. But realistically, you need to, like, think on it. You get some things wrong on on zero shot, and you do, like, kind of go do some research bounce around.
Speaker 8:And so, like, that's what really agents are kind of replicating in my view is, like, how we as humans actually think and work. And so how do you really tune the models to to be good at going and going down different thought paths, killing ones that don't actually look promising, etcetera, etcetera? And you look at Claude code is is probably the best example of this Yep. In the cogeneration world. And so there's remarkable, you know, progress being made in that realm of things.
Speaker 8:Right? Yeah. So there's a lot seems to me there's a lot of room to run just on, you know, incremental improvements on the zero shot aspect of models, but then also how these things are going in reasoning and working in
Speaker 2:the genetic systems. Yeah. The, yeah, the un hobblings. I think about, like, I'm I'm sure that you don't vibe code a database every time someone builds a website. You pull a database off the shelf, I've and seen the stats of all the databases that you guys are, like, pumping customers into.
Speaker 2:And so, yeah, as more of those tools roll out and and you get more of that functionality off the shelf and you can pull this from over there, pull that open source project, pull this data like that feels like that unlocks a lot of a lot of growth.
Speaker 3:Last question from my side for now. Gabe in the chat asked what are those champagne bottles in the background? What's going on there?
Speaker 8:First time someone's asked about this. Yeah.
Speaker 2:Actually,
Speaker 8:those so that you know, this is these the first enterprise deals. But when we closed the first because, like, we had never done enterprise
Speaker 2:Sure.
Speaker 8:Sales motions before Yep. Period.
Speaker 2:Like, I've
Speaker 8:never been a salesperson. So, you know, my chief of staff and I, my CTO, when we closed our first kinda three major customers, this is like probably four or five years ago. Yeah. We started with the $15 bottle of Cook's for the 20
Speaker 4:ks deal
Speaker 10:we did.
Speaker 3:Start somewhere. Yep.
Speaker 2:That's good.
Speaker 8:And then worked our way up. There we go. So those are like, yeah, those are the things I keep on the shelf
Speaker 2:just so What's the top tier bottle in the back?
Speaker 8:I I think the top of it, I think it's a bottle of Dom. I can't
Speaker 2:There you go. That's probably $2.50, $3.50.
Speaker 8:Yeah. Yeah. I think someone got it for us as a gift or something. Maybe I can't remember what that was about. But it's that's that's like the I I, like, never drink alcohol, but it's like, that's,
Speaker 4:you know
Speaker 2:Let's hear it for some My empty shell.
Speaker 3:Enterprise deals.
Speaker 2:We love it. We love it.
Speaker 3:Good experience.
Speaker 2:Well, thanks so much for coming out on the show. We'll talk to you soon. Have a good rest
Speaker 8:of Likewise. Your Thank you.
Speaker 2:See you.
Speaker 7:See
Speaker 2:you. Up next, we have Matthew from Merlin Labs waiting in the Restream waiting room. Let's bring in Matthew. He has some really big news. We're gonna need a bigger gong, Jordy Hayes.
Speaker 2:How you doing?
Speaker 10:Hey, guys. How are you?
Speaker 2:We're great. How are you? Give us the news. Give us the update. Give us an introduction on you, the company, and then the news today.
Speaker 10:Hey, guys. I I'm Matt. I run Merlin. We are, yeah, we're gonna need a bigger gong.
Speaker 3:We're gonna need a bigger gong.
Speaker 10:No. Like, I'm seeing you ready with a mallet, like, I'm I'm here for it, like, especially the end Yeah. Of the So I run a I don't know, biased, like, a really cool company called Merlin, where we're developing essentially a pilot, just not a human one. Yep. We are deploying that predominantly with US Air Force and a bunch of other partners and customers around the around the world.
Speaker 10:We announced this morning that we're taking the company public, which is gonna be the first time one of these state defense, startups go public. Congratulations.
Speaker 3:There we go.
Speaker 2:I love it.
Speaker 6:I was waiting for that.
Speaker 2:Let's let's stay on the anatomy of the deal. What's actually happening from a mechanics perspective? What does it mean to take this company public? Where will you be listed? Do you have a ticker?
