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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 TV The End. Jordy, what is going on in the timeline?
Speaker 2:We got a red flag.
Speaker 1:We got a red flag on the play. The timeline is in turmoil. Elon Musk and Sam Altman are fighting. Mom and dad are fighting. Mom and dad Shots are fired.
Speaker 1:This all started because of Apple actually, not OpenAI, not x, not the everything app, but Apple and the and the iOS charts. So, this started with, Elon Musk posting. Apple is behaving in a manner that makes it impossible for any AI company besides OpenAI to reach number one in the App Store, which is an unequivocal antitrust violation. XAI will take immediate legal action. Well, the the community notes section took immediate action and added a number of extra context that they thought people might wanna know.
Speaker 1:First, in January 2025, DeepSeek reached number one overall in the App Store similar to how Ramp is our number one sponsor on this show. Time is money. Save both. Easy use corporate cards, bill payments, accounting, and a whole lot more all in one place, folks. Go to ramp.com.
Speaker 1:And just one month ago on 07/18/2025, Perplexity reached number one overall in India's App Store. That's interesting. I didn't
Speaker 3:realize And Grok has hit number one in Japan.
Speaker 1:Oh, that's right. Yeah. But we
Speaker 3:Probably have
Speaker 1:no other factors contributing to that. So most of the AI apps live in the in the productivity section. So that must have been in that. But it's odd because it's like we need a whole new set of of of categories for the new AI apps. I feel like they should have their own category immediately.
Speaker 1:What are all the categories? I mean, productivity, I feel like that's everything from, like, spreadsheets to ChatGPT. Like, it's a pretty broad it's a pretty broad category. And and so they I mean, Apple probably needs to redo the the the categories. Where are the categories?
Speaker 1:I feel like you can't I feel like they're hard to find these days. They have editor choice apps, which we'll get into because, okay. So browse categories. They have Apple Vision Pro apps at the top. That's an odd choice for the iPhone version of the App Store, then Apple Watch apps, then AR apps, then books, business, developer tools, education, entertainment, finance, food and drink.
Speaker 1:Food and drink gets its own Well,
Speaker 3:I'm looking at the global top charts right now or global for The US so across all the different categories and right now ChatGPT is number one. Number two is Tea on Her dating advice which
Speaker 1:is Wait. There's a new tea app.
Speaker 3:Which is helping men date safe.
Speaker 1:Wait. Wait. So it's the men version?
Speaker 3:The male version.
Speaker 1:The male version. It is It's men's cereal Very poorly. The t app.
Speaker 3:Rated, but it's number one in lifestyle, and number two on the overall charge. Number three is Tee Dating. Four is Threads, which apparently just crossed 400,000,000 monthly active users.
Speaker 1:Ademaseri's not messing around over at
Speaker 3:And Grok is number five.
Speaker 1:Okay. That's
Speaker 3:not this is despite Apple I I do believe that Elon is correct and that Apple's not including Grok in features, which
Speaker 1:are editorial decisions. Editorial. Yeah. So, yeah. I mean, Doge Designer says Grok is the number two app in productivity, number six overall.
Speaker 1:So why is it so hard to find? And what he's pointing out is that Elon Musk showed this. Grok is the smartest AI in the world and on the toughest test and came first by far in coding, but is not mentioned all at all under AI by by Apple. So Apple did an editorial view on the AI powered apps, and they listed out a bunch. Chattypetit, Google Gemini, Microsoft Copilot, Lightroom, photo and video editor, which I mean, I I use it every once in while, but it barely has AI features.
Speaker 1:It does not compare to a foundation model. It's not a chat interface. Then you have Canva. Then you have Duolingo, which, of course, Duolingo uses artificial intelligence in some ways, but you don't think of it as like a competitor to ChatGPT. So this is clearly just like, here are some fun apps.
Speaker 1:Yeah. And we're using the AI buzzword over at Apple.
Speaker 3:And I think it's given given the, series of PR crises that Grok has experienced in the last, call it six weeks. Yep. I think it is fairly fair for the App Store to say, hey, let's let this breathe a little bit. Yep. We're not we're not removing them from the App Store, we're not removing them from the rankings.
Speaker 3:They're still ranked. Yep. But maybe let's not feature it given that it's been saying
Speaker 1:Yeah. The other the other interesting thing is, like, Grok usage has to be split across X and Grok, the actual app. Like, I bet I wouldn't be surprised if the majority of actual prompts or tokens flow through X, the everything app. Like, that's certainly how I use Groc. When I use it, I usually start with the post, click the Grock button, then I'm going back and forth a little bit there.
Speaker 1:And then also, they actually have a a pretty awesome, flow where now on any image you see on axe, you can press and hold and say, edit this in Grok, and then you can just type you can just type Studio Ghibli and it just Ghibli's it right there in Grok.
Speaker 3:Yeah. And they launched a feature to make turn it into a video.
Speaker 1:Video. Exactly. So all of those Grok tokens, all those Grok usages, that's gonna feed into the X app, which again, the the they've always put X in news and not in social networking because I think it couldn't beat Facebook and Instagram, but it can beat, like, the the, like, the traditional news apps. So all of the different rankings are all very they're they're it's all gamed in different ways. Some of them are momentum based.
Speaker 1:Some of them are different categories. And, I mean, we heard this from Nikita Beer where he was saying that, his last app that went super viral, he hid in the games section as to his those were his words. He hid because the game section is so crowded that people wouldn't see him climbing the rankings but
Speaker 3:Charts are based on acceleration broadly.
Speaker 1:Exactly. And and Total usage. And there are only, like, 10 dominant social platforms. So if he had a ton of momentum, he'd probably be in the top 10. People would be screenshotting and being like, what is this?
Speaker 1:And it would be on Mark Zuckerberg's desk. And Mark would have to Yeah. Be like, what's our plan to kill this? Right? As opposed to if you're hanging out in games next to 75 Candy Crush clones, you're you could be doing well, but realistically, you're not you're not really gaining that much.
Speaker 1:You're you're not drawing that much attention. Then at the last second, he swaps over to social networking where he actually wanted to be, and then he's at the top of the charts. Anyway.
Speaker 3:So Elon says Apple's behaving in a manner that makes it impossible for any AI company besides OpenAI to reach number one in the app store. He starts getting community noted. Sam Altman fires back says, this is a remarkable claim. Claims that Elon is using X to benefit himself and his own companies and harm his competitors. Sam starts getting community noted.
Speaker 3:Elon fires back and says, you got 3,000,000 views on your BS post. You liar far more than I've received on many of mine despite me having 50 times your follower account. Elon's getting community noted, but Sam fires back skill issue or boss.
Speaker 1:Skill issue or Anyways, based The timeline's in turmoil.
Speaker 3:Timeline's Sam says, will you sign an affidavit that you never directed changes to the X algorithm in a way that hurt your competitors or helped your own companies? Wait.
Speaker 1:Who said that?
Speaker 3:This is Sam.
Speaker 1:Sam said An affidavit.
Speaker 3:I apologize if so. One thing is that OpenAI has consistently dominated the narrative on X organically. Of their To
Speaker 1:some degree. I feel like I feel like OpenAI has been more dominant just in the real world. And actually, Anthropic's done very well in X. And there's been this whole Sure. Theme of, like, Claude has better vibes and big model smell and, oh, I would Claude just Cove say and from
Speaker 3:if Sam Altman puts a post up, he can put up a picture of a Death Star get 20% so I don't believe that he's like shadow banned. I don't believe that anyone in OpenAI is like shadow banned or being held back in the algorithm. Yeah. But somebody responded Well, really
Speaker 1:quickly, if Sam's worried about reach, he should be using Restream, putting his content all over the Internet, Restream one live destination third One livestream 30 plus destinations, multi stream and reach your audience wherever they are. And thank you to everyone in the chat today, Mark, Suraj, we got Taylor, David. We got a whole crew here. Techno chief, I believe, said good morning to me. Hello, Techno chief.
Speaker 3:Good morning.
Speaker 1:Good to see you. And, it's fun having all the crew assemble in the chat rooms. We actually can see the chat wherever it's happening, whether it's on X or on YouTube because of Restream. So thank you to Restream. Anyway, continue.
Speaker 3:A friend, just just messaged and said Yeah. Somebody tell Elon to unshadow ban me. Okay. And I think that
Speaker 1:Oh, good. I I think I know who this is.
Speaker 3:I think it's much more likely that that it's a skill issue.
Speaker 1:I think it is a skill issue
Speaker 4:Sam for this particular
Speaker 3:is saying here, you never know. You never Yep. But somebody responded to Sam and Elon's exchange and they said, Grock, who's right? Don't be biased. Grock and fires says, based on verified evidence, Sam Altman is right.
Speaker 3:Musk's Apple antitrust claim is undermined by apps like DeepSeek and Perplexity, reaching number one in 2025. Conversely, Musk has a history of directing x algorithm changes to boost his posts and favor his interests per twenty twenty three reports and ongoing probes. Hypocrisy noted. We'll see how
Speaker 1:This is four d chess because in general people don't believe Grok because they believe it to be insane.
Speaker 3:Well, it said some wild It
Speaker 1:said wild thing. Crazy thing. And so if Grok is siding with Sam, people will be like, well Grok's wrong. Elon's actually correct. Yeah.
Speaker 1:That's the beauty of these things.
Speaker 3:Elon was thinking, what have I created? Created a monster. Created
Speaker 1:a monster.
Speaker 3:This is like the child that what's the what's that mythology where child kills the
Speaker 1:Oedipus Rex, of Yes.
Speaker 3:Yes. Oedipus Rex moment. The child's coming for the for the father. Yeah. Well, we'll see how long
Speaker 1:Rock
Speaker 2:how lasts. Much
Speaker 1:you want to play on that on that analogy. Gets pretty weird.
Speaker 3:Gets pretty weird.
Speaker 1:I mean, Oedipus marries his mother.
Speaker 3:Yes. But, we'll see how long Grock lasts in the timeline today. We'll see.
Speaker 1:We'll see. We'll see. So the, yeah, the Wall Street Journal wrote it up. Apple is behaving in a manner that makes it impossible for any AI company besides OpenAI to reach, number one, the App Store which features lists of top and trending apps is a key way for apps to access new customers. Apple doesn't say much about how or why it chooses particular apps to feature.
Speaker 1:Among the factors it considers is usability and positive reviews and ratings. Yeah. It's definitely getting more and more complex.
Speaker 3:It's just important to break out editorial decisions from the App Store team and true rankings. Right?
Speaker 1:I mean, it I I really I think a lot of people have not taken a tour of the modern App Store on iOS because it used to be that you just show up and there were and there was just a list of like, the charts were, like, a few clicks away. I'm, like, seven clicks deep. There's an ad for just Google, I guess. Yeah. In here, there's essentials that are just top games right now.
Speaker 1:Like, you have to scroll and scroll and scroll, then you go over to apps, then you can browse the categories. But even when you browse the categories, you go to productivity, it's going to give you like, the when I go to productivity, you think I'd be browsing to hit, like, okay. Show me the top productivity apps. Yeah. No.
Speaker 1:It's it's showing me an app called Sofa, a downtime organizer. Then it's showing me essential productivity apps that are selected by the App Store editors, then the best calendar apps, best to do apps, best email apps, best focus time or habit tracking. It's going, going, going.
Speaker 3:And Well, the big question is how much how much discovery is actually happening in the App Store. Yep. Is this where people are
Speaker 1:actually finding the top charts. But it's seven it's seven clicks deep. And so, yeah, if I go to free apps, it's ChatGPT number one, then Grok number two, then Microsoft Authenticator, number three, AGI Achieve. Microsoft Authenticator.
Speaker 3:Maybe Don't get enough love. No. But the the question here is are people discovering various LMs through TikTok Yeah. And X and Instagram, various Is that where discovery happen is happening? Yeah.
Speaker 3:And I'm sure there's some discovery happening in the App Store, but it it has to be a a very small fraction of the the downloads being driven are are actually driven by the editorial decisions from the the App Store.
Speaker 1:Of course. Of course. Yeah. And and games don't even show up in the top like, it's not games are not it's a completely separate tab. You cannot select games as one of the subcategories of apps because games are not considered apps anymore in the App Store to answer the question about, like, hiding in games.
Speaker 1:Yeah. Yeah. The other the other question is just, like, how much how fair is it to give yourself a little boost in your app that you paid $70,000,000,000 for? Yeah. Like, I was thinking about this and I was saying, like
Speaker 3:44,000,000,000.
Speaker 1:Well, he was 44?
Speaker 4:Yeah.
Speaker 1:Yeah. It was 44. It wasn't 69. I thought it was 69 for some reason. That that was the that was the price per share was Yeah.
Speaker 1:He he paid. So ridiculous. Anyway, I was thinking about, like, before the launch of Instagram stories, I didn't have a way to share Snapchat stories on Instagram. Like, you could screenshot them, but there's no sort of, like, native way to share a link to a story that if someone on my Instagram feed sees it, it clicks and it automatically opens in Snapchat. Like, there the the it was always a walled garden.
Speaker 1:And then when Instagram stories came out, there was really no way to tie those two platforms together. Like, in the in the pre meta era, there was a way when you shared a post on Instagram to check a box and automatically share it to your Twitter. And it would not just share a link, would share the actual
Speaker 3:photo Yeah.
Speaker 1:With the comment and it would work as a native post on X and it could, you know, not not really go viral but it could it it could it it existed on Twitter as like a first class citizen in the sense that the image was there. There was no link. It was just like you had just actually opened the app, posted the same photo with proper cross post. Right? And then eventually, once Facebook bought Instagram, Twitter had to respond by breaking that integration.
Speaker 1:So early on, Twitter had this very this was like the Adam Bain era, like the early, back the Dick Costolo era. Twitter had this idea of, like, we're gonna be the command line for your life, and there was this idea of, like, I'm gonna be able to tweet at you to send money to you. Like, the everything app idea is something that's over 13 years old at this point, maybe 15 years old at this point. Like, the Twitter executives were thinking about this a long time ago.
Speaker 3:Like Yeah.
Speaker 1:Being able to tweet money at you, being able to to like, use use Twitter as kind of this, like, substrate or this, like, API for all sorts of things. Other apps would be built on top of Twitter if there was TweetDeck and Tweety Bird and, like, all these different like, the mobile app was by an independent developer, And they just didn't And they were like, why would we need one? We just developed the protocol. Well, yeah. Well, you need one because you wanna stuff ads in it obviously.
Speaker 1:And you wanna monetize it. It makes a ton of sense. And so I think Elon Kader killed all that. But
Speaker 3:The other challenge here is is Grok has a variety of NSFW features. Yep. And when Apple is making editorial decisions about which apps to feature in the App Store. Yep. That is certainly gonna be on their mind.
Speaker 1:We're having Eugenia from Replica on the show later today. I'm wondering if Replica, I think, is is currently in the App Store with 226,000 reviews, hasn't gotten kicked out. I'm trying to think if any other if any other apps so, like, OnlyFans, for example, does not have an app. I'm wondering if any of the what Character AI does. Right?
Speaker 1:So Apple's clearly drawn the line at like like AI chatbots even if they're somewhat erotic are okay. But we But that
Speaker 3:doesn't mean they're gonna feature They're
Speaker 1:not gonna promote it.
Speaker 3:Yeah. To the average person Yep, on the App yep.
Speaker 1:That's absolutely correct.
Speaker 3:So, and then again, I think it's very hard to say how Apple makes these editorial decisions. Yep. But it's very possible that they are talking with people on the Apple team being like, what apps do you like? Yep. What apps are you using?
Speaker 3:Making decisions that way, right? I part of Grok over the last month or so is like figuring out like how do we get strong consumer adoption? Which categories are we gonna get strong?
Speaker 1:You how they get strong consumer adoption. SOC two compliance. They need to get on 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 1:No. That is a good question. How can Grok actually get consumer adoption? The companion space seems like the maybe the right move even if it is a little weird, But is there any other path? I mean, forking it into X and Twitter and, like, having it show up on every post seems like a reasonable way.
Speaker 1:I wonder it it is weird that they have two apps. I thought x was supposed to be the everything app. Like like, why are they trying to get me to install a second app when they should maybe just say, hey. We're actually going to be the everything app. You can use Grok fully and you're all the upgrade and you can get on Grok heavy and Yeah.
Speaker 1:You can be paying $200 a month for a top tier, the super insane level LLM, but it all exists and it's all managed within the X app that already has a lot of installations. Why Yes. It's challenge is here.
Speaker 3:Your Grok is is top or near the top of a bunch of different benchmarks. Yep. And yet that doesn't guarantee consumer adoption. Right? Yep.
Speaker 3:People don't switch products because something is 20% better in this technical way, right? They develop habits. Yep. And the other thing, it was only a month ago, Croc or XAI announced a partnership with the Department of Defense, a $200,000,000 contract. So that's serious.
Speaker 3:Mhmm. But again, you know, figuring out where they're going to ramp revenue with consumers that in when it's not just bundled into X, the social media app.