Speaker 2:Like, break down the like, what's going on with the deal, what it means. And then and then I I have ton of questions about autonomous flight.
Speaker 10:Yeah. A 100%. So we we we were looking at a couple different options. And particularly for us, going public sort of efficiently allows us to do a bunch of things, allows us to go build a lot more capital to go sort of execute on a couple of big contracts that we're working on Mhmm. But also allows us some currency to do m and a
Speaker 2:Yep. Which
Speaker 10:is important for us, especially as we as we, you know, sort of build build up. So we talked to a lot of folks, and we're combining with Inflection Point. Inflection Point has done, two other, like, really high profile deals, USA Rare Earth and then, Intuitive Machines, both of which are trading at multibillion dollar valuations with hundreds of millions of dollars of cash in the
Speaker 2:balance sheet. And Let's go.
Speaker 10:I love it. And then another big part of the announcement today is we announced like a 120 plus million dollars of committed capital before we even announced the deal.
Speaker 2:Yeah. So it's effectively like an investment in the company, although it'll happen after the merger.
Speaker 10:A 100%. Yeah. So most companies, when they're going public, they raise their pipe between when they announce and when they go public. Yep. Based off the strength of the deal, we were able to pretty quickly raise about a $120,000,000 before the announcement.
Speaker 10:TBD, how much more money will take, sort of preannounce, but super exciting and I think a really important moment for Defense Tech.
Speaker 2:Got it. Talk to me about, the value of autonomy in flight. We were talking to Deleon earlier about this. There's a, like like, the the the model for self driving cars is very logical. Something like 70% of the cost of an Uber is the human driving the car.
Speaker 2:In the plane context, it's usually something like 7%. It's much lower because the fuel is very expensive. You only have a couple pilots. You have a lot of people in the in the vehicle. So how are you thinking about focusing on, like, fully autonomous versus, you know, pilot assistance technology?
Speaker 2:Kinda what's the equivalent of a level five self driving, level two self driving? How do you think about the progression to self flying planes?
Speaker 10:Yeah. I mean, well, Deleon Deleon is captaining his Cessna Yeah. Extreme, extremely well.
Speaker 5:But he
Speaker 2:might be joined by a by a copilot Right? No. I
Speaker 9:I Yeah.
Speaker 3:He's gotten himself in some situations where he probably would have been better to let the copilot take over. But he's always made it through. So It's
Speaker 10:a situation. Alright. So everybody thinks of an airplane with like two pilots. Right?
Speaker 2:Yep. But for
Speaker 10:if you're like FedEx or like big airplanes, I don't know what Delhi inside of it, but like big airplanes
Speaker 2:Yeah.
Speaker 10:There's anywhere between thirteen and twenty FTE pilots per airplane making all in anywhere between half a million and a million dollars a year.
Speaker 2:Yep.
Speaker 10:So if you're able to, in the future, augment that and go from two crew down to one, that's that's, you know, billions of dollars of savings for, you know, the airline industry, which is which is super important. But for our military customers, getting that out there enables those pilots go act a little bit more like mission managers
Speaker 5:Mhmm.
Speaker 10:Which is super important, particularly given that the air force is short pilots, which enabled our big contract that we announced last year, sort of a big 9 figure contract to go spearhead fixed wing autonomy for for certain parts of the air force.
Speaker 2:What about what about the role of of, like, not necessarily autopilot, but, like, just enhancing the safety of of airplanes. I feel like that's just something that everyone should be excited about. Get about. Everyone's seen the the the different flight disasters. Everyone wants more airplane safety.
Speaker 2:They're definitely willing to pay for it. It seems like there's an an, like, a an opportunity to plug in, and I'd love to know about the the different FAA pathways for what it means to actually pilot the plane via a nondeterministic machine learning based AI based system versus having a, you know, an iPad next to you that's more, just offering advice and diagnostics and acting as kind of a just bring it like a centaur model, bringing super intelligence alongside a human in the loop.