Speaker 1:Yeah. I think it it it's interesting to to debate, like, when can a new technology be bolted on and become additive to an existing platform versus you need a new app to actually get it to work. So Facebook actually rolled out a search engine in Facebook, the blue app, like, years ago. And when you would go to search, you could search for your friends, but then you could also go and it would search the web too. And it would say, hey, you're searching for this thing.
Speaker 1:There's no posts about it out there. So let's just pull from the web. And they basically built a search engine.
Speaker 3:Team, pull up this post from Chad GPT. I wanna see John's live reaction to it.
Speaker 1:Okay. Let me let me see this post. Whereas whereas like like stories was something that was added on.
Speaker 3:So they ChatGPT quoted Drak saying that same altman
Speaker 1:is right
Speaker 3:and said goodbye.
Speaker 1:Goodbye. Timeline's in turmoil. You love to see it. It's a great day on the Internet. But there's always yeah.
Speaker 1:So so I I think there is something about like the pixel screen the screen pixel real estate that is that is somewhat like like screen pixels are are like scarce and you can only do so much. Like, it's it's like Instagram was able to add reels as a tab, integrate those into the main feed. They were able to add stories up at the top as a little bar and it got crowded, but no but Instagram did not did not see massive churn. Yeah. But I think that if they I'm I really think if they try and stuff like, okay.
Speaker 1:Yes. This is also like Claude code and you're going to, like, do your you're gonna do your homework in Instagram now. You're gonna do your your your software engineering in in Instagram right now.
Speaker 3:Up here. You're gonna have a chat below.
Speaker 1:I think will be out. I think it's I think it's too too big of a step. Whereas going from photos to videos to reels to stories, like, all of that works within the same kind of UX UI space. But if you try and bolt on like a productivity tool into a social network, it it it winds up being a little rough. And so maybe that's the reason why Elon, like, realizes that, like, Grok has to be a separate app.
Speaker 1:Because if I'm using Grok heavy to solve Olympic level math, I might not want that to happen on the chaos timeline feed. Right?
Speaker 3:Yeah. I mean, if if
Speaker 1:But it's not a pill battle.
Speaker 3:If you're a software engineer working at a company, and every time you your boss walks up to talk to you about something, you're in X, the everything app, just scroll on the timeline while coding, that might be tough, right? It might be better to be doing those, doing that coding work and, you know, with with Grok. Right?
Speaker 1:Put put a spreadsheet in there. Put put a database in there. Let me let let me build let me build an entire business within the Everything app. Tyler, what's your reaction today?
Speaker 2:I think so so one thing I've been thinking about is like, I forget who it was, but someone said like, as a company, you wanna like do things that your competitor that like go against your competitor's morals. Right?
Speaker 1:Do you remember? Yeah. This was Paul Graham. Yeah. Okay.
Speaker 1:It wasn't it wasn't morals, it was just like the idea of counter positioning. This idea that like Avi Shiffman, a friend, like he's making a product that is a wearable AI device. And if he makes it look like an Apple product and he makes it like, oh, it's instead of an AirPod and, you know, an iPhone, it's a necklace, like, and it has Apple design language. Like, Apple will totally be able to just steamroll that by launching something very similar. Yeah.
Speaker 1:Whereas if he comes out with something that has such a bizarre design that Apple would be like, wow, if we try and
Speaker 3:copy he's not trying to make it useful for anything other than being your friend. Yep. Right? Yep. He's also counter positioning against ChatGPT which is a tool.
Speaker 3:It's not, it's default state is not to be your friend. People use it that way, but and and in some ways it's designed to to function like that. But ultimately, yeah, I think he he's found, he's carved out his own. And Grock did the same thing by coming out and and like leaning really heavy into companionship.
Speaker 1:Yeah.
Speaker 3:Right? Yeah. That is a I think that's like the
Speaker 4:point right?
Speaker 3:That path. To do.
Speaker 1:Yeah.
Speaker 2:If they're gonna go like in that like kind of counter positioning like idea, I think they could also I I could see them doing almost like a Cluelly type thing where it's like, okay, you can use this for your homework. Like you make it very good at like you don't have to use like cheating per se. Mhmm. But I think that's like an interesting way that like if they want to go further down that like consumer kind of positioning.
Speaker 1:Yeah. It's just it's odd that it feels like they're trying to do a lot right now. They're still in the exploration phase because I have I mean, maybe this gets to, like, the value of transfer learning and reinforcement learning, but I have a I have a hard time believing that many people who are in the market for, like, a companion are, like, I definitely want it to be able to ace humanity's last exam. Like, I in fact in fact
Speaker 3:Super important
Speaker 1:to me. In fact, I think that you might want a companion not to be better than you at math. Like, I think you might want a companion that just kind of like is like, oh, yeah. I agree, man. Like, that math problem
Speaker 3:is toxic friendship dynamic. People are like, I want I want my friend to be but not better than me.
Speaker 1:Exactly. That that's real. So they need to they need to dumb it down. They need to be the inverse of bench hacking.
Speaker 2:Yeah. The the truth Yeah.
Speaker 3:Game meta is gonna be teaching your AI how to do things.
Speaker 1:Yeah. Yeah.
Speaker 3:Yeah. Teaching it history. Yeah. Teaching it how to do your homework.
Speaker 1:Yeah. Yeah. Yeah. Yeah. I mean, the the Feynman method.
Speaker 1:You teach and then you learn you learn like, I would probably learn more from teaching an LLM the answer to a problem than it trying to teach me. What were you about to say?
Speaker 2:I was gonna say like the truth seeking like idea of Grok seems very much like opposed to the companion aspect. It just seemed like two different ends of
Speaker 1:The hero of our group chat right now is one of the greatest fabulous in history. He's a he's a serial liar. Yes. But but but he's the most entertaining character. The court jester of our group chat because he hallucinates more than GPT two, and it's fantastic.
Speaker 1:And and he and and he genuinely provides a lot of value than just someone who's like, oh, I will only give you things that are 100%. I will only say things that are 100% factual. I will only say things that are definitively provable. It's like, no. He he he throws out a lot of wild pitches.
Speaker 1:But every once in a while, you just slam it into the outfield. Roy Lee is in the news again. He bought a bag in in Manhattan. And he said, Alex Cohen says, fine. I'm starting to like the Clearly guys because Roy put up a billboard that says
Speaker 3:On billboard.
Speaker 1:Hi. I'm Roy. I'm 21. Missing an apostrophe on the second. I'm clearly deliberate.
Speaker 1:Absolute wordsmith. This was very expensive. PLS, buy my thing. Please buy my thing. Clearly.com.
Speaker 1:And John Chu, Coastal Ventures says, this is why I invested in Roy Lee, once in a generation talent, a tapping into culture and zeitgeist. This was a spicy post. People kinda going back and forth on whether or not this would actually deliver. Roy also put out a post saying that, like, everything he does is for short form. So he bought this billboard.
Speaker 1:He expects it to convert on the short form that will be created around the billboard. Certainly feels like people will create will take pictures of this share. Yeah. I mean, when
Speaker 3:you when you look at when you look at I think what I'm interested to see from Cluely is where they really get where they really get long, you know, retention.
Speaker 1:Yep.
Speaker 3:Right? Because they have
Speaker 1:The top of funnel They kind of yeah. They they Extremely full.
Speaker 3:Top of funnel marketing. But when you look at like it doesn't It seems like if they just focused on students, right? They seem to be in this kind of place where they're they're thinking They're about exploring
Speaker 1:a lot
Speaker 3:of different markets. Exploring different markets. But if you look at the way that ChatGPT's usage, basically tokens generated dropped as summer started, that's a good that's a good argument to say, clearly, just focus on Students. Products for for students that will eventually graduate into the workforce and things Sure. Like But, anyway,
Speaker 1:Well, they what didn't make the top AI agents by revenue chart that Anand Sanwal shared. Said who would you put your money today to win in the long term? The top was Cursor at 500,000,000 in annual revenue, and they're making $3,200,000 in revenue per employee. Glean's at $100,000,000 Merkor's at $100,000,000 Replitz at
Speaker 3:one How 100 are you defining an agent?
Speaker 1:I think it's just AI startups, anyone who's used the AI agent meme basically.
Speaker 3:Stolen the
Speaker 2:agents are going
Speaker 1:to be
Speaker 3:pissed about this. Stolen Valor.
Speaker 1:I don't know. Wait.
Speaker 3:It's hard to call Merkhor an I
Speaker 1:AI agree with that one. That one feels particularly odd, but in Glean Even
Speaker 3:Glean is is enterprise search.
Speaker 1:Yeah. It's search. But I would say Rapplet is an agent company. It's kind of like every AI company is now an agent company. Harvey, you know, hasn't really branded themselves an agent
Speaker 3:company. But it's interesting like you're not putting Claude you're gonna put Cursor on here which generates revenue from Claude code. Yeah. And is a agentic IDE.
Speaker 1:Yeah. You don't put a drop is crazy. And also not including ChatGPT which has deep research which is probably the most used AI agent in the world right now, I have to imagine, just by number of queries. There it's missing some stuff. It's missing some stuff, but it's okay.
Speaker 1:Also, Devin's not on here, which is kind of odd. But that's the nature of these lists. It's CB Insights, folks. They do the best they can. Let's pull up the videos of Sam Altman on AI ads, and I think it will crystallize a little bit of, like, what we mean when we mean, like, monetizing a free LLM, a free AI chat app.
Speaker 1:It doesn't necessarily mean stuffing display ads in there just like the answer to Facebook's monetization problem was not banner ads on the in the right bar. It was in feed ads that look it if you're watching Reels and you see a Reels ad, it looks exactly like a Reel. And in fact, the best performing ads on Instagram Reels feel just like user generated content. They don't look like Super Bowl ads.
Speaker 3:They're additive.
Speaker 1:They're yeah. They're additive and people often enjoy them. And so that will be, at least this is the semi analysis argument that I sort of agree with. That will be the the the like, what what we say about ads in AI, it will be more like commissions for agentic checkout at least Yeah. At least to start.
Speaker 1:So let's pull up the first video.
Speaker 3:Example right now, there's a lot of people that have websites that monetize with referrals to Amazon. Yep. And they're frustrated because a lot of the the admin traffic just like organic SEO is way down. Yep. And the general read here is that OpenAI will ultimately start to earn that same type of revenue that the publishers historically did.
Speaker 1:Yep. So there was a fireside chat at Harvard Business School with Sam Altman. It's giving up for Harvard Business School. It's giving up for Harvard Business School.
Speaker 3:It's the Harvard Business School.
Speaker 1:That's what they've been saying. They've been saying. So he he got a question from the audience about ad monetization. We'll hear how Sam Altman responded to it.
Speaker 5:Although fair, it could be a barrier for early stage entrepreneurs or startups or even small businesses. Given this context, do you envision OpenAI exploring alternative monetization strategy that could include, like, free free API access, perhaps supported by advertising or other methods, to foster innovation in the future?
Speaker 6:I will disclose just as, a personal bias that I hate ads. I think I think ads were important
Speaker 1:We love ads.
Speaker 6:To give the early but think they they do sort of somewhat fundamentally misalign a user's incentives with the company providing the service.
Speaker 1:I'm I'm not
Speaker 6:totally against them.
Speaker 1:I'm not saying I
Speaker 6:don't like them in general, and I think that ads plus AI is sort of uniquely unsettling to me. You know, when I when I think of like GPT writing me a response, if I had to go figure out, you know, exactly how much was who paying here to influence what I'm being shown, I don't think I would like that.
Speaker 1:But the knowledge and things go on.
Speaker 6:Think I would like that even less. So there's something I really like about the simplicity of our model, which is we make great AI and you pay us for it, and it's like we're just trying to do the best we can for you, and then Senator, we run ads. That has some inherent lack of access and inequality, we commit as a company to use a a lot of what basically the rich people pay to give free access to the poor people or the poorer people. You see us do that today with the ChatGPT free tier. You'll see us do a lot more to make the free tier much better over time, And I'm interested in figuring out how we bring the equivalent concept to the API.
Speaker 6:But I I kind of think of ads as like a last resort for
Speaker 1:us
Speaker 6:for I a business could
Speaker 1:do it
Speaker 6:if it meant that was the
Speaker 1:That's where he says he says, I kind of think of ads as a last resort of a as a business model, but recently, he dropped a new podcast. This was from, I think, a month ago, and it's from the OpenAI podcast. So you have to imagine that they that they that the the run of show and the talking points in here are very carefully selected to, you know, move the narrative forward and kind of educate the community on where the company is going. Calculate. And and so so we'll pull up Sam Altman's interview on AGI GPT five and what's next from the OpenAI podcast.
Speaker 7:So that brings up the other question from people who are using this or skeptical is that OpenAI now has access to this data and there's the concern one was about training, which OpenAI has been very clear about when or when not it's training. You have the option to turn that off. The other thing is like advertising, things like that. What's OpenAI's approach towards that? How are you gonna handle that responsibility?
Speaker 6:We haven't done any advertising product yet. I kind of
Speaker 8:I mean, I'm not totally
Speaker 3:against it.
Speaker 1:Yay. Here it is where Woo.
Speaker 6:I like ads. I think ads on Instagram. Kinda cool.
Speaker 1:Ads on Instagram. Very cool.
Speaker 8:Let's go. I am like I
Speaker 6:think it'd be very hard to I'm gonna take a lot of care to get right.
Speaker 1:I I have faith. I think you can do it.
Speaker 6:People have a very high degree of trust in ChatGPT, which is interesting because like AI hoosenegs should be the tech that you don't too.
Speaker 7:So I trust them.
Speaker 1:People really Yeah.
Speaker 6:Do. But I think part of that is if you compare us to social media or you know There's a change. Web search or something where you can kinda tell that you are being monetized and the company is trying to like
Speaker 1:Yeah. You can see places with
Speaker 6:no doubt,
Speaker 1:but also this is the block.
Speaker 6:This is block. Like, you know, how much how much do you believe that like you're getting the thing that that company actually thinks is the best content for you versus something that's also trying to like interact with the ads? I I think there's like, there's a psychological thing there. So, for example, I think if we started modifying the output, like the stream that comes back from the LLM Mhmm. In exchange for who is paying us more, that will feel really bad.
Speaker 1:Yeah. This is a great solution. Give you the actual answer you want, but, hey, these are the best headphones for But if you want me to buy them, I'm gonna have to go cook as an agent. I'm doing the work and I'm gonna take a cut of that. That's that's amazing.
Speaker 1:I'm shutting down
Speaker 6:for that.
Speaker 3:The the agent's like, I'm getting paid either way.
Speaker 1:Yeah. Exactly. And and I could say, okay, which headphones do I want? Do I want the Sony's or do I want the, or or or or do I want the the Apple AirPod Max's? And if I decide the Apple ones, it goes checks out, it uses some coupon code to get some comparing
Speaker 3:this to the other ways that people discover products and services. Yeah. If somebody searches best luxury hotel in Hawaii Mhmm. They're gonna get ads against that. And then they're gonna get organic rankings that aren't necessarily the truth, right?
Speaker 3:Mhmm. Because the truth is for something like best luxury hotel in Hawaii is very subjective.
Speaker 1:Yeah.
Speaker 3:Then they might go and try to get recommendations from an influencer.
Speaker 1:Yep.
Speaker 3:And hopefully, the influencer is disclosed Yes. Whether or not they're being compensated by the advertiser.
Speaker 1:Yeah. And So if I were to ask you as an influencer, like, what design software would you recommend? Like, what would you say, just honestly? Figma.com. Think bigger, build faster.
Speaker 3:Build faster.
Speaker 1:Figma helps design and development teams build great products together. This is a paid
Speaker 3:But, yeah, disclosure is super important. Exactly. And if and if the influencer is saying like, oh, yeah. I love this hotel Yes. But that hotel is giving them, like, you know, two weeks free a Yes.
Speaker 3:Year then, like, that's not a super ethical
Speaker 1:Totally. Yeah.
Speaker 3:It needs
Speaker 1:to be disclosed. Then also
Speaker 3:key thing is
Speaker 1:the beauty of the LLM is that is that, like, the, like, the the recommendations are gonna be able to be tailored. So best luxury hotel, well, if you're if if you really want a certain type of pillow or you really want, you know, a a a pool in your unit or you want it to be wheelchair accessible or you want, you know, high ceilings or you want, you know
Speaker 3:Yeah.
Speaker 1:Beachfront access. Like, there's a million different parameters that could go into that.
Speaker 3:And the thing the thing that needs
Speaker 1:to And then it could just and then it just saves you the time at the very last step.
Speaker 3:Well, the thing that Chatuchipiti needs to navigate is maintaining that trust. Yep. Right? I trust that Instagram is gonna serve me ads Yep. That that I I trust that they're gonna try to serve me ads for things that I will want to buy.
Speaker 3:Yep. Right? Sometimes they serve me an ad, I'm like, this looks garbage. I'm not going to buy it. Other times they serve me an ad and I'm like, this looks great.
Speaker 3:You're actually good call. I am interested in this product. Totally. And the thing is, is like, ChatGPT has to maintain that trust because if they recommend you a hotel, they're like, you're going love this. I know what you like, you're gonna love this hotel and you go there and you spend all this money and you stay there and it's and it's terrible.