Speaker 10:Yeah. So for for our customers, particularly our DOD customers, like, bottom line, most people living today have lived in a world where America has been able to go project air power and, like, prevent World War three from happening for the vast majority of their adult lives. Mhmm. We are in a world, for the first time ever, where America does not and the West does not have the unilateral ability to go project air power and prevent World War three. So, like, what we're doing and what we're building here of, like, getting autonomy out actually in an operational service going from two crew down to one, and then we're doing some uncrewed stuff as well, with with with a few customers, Like, gets us to that point of, like, getting out of this, like, kinda toy iPad pilot assist kinda, like, I don't know, kinda like a BS solution and actually going out and and really operationalizing autonomy and, like, getting, like, millions of hours of operating history so that we can start to go claw back that lead against some of our peer adversaries.
Speaker 2:Yep. Makes sense. Jordan Super
Speaker 3:important stuff. Come back on as this cycle progresses.
Speaker 2:Yeah. We're very excited for you. Congratulations on the news.
Speaker 10:Cool. We're gonna need a bigger gun, guys.
Speaker 2:Yeah. We'll get it ready. We're working
Speaker 3:on it. Actually it's actually in the works.
Speaker 2:Hopefully, it's manufactured, we'll fly.
Speaker 3:So it's really against against you guys getting out. Yep. Okay. So we'll do our I'll absolute
Speaker 10:I'll be back and we'll expect to be here going.
Speaker 2:Fantastic. We'll talk to you soon,
Speaker 10:Matt. Have
Speaker 2:a good one. Bye.
Speaker 3:News. The Trump administration has said to discuss US taking a stake in Intel.
Speaker 2:Someone predicted this on the show. Maybe it was Aaron.
Speaker 3:The Trump administration is in talks with Intel to have the US government potentially take a stake in the beleaguered chip maker helping support the company's effort to expand domestic manufacturing. The deal would help shore up Intel's planned factory in Ohio who said the people who asked not to be identified because the deliberations are private, of course. The company had once promised to to turn that site into the world's largest chip making facility though it's been repeatedly delayed. The plan stems from a meeting this week between President Trump and Intel CEO Lip Bu Tan. The people said, the idea is for the US government to pay for the stake and the details are being sorted out.
Speaker 3:One of the people said, another caution that the plans remain fluid. So, it will be interesting to see here if this is taxpayer dollars or is this like sovereign slush fund that we're getting from Japan
Speaker 2:Making not videos pay for it. 15% of H20s put that money to work by Intel. I don't know if I like that. I don't know if I like buying Intel. It feels like we also, it I don't know.
Speaker 2:I mean, the US government does own some companies like Fannie Mae and Freddie Mac were recently they're the the lenders for student loans or, all sorts of all sorts of lending that goes on. Those are, nationalized. And so Trump was talking about IPO ing those or spinning those out.
Speaker 3:Tyler, what's Do you
Speaker 5:think this is bullish for Leopold? Situation awareness big. Aren't they big intel?
Speaker 2:Oh, yeah. That's huge.
Speaker 3:Mean, Intel's up 20% in the last five days.
Speaker 2:Exercise those calls, Leopold. Let's go.
Speaker 3:Buco Capital has a I got a post here. We'll use this to close out the show. Okay. Pull this up. Team port please.
Speaker 2:You just drop it in the chat.
Speaker 3:It's in the chat. Leopold Ossenbrenner today after realizing intel is a horrible
Speaker 2:We're gonna get demonetized.
Speaker 3:Turn this off before we get demonetized.
Speaker 2:You know, we just gotta talk over as it's playing so that the AI gets confused and thinks that's not a real song.
Speaker 3:Anyways Anyway
Speaker 2:Fun hanging out with everyone in the chat. Thanks for watching Gabe, Techno Chief, John Exley, Deepak, Regat.
Speaker 3:So many good usernames.
Speaker 2:Thanks for watching. We will see you tomorrow.
Speaker 3:I can't wait. It's gonna be Friday episode. The mansion section incoming.
Speaker 2:Really? It's already Friday? Wow. Hard to believe. You so much for watching.
Speaker 2:Leave us five stars on Apple Podcast, and we will see you tomorrow. Goodbye.
Speaker 3:Bye. We love you.