Speaker 3:Yep. It's the same thing if if you go to a friend for a recommendation for a hotel, they recommend you a hotel, you show up there and it's like, this is terrible. Yep. Like why did you recommend this? And if they go, oh yeah, I recommended it because I was getting like 7% referral fee.
Speaker 3:You're gonna be like, what are you doing? Why are you monetizing me? Right? So I think it like it's a very It's an interesting challenge that they have where they're gonna be directing already directing so much economic activity. And how do you monetize that in a sustainable ethical way?
Speaker 1:Exclusive from the Wall Street Journal, AI startup Perplexity made an unsolicited long shot offer to buy Google's Chrome browser for 34,500,000,000.0.
Speaker 3:This inspired me, John. Yes. Everybody needs to be making long shot offers. TBPN, let's let's submit an offer to buy the Golden Gate Bridge. Privatize the
Speaker 1:That's good one.
Speaker 3:Else should buy? I
Speaker 1:don't know. It's tough.
Speaker 3:Yeah. It's it's it's really when I saw this, it's funny to think that Sundar has to go to the board. Or like, probably send them an email and say like, I'm required to let you know that we've received this offer from Perplexity to buy one of the crown jewels of our product ecosystem.
Speaker 1:I wonder I wonder how how real this is. Like, it seems like we would, like, the reporting is pretty loose. We can read through this Wall Street Journal article and then kind of, like, dig into it a little bit more. So, Perplexity's offer is significantly more than its own valuation, which is estimated 18,000,000,000. Has this ever been done before?
Speaker 1:Has any tech company been able to pull off an acquisition that's bigger than their own valuation? Like, you really mean so much
Speaker 3:What the what was the Slow Ventures company that that Metropolis?
Speaker 1:Oh, okay.
Speaker 3:They buy Yeah.
Speaker 1:Something that was much larger, you know, basically more merger almost.
Speaker 3:Yeah. Exactly. Interesting. These things happen.
Speaker 1:So there's there's also pressure. So estimates of Chrome's enterprise value vary widely, but recent ones have ranged between 20,000,000,000 and 50,000,000,000. I have no idea how you got that. I feel like Chrome is probably more valuable than that just on I mean, I imagine that the default search engine in Chrome has gotta be as valuable as the default search engine in iOS, Safari. Right?
Speaker 1:And how much is Apple paying Google every year?
Speaker 3:20.
Speaker 1:20,000,000,000?
Speaker 3:Per year.
Speaker 1:I mean, you'd pay, like, you'd pay way more than $50,000,000,000 to get $20,000,000,000 of profit every year. Yeah. It's crazy. So that feels low. I don't know where I don't know where where those estimates came from, but they are apparently under pressure.
Speaker 1:US district judge Amit Mehta is weighing whether to force Google to sell the browser as a means of weakening Google's stranglehold on web search. It's so it's so interesting that, like, we're having this debate now. Like, Google's had 99% of the web search market for two decades, and they finally have a crack in the in the the in the foundation with ChatGPT actually eroding things, AI, LLMs kind of upending web search dominance like
Speaker 3:Yeah. We're having we're having James from ProFound on later today which which is built a big business very quickly because consumers are now using something besides Google search to to do web searches.
Speaker 1:Yeah. This is like the last this is this is like completely the wrong time to be focused on this. The ship has completely sailed, but that's kind of the kind of the pace that the government operates at.
Speaker 3:Yeah. The journal says perplexity offer could be an attempt to signal to the judge that there's an interested buyer should he force a sale. I'm I'm I think there would be a lot of interested buyers if there was a forced sale.
Speaker 1:Yeah. Who else would buy it? Apple? Meta? Microsoft?
Speaker 1:Get Bingo ing again?
Speaker 3:Bing. It's Bing Bing.
Speaker 1:Bing it? I mean, Microsoft would have a wild strategy because they'd have all the code to chat GBT, all the OpenAI intellectual property. They could Got do to IP. They could do what Perplexity is thinking about. Right?
Speaker 3:I mean, what does this say what does this say about, I mean Yeah. So they just launched the Perplexity Comet browser.
Speaker 1:Yeah. Daniel says Chrome's worth at least 90 to 120 billy. I agree. I think 20 is a
Speaker 3:But 20 is too yeah, so Perplexity just launched Comet. Mhmm. We had Arvind on the show. Yeah. He said this is a big important bet for the company.
Speaker 3:Yep. If you're if you just launched a browser
Speaker 1:Mhmm.
Speaker 3:And now you're saying that you want to buy to compete with Chrome and now you're trying to buy Chrome.
Speaker 1:Yeah.
Speaker 3:What does that say about the state of your new product?
Speaker 1:Like, is king. Yeah. It's very clear that that even if you built a better product, the best product is not gonna win. And we see this with the with with the LLMs. Like like, the the the leaderboards and the the vibes shift constantly, but the consumer adoption is just around chat.
Speaker 1:Everyone just uses chat. That's the one that's broken through. That's the one that people are familiar with, all over The United States and all over the world. And so, it's it's very hard to break through even if even if Perplexity can, like, rocket to the top of the App Store in India for a little bit. Like, it's hard to hold on to when when the Chatuchi PT snowball is just growing bigger and bigger every single day.
Speaker 2:Yep.
Speaker 1:Much like the Graphite snowball. Code review for the age of AI. Graphite helps teams on GitHub ship higher quality software faster. Get started for free. Graphite.dev.
Speaker 1:Is is there a is there a Polymarket on Perplexity, by the way? Can you look that up? Will Will
Speaker 3:Perplexity acquire Chrome in What's 2020 the what's the market on it? When I posted about it earlier, it was at 12%.
Speaker 1:Mhmm.
Speaker 3:And it's and I said 12 seems quite high. And it's now at 3%.
Speaker 1:It went down even though they're in the journal saying they're gonna do it. They're like Well, it
Speaker 3:came out there's a new one. Opened at thirty four percent
Speaker 1:Okay.
Speaker 3:At, like, 9AM when news dropped, and it's now down at 3%.
Speaker 1:So Wait. Just today, it went from 34 down to three. Wow. So this has basically been, like, debunked. Yeah.
Speaker 1:Makes sense.
Speaker 3:Yeah. Mean, there's I would I would put the odds of this deal happening closer to 0% than 1%.
Speaker 1:That sounds fair.
Speaker 3:But great way for Perplexity to get Yeah. In the journal.
Speaker 1:Call me Bloomberg. No. This is great for SEO. It definitely puts Perplexity and web browser in the same keywords
Speaker 3:Perplexity was also bidding on TikTok
Speaker 1:Yeah. Earlier this year. Arvin loves a long shot bet, a long shot bid.
Speaker 3:I invited I invited Throw his invited him on the show this morning. He I I don't think they wanna No.
Speaker 1:He's not ready for press.
Speaker 3:Not ready to chat, but Figure. We love a we love a size lord launch offer.
Speaker 1:Keep throwing these out. More things out. Do this. Google hasn't indicated a willingness to sell Chrome. In testimony this year, Pichai told the judge that forcing the company to sell it or share data with rivals would harm Google's business, deter it from investing in new technology, and potentially create security risks.
Speaker 1:Chrome has roughly three and a half billion users worldwide. It's like it's like perplexity has probably, like, millions of users, but it's just gonna take decades even at reasonable growth rate to hit 3,000,000,000. It's just so many people and accounts for more than 60% of the global browser market. That's lower than I thought it would be. Founded in 2022, San Francisco San Francisco based Perplexity recently released its own web browser called Comet to some of its users.
Speaker 1:Tyler, you've demoed these. Yep. What are you daily driving these days in terms of the web browser?
Speaker 2:I'm using old reliable Chrome.
Speaker 1:You're using Chrome?
Speaker 2:Yeah. I I I don't know. None of the agent browsers really seemed very helpful to me.
Speaker 1:Have you churned from Cluely too? Yeah.
Speaker 2:You're not I saw you used to have like know,
Speaker 3:right after
Speaker 2:the show ended. Yeah. I was I mean, I'm not doing interviews.
Speaker 1:I was thinking about like the Cluely pattern.
Speaker 3:What Tyler was like been using Cluey every day, hours a day, and we're like, wait, you've been interviewing with other companies?
Speaker 1:Well, that's the thing is that I I I when I was thinking about Cluey, I was actually wondering like if we ran the show through Cluey and we had, like, this just this idea of, like, streaming audio essentially and streaming pixels and then just somewhat random LLM queries firing all the time. Like, is that a good pattern versus ChatGPT where you have to decide, okay, this is the time to query it. And so when I think about, like, the going to you and saying, like, the pull the poly market up on perplexity or tell me the market share for Chrome. Like, if we could have something like Clearly running and it's just a big screen there that I can see and it's just pulling up answers to questions that it thinks we're about to talk about or ask or just adding context, like, that actually might be kind of useful to us. But I don't know if a tool like that exists.
Speaker 1:It also just might be so sloppy and so noisy and so inference heavy that it just doesn't math out. I don't know. Are are there any are there any value or, like, what what's actually seeing breakout for you in terms of AI adoption?
Speaker 2:I mean, most of my time using AI tools is just like coding stuff. Yeah. So it's like Cloud Code, Hurst a little bit. Sometimes I just go rawchattybitty.com.
Speaker 1:Oh, that's raw?
Speaker 2:Yeah. Yeah. Just straight prompt like
Speaker 1:Raw text file. What happened to what happened to good old fashioned just handwritten code, farm to table code? Not.
Speaker 3:Yeah. Has to raise code.
Speaker 2:But yeah. I I don't know. I mean, like, clearly, I'm not like doing I'm not doing like sales calls or like anything that really requires that kind of like interaction.
Speaker 1:Yeah.
Speaker 2:Yeah. So not to be useful for me
Speaker 1:but Yeah. I wonder how the product will change. Because like the marketing is not gonna Like, they are definitely going to keep filling that top funnel until they figure out the the bottom of the funnel and the and the and the churn. But but I I wonder what retention's like. I mean, I imagine that, you know, you bring in such a broad top of funnel.
Speaker 1:Like, there's probably people that are sticking around. There's probably people that just sign up and forget their credit cards are down, and they just pay for a while. Like like, the the the nature of just getting someone to convert for $20 a month, they don't even have a free tier. Right? Like, you have to pay to, like, get get up and running?
Speaker 3:No. They do have
Speaker 1:a free tier.
Speaker 2:They do.
Speaker 1:Okay. Yeah. Interesting. There was something oh, yeah. Tyler, did you see VibeSort?
Speaker 1:Someone wrote a sorting algorithm that uses LLF. You have to put in your you have to put in your OpenAI API key, and then it just passes the random list or the array of numbers to ChatGPT and asks ChatGPT to sort it, and it just comes back with whatever it can do. And I was thinking that have you ever did you ever did you ever have to do FizzBuzz back in the day? Have you ever heard of this?
Speaker 2:Yeah. I've, like, heard of it.
Speaker 1:Yeah. We should we should definitely do Vibe FizzBuzz where it it it it it it for each for each number between one and a 100, it queries it queries the GPT five API to ask it, should it respond with the number, Fizz, or Buzz? The most the most inefficient and most inference heavy FizzBuzz answer possible. Anyway, back to Perplexity Per Perplexity told Sundar Pichai as part of the proposed acquisition, it would maintain and support Chromium, the open source project that supports Chrome and other browsers. It also said it would continue placing Google as the default search engine within Chrome, though users could change settings.
Speaker 1:That's crazy. Because you would think the first thing you would do if you own Chrome would be change the browser to mine. I'm getting those ad dollars, but I don't know. Maybe it's a nice olive branch in this, somewhat somewhat, hype y offer. The justice department filed the antitrust case against Google in 2020.
Speaker 1:And just a few five years later, in addition to they're here. In addition to forcing a sale of Chrome, the judge is considering limiting Google's ability to pay to be the default search engine on devices and browsers and requiring it to share data with rivals among other things in weighing potential remedies earlier this year. Meta questioned how much new AI chatbots might be whittling away at the traditional search business of which Google has 90% market share. So 60% share in browser, but 90% in search. So even even for there's 30% of people out there that are using Firefox or Brave or or Edge.
Speaker 1:It's Edge. Right? It's the Microsoft one. Yes. But then they they they they use Edge, then they still set their default to Google because Google has dominant.
Speaker 1:Or maybe maybe they just Google users are are querying more.
Speaker 3:I'm so fascinated by perplexity Yeah. And I can't wait to see what
Speaker 1:It's perplexing.
Speaker 3:It's perplexing and I can't wait to see what ultimately becomes of the business. They're offering to buy TikTok, they're offering to buy Chrome, they're rumored, you know, there's rumor mail saying that Apple's kicking the tires on it, it's hard to tell where that's coming from, right? Is that just more marketing? Yeah, yeah. Complexity?
Speaker 3:They have, I think the last reported number or the alleged number is something like 30,000,000 monthly actives, which is a lot. Yeah. But it, but they have such a tiny share of overall queries.
Speaker 1:Yeah.
Speaker 3:That it becomes and and it's just clear that that search feels like it'll be a winner take take all market.
Speaker 1:Yep.
Speaker 3:And it's it's they're not gonna you know, two years from now if they're sitting at 30,000,000 monthly actives or or even a a multiple of that, it's hard to see it, you know, being worth, you know, significantly more than Snapchat, for example.
Speaker 1:Yeah. And I think that's why you're seeing Arvin talk about potentially maybe pivoting to b two b context with the Bloomberg thing. It feels like if you're if you're in a winner take all market and you're and the writing's on the wall that you're not gonna be the winner in that market, a a b two b pivot feels like a decent move. You could even put kind of Anthropic in that bucket where there was a time when it was like, oh, is everyone gonna switch to Claude, like, the app on their phone? And then it didn't play out that way.
Speaker 1:Now they have a dominant b to b business. So you can imagine the Perplexity niches down. Like, the Perplexity interface, the Perplexity ability to to, you know, like, answer questions, act as a search engine that feels valuable in enterprises. It feels value in in finance. It feels valuable in medicine if you if you fine tune the service for that.
Speaker 1:But it's just a very different business. Yeah. So they have to go through a little bit of a of a rebuild or kind of read readjustment maybe. I don't know.
Speaker 3:Yeah.
Speaker 1:We'll
Speaker 3:see. Yeah. Mean, at at the end of the day, when when Elon bought X, it took someone like Elon to be able to put together the amount of equity and debt to buy that business. Yep. And he had to put a lot of his own capital on the line.
Speaker 3:And in this situation, and that was buying a business that generated a lot of advertising revenue. Right? It wasn't known as, was a bit of a dog in some ways. Right? Never was living up to its full potential.
Speaker 3:Where in this case, if you offer to buy Chrome and then in theory, you have to create an entire new economic model for the business because you don't have the Google Ads engine built into it. It's hard to see. It feels like basically impossible to pull that amount of cap, to find people.
Speaker 1:Yeah. Call me when the Morgan Stanley associates are losing sleep.
Speaker 3:Good point.
Speaker 1:Unless unless Morgan Stanley is, is burning the midnight oil Yeah. This deal probably isn't happening.
Speaker 3:I'm remembering that exchange between, Allison and Musk basically saying how much Allison's like, how much should I do? A billion? And Elon goes, I don't know. I think you should do like two.
Speaker 1:Yeah. It's great. So who yeah. So I mean Arvin's gotta find some Ellison's.
Speaker 3:Gotta get Larry.
Speaker 1:Get get a few of those guys on board for sure.
Speaker 3:34 Larry's.
Speaker 1:Well, we have some big news in the TBPN world. We are officially partnered with Waymo via Spotify. Because Spotify has a partnership with Waymo, so you can listen to TBPN and Waymo's now.
Speaker 3:Now what?
Speaker 1:Yeah. Big. This just dropped. Very cool. There's a new upgraded Spotify in Waymo launching today.
Speaker 1:Waymo put out the post two hours ago. You can connect your accounts and you can vibe. You can listen to TBPN in your Waymo which is probably the most tech thing you could possibly do. A
Speaker 3:little birdie just told me that they spoke to a number of bankers
Speaker 1:Mhmm.
Speaker 3:That have not heard of the Perplexity deal. Mhmm. Which I imagine as it as it firms up, if it firms up, they'll certainly hear about it.
Speaker 1:UFC landed a $7,700,000,000 deal with Paramount after a whirlwind forty eight hours according to TKO executives. But zoom out for me. Explain UFC. This is this is the punching one or the punching one and the kicking one. How does
Speaker 3:this This is one of your best bets. So Senra and I
Speaker 1:Yeah.
Speaker 3:Love UFC. Yep. And we'll text John Yep. And say, hey, John, do you wanna watch? Do you wanna watch come over and watch like the the pay per view tonight?
Speaker 3:Yeah. And John Game. Awesome.
Speaker 1:I love watching my boys.
Speaker 3:Who's playing tonight?
Speaker 1:Yeah. I mean, I'm there if the if the the teams are good.
Speaker 3:Yeah.
Speaker 1:If there's good match
Speaker 3:up. If
Speaker 1:Yeah. But it depends on who's starting. I wanna know.
Speaker 3:The starting it'll depend on the starting line.
Speaker 1:I wanna know who's playing.
Speaker 3:So UFC.
Speaker 1:The kicking and punching one.
Speaker 3:The kicking and punching one. They can do both. And wrestling.
Speaker 1:They can do wrestling too. And choking.
Speaker 4:Okay.
Speaker 3:Regan aching chokes.
Speaker 1:Got
Speaker 3:it. It's a
Speaker 1:popular move. It. Of a mixture of experts model in fighting sports.
Speaker 3:Yes. Got it. Yes. Multimodal. Yes.
Speaker 3:Exactly. So Long relied on the pay per view model. Worked well before the internet and illegal streaming. And the pay per view model has been in decline. UFC has also struggled to surface new American superstars.
Speaker 3:Mhmm. A lot of the biggest stars are international. Mhmm. But UFC's biggest market is in The US. Mhmm.
Speaker 3:International stars have a lot of fans in The US, but they're not driving pay per views. Right? People in Brazil are not paying a $100 to watch a single card. Right? So the pay per view model has been in decline.
Speaker 3:The UFC's relationship with ESPN has been a little bit rocky.
Speaker 1:Pay per view model in decline, Is that is that just because of the trends in, like, how how yappy and how popular the the fighters are, or is there something else going on, like, technological level where, like, I don't have to click any buttons to open Instagram Reels or TikTok or YouTube? And with pay per view, it's, like, technically difficult. It's kinda janky tech systems. Is that a real a real headwind or is that, like, fake news?
Speaker 3:So there's definitely friction to buying pay per views. Yeah. Yeah. You gotta, like, be on a traditional television.
Speaker 1:It's not like in app purchase, like double tap and face ID, like that level.
Speaker 3:It's not that easy. I mean, I think you can go in the the ESPN app and, buy the pay per view, but a lot of people buying the pay per view to watch it on their phone. Sure. I think the bigger challenge and and something that
Speaker 1:And Apple would take 30% if if you paid on your phone. So even then
Speaker 3:I don't know. I think they would be digital. Real world.
Speaker 1:It's digital.
Speaker 3:Oh, because
Speaker 1:it's It's sure. It's for sure digital.
Speaker 3:So But but the the funny thing is is Dana's been in this challenge because he gets very frustrated about illegal streams and every now and then he'll be like, if you're watching a stream tonight, illegal stream tonight, we're coming for you. We're coming for you. And everyone's like, okay. I don't know how you planning to do that. Yep.
Speaker 3:But they try to take they they I I I think that they try to like DDoS the various streaming sites.
Speaker 1:Oh, interesting.
Speaker 3:Like, you can just like Yeah.
Speaker 1:Send a ton of traffic. And they probably have someone like talking to Twitch and being like, we are we are going live right at this time. You need to have someone searching and taking down streams actively.
Speaker 3:Yeah. But there's plenty
Speaker 1:of Yeah.
Speaker 3:Yeah. Plenty of other, like, more decentralized Totally. Illegal streams
Speaker 1:that are happening. All these different ones. Yeah. Random
Speaker 3:URLs Yeah. Yeah.
Speaker 1:Even just somebody spinning up a cop. Right. And
Speaker 3:so Dana was in a tough position because the more he talks about illegal streaming affecting the business, the more people are like, wait,
Speaker 1:I can stream it illegally. A little Streisand effect. Yeah.
Speaker 3:And so he had been looking for a new home for UFC. People had debated, you know, would Netflix be a potential buyer there? There's a lot of potential candidates.
Speaker 1:Meta Quest. You have to buy the headset. You got to watch it in VR.
Speaker 3:I'm sure. I mean, Dana's obviously on the meta board and I'm sure that that idea got
Speaker 1:I mean, $7,700,000,000, that's one researcher. Just just cut one one head count from MSL and you're good. And Zuck can just own all of UFC and be like, look, put on the headset or you don't get to watch.
Speaker 3:Yep. No. Anyway. The deal that was reported, were in Yahoo Sports, how the UFC landed at $7,700,000,000 deal with Paramount after a whirlwind forty eight hours according to TKO execs. Even in 2026, all UFC events will stream on Paramount plus with select events also airing on CBS.
Speaker 3:And so anyways, Ben Folkes is reporting just how big of a surprise was the UFC's bombshell $7,700,000,000 deal with Paramount and CBS so big that even UFC CEO Dana White didn't see it coming? No, this is a quote, no, I didn't think this is where we'd end up. White said Monday during an appearance on the Pat McAfee show, shout out to Pat.
Speaker 1:That's good.
Speaker 3:To discuss the new broadcasting rights deal. But this sort of, this is sort of how it played out. I love it. These guys are obviously smart guys, very aggressive. He's talking about the team, the new team over at Paramount.
Speaker 3:So in an interview with CNBC, TKO President and CEO Mark Shapiro said he initially expected to make a deal that would bring only the UFC Fight Night events to Paramount, but after Skydance and and Fight Night events have always aired on ESPN, just fully ad supported. Yeah. So Got it. But after Skydance Media completed its deal to purchase control of Paramount last week, Shapiro said the deal for the entirety of the UFC's US broadcast rights came together in just forty eight hours. Now, instead of just the 30 UFC Fight Night events per year, Paramount will feature And the fight night events were were events that wouldn't draw big pay per view buys.
Speaker 1:Those were not the numbered UFC events?
Speaker 3:Correct.
Speaker 1:So it's a UFC 770 That's like pay per view. Fight nights just random on the
Speaker 3:on the the And there's only 13 of those events. Okay. Per year.
Speaker 1:So 13 it's like numbered and 30 fight nights. So almost every week there's something if you're a But you're really once a month is when you really wanna tune in.
Speaker 3:But for the they they sort of depend on more casual fans historically to drive pay per views. People that are like, I watch UFC when Conor McGregor's fighting. Right?
Speaker 1:That's what really Spike the pay view and have kind of a power law outcome
Speaker 3:People that getting together being like, hey, we're going buy the pay per view. We're going to watch it.
Speaker 1:Sure, sure,
Speaker 3:That kind of thing. So possibly the biggest news in all of this for fight fans is the end of UFC's pay per view era. Ever since the first UFC event in 1993, pay per view has been a vital part of the UFC strategy. Remember, UFC, when it started airing on TV, was thought to be it was so shocking and violent to people that even politicians wanted to get it banned. Wow.
Speaker 3:Like, they were like, this should not be on television. Yep. So it had to be in that bucket.
Speaker 1:Oh, it had to be paid with you. Because it was like, yeah, it was like adult restricted anyway.
Speaker 3:So under
Speaker 1:the Do the fighters need to sleep well before the fights? Of course. They have to be on Eight Sleep. Pod five.
Speaker 3:That's right.
Speaker 1:Five year warranty. Thirty night risk free trial. Free returns. Free shipping.
Speaker 3:We gotta make sure Bo,
Speaker 1:Nick, all the time. Come on.
Speaker 3:Is on an Eight Sleep. I'm gonna message him after this.
Speaker 1:Okay. Perfect.
Speaker 3:Let's let's figure this out. So ever since the first UFC event in 1993, pay per view has been a vital part of the UFC strategy. Under the current deal with ESPN, each UFC pay per view costs $79.99 in The US plus the cost of the ESPN plus subscription on top of that. You've to subscribe and then you've got to pay per event. Sure.
Speaker 3:With the pay per view revenues reportedly in decline, it makes sense for the UFC to finally ditch that model. The fact that it's doing so as part of a deal that will essentially double roughly 550,000,000 per year that UFC currently receives from ESPN likely only made that
Speaker 1:calculation easier. Crazy. This This is crazy. When they find out, wait. If I if I just sign up for Paramount Plus for $12.99 a month, I'm going to automatically get UFC's numbered fights and the rest of the portfolio.
Speaker 1:That's a message we wanna amplify. That is a crazy, crazy value change. Because if you were doing if you were doing all 13, if you were the hardcore UFC pay per view buyer, you're up at a thousand dollars a year on UFC pay per view, basically. Like, 700, $800. Like, that's a lot of money, and you're going from there down to $12.99 a month.
Speaker 1:That's a $150, basically. That that is a steep, steep savings. Yeah. The hardcore fans are gonna be excited
Speaker 3:for of A fan I mean, a lot of fans would, you know, somebody's hosting the pay per view one night.
Speaker 1:Split it or something. Yeah. It makes sense. But still, mean, that's a big, big savings. I do wonder what the ad load will be like because when we watched UFC that a couple months ago with David Sender, I noticed that it felt extremely extremely content rich and, like, the flow of the show was fantastic because you'd just be watching a fight, and then it would cut to the commentary, the post show the like, in ring, Joe Rogan's doing an interview.
Speaker 1:And then pretty quickly, they start telling you who's coming up next. And the actual fight to like, you're only watching maybe, like, a half an hour of of fighting over an hour or two of content, but it didn't feel like, oh, I'm not crazy commercial break, and I'm totally taken out of the stadium. Like, even even the they did a really good job at the production to show, like, when they show you the stats, it's virtually laid over in the stadium. Like, you're watching a camera pan around the stadium. So it actually kind of feels like you're there the whole time.
Speaker 1:It was really well produced. I wonder if they'll lose any of that by stuffing ads all over the place.
Speaker 3:Yeah. We'll see. I mean, and you compare that to NFL. Yeah. NFL is like roughly I think 25% of of the time allotted to NFL is advertising.
Speaker 1:Yep. And that's not
Speaker 3:the case. That hasn't been the case for pay per views.
Speaker 1:Yeah. And it certainly feels like it's Yeah. It's like a it's a shift in the in the type of content. Yeah. They just gotta work on making seamless transitions to advertisements like we do here with Fin dot ai.
Speaker 1:Of course. The number one AI agent for customer service.
Speaker 3:Bake off.
Speaker 1:Number one in performance benchmarks. Number one in competitive Bake Off's number one ranking on g two. You can get started at fin dot ai.
Speaker 3:Anyway, so Paramount is Yep. Or Skydance
Speaker 1:Yep.
Speaker 3:Young Allison is all is just getting aggressive across the board. Right? He's been rumors of this free press acquisition that I'm sure is still in the works, but it had been reported it was quarter billion dollars for the free press.
Speaker 1:Yeah.
Speaker 3:From our sense, they have about a million a million people subscribed to their newsletter, most of which, vast majority of which are non paid. And so, that just says that Paramount sees, CBS Paramount, you know, the combined and Skydance, sort of this combined entity, just see the free press and
Speaker 1:Yep.
Speaker 3:As as highly and and Barry Weiss specifically is just highly strategic.
Speaker 1:Right. And then CBS also cut the late show, which is losing 40,000,000 a year. So they're really, like, kind of really, like, shuffling the chips around, like, really restructuring the organization. Like, what does CBS actually do? Well, now it's potentially UFC and Barry Weiss as opposed to Stephen Colbert, I guess, in terms of, like, headline stuff.
Speaker 1:I love this. I love this article. Back in back in 02/2009, Dana White swore that if UFC one hundred did a million pay per view buys, he'd bungee jump off the Mandalay Bay. It did. He didn't.
Speaker 1:When UFC one fifty one was canceled after Jon Jones refused an appointment an opponent switch, White called Jones' coach Greg Jackson a sport killer. He left a crater in the UFC schedule that only MMA fans could fully appreciate. A few years later, when Conor McGregor and Nate Diaz shattered the pay per view world record at UFC one ninety six, it was a testament to how big the sport had become. We cared about those numbers as much as we did the outcome. Since UFC won, when people paid out of morbid curiosity, this is what you were talking about earlier, pay per views have been a vital part of the identity of the sport.
Speaker 1:It's hard to get nostalgic over being gouged, but what follows here should shouldn't be mistaken as such, but Monday's news of UFC coming 7,700,000,000 partnership with Paramount came with a small pang of sadness upon realizing the pay per view model will soon belong to a
Speaker 2:buy Yeah.
Speaker 3:I'm interested to see how this impacts the fighters because early in their UFC careers, they don't get any exposure to pay per views points, which is like a percentage of pay per view sales that top fighters would earn. Mhmm. So, you're a rising fighter and you got on a pay per view card, you weren't necessarily getting cut into that revenue. But if you were Conor McGregor or a true superstar, you were actually getting some percentage of the sales. Right?
Speaker 3:Yeah. They call these pay per view points. And so, now that that model is going away, I mean, I'm sure that number one thing on the fighter's mind with this new deal is how are we gonna actually, you know, basically get cut into the to this new structure. Right? Because historically, a lot of fighters have have critiqued, the the way that UFC fighters are comped.
Speaker 3:But
Speaker 1:this a funny nostalgic article. This this, this writer clearly really loves UFC. Back in the mid aughts, the UFC combined the tuxedo affairs of nineteen nineties boxing with the vibes of an underground temptation. From there, it slowly stockpiled its greatest passions behind the paywall. Remember how red Dana's face would turn as he tried to sell the pay per view at the end of the televised portion of the card?
Speaker 1:Remember the names? He goes through. The BJ Penn, Matt Hughes, Chuck Liddell, Tito Ortiz, Randy Couture, Connor McGregor, Rhonda Rousey, go through the posters of the past, and they were special. They were the special attractions. The names on the marquee for the number of events, those were some good parties we shelled out for.
Speaker 1:As MMA fans, they were ours.
Speaker 3:Well End of an era. Yeah. And TKO Holdings, the company that, of course, owns WWE and the UFC, is a $36,800,000,000 company as of today. It's up 11. Let's take it over to Mark Gurman himself.
Speaker 1: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:Give you
Speaker 1:Oh, it makes sense. They've been they've had they've 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 it.
Speaker 1:Yeah. Exactly. And so I I think that there were, there there were high expectations because of Apple's position with on device inference I being very
Speaker 4:gave
Speaker 3:you Genmoji. Are you not entertained?
Speaker 1: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 whatsoever. Crowd. Exactly.
Speaker 1:A lot. 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.
Speaker 1: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 1:Entry
Speaker 3:level. Tabletop robot that's a virtual companion. Yep. That's big.
Speaker 1:Lot of lot of software they got 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
Speaker 3:on that. Get on Graphite. So this is big 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 to the people who ask not to be identified because the initiatives haven't been announced.
Speaker 1:I mean, this seems like something that they could knock out of the park. Like, just the 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. 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.
Speaker 1:So I I I think I like this overall. The robot is where it gets funny because this feels crazy. But I'll
Speaker 3:I'll let Yeah. They're going into companionship feels interesting.
Speaker 1:I don't think it's a companionship. I I I I don't I don't think of it like that
Speaker 3:robot that serves as a virtual companion is the centerpiece of the AI strategy.
Speaker 1: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 1:This could just be Jarvis. Assistant. Yeah. Jarvis. Exactly.
Speaker 1:I mean, I guess Jarvis is 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. I do think that there's 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. Mhmm. But this does feel like giving Siri Yeah. A presence in the home.
Speaker 3:Yeah. Like an always on presence in the home.
Speaker 1:It will be interesting to see how they solve it. A partnership with OpenAI or Anthropic seems logical, but Apple Siri partnership with OpenAI 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 1:Like, Siri is just not reliable enough, but I would I would welcome Claude or or Chatty PT into my house. So you can But I but I would treat it specifically as a like an Alexa. What's the weather like? What's on my calendar? Look up the history of the Roman Empire.
Speaker 1: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 when you want to know the weather, it's you're you're within earshot.
Speaker 1:I think I think this could be really cool. I think it could be really cool. I mean, they say FaceTime way do competing
Speaker 3:you're they're still competing with their own
Speaker 1:Yeah. But if you're ever in the kitchen, like like 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 1: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 1: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 it it didn't have any motors in it. And I feel like this could
Speaker 3:be interesting. Link in the chat. The whole This all reminds me of the Meta portal.
Speaker 1:Yep. That's the one I'm talking about, the portal.
Speaker 3:Yeah. Basically, I didn't 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. As they wound it down. So anyways, Tim Cook
Speaker 1:told employees in all hands. I 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.
Speaker 1:I don't know if putting it on a robotic arm is enough to make it useful. 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 1:That's literally listed here as, like, one of their inspirations apparently.
Speaker 3:So Tim Cook told employees in an 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 publicly via Apple's own channels.
Speaker 1: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 1:No coding required.
Speaker 3:We need to get our logo up there. Yeah. The fourth logo.
Speaker 1: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, animated paper clip from the nineties that serves 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 1: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
Speaker 3:was really hoping I was really hoping
Speaker 1:Seven feet. 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 and dystopian.
Speaker 3:Oh, that's funny. Sorry. Sorry. I actually
Speaker 1:didn't
Speaker 3:see this, but there's a quote in here. Some people familiar with the product call it the Pixar lamp.
Speaker 1:Yep. Exactly. I I I I think it could work really, really well. Now they have to be cognizant of
Speaker 3:black mirror.
Speaker 1:Hop around.
Speaker 3:Don't know.
Speaker 1:That would be very cool. Because that
Speaker 3:if it could hop off
Speaker 1:You can definitely
Speaker 3:have table around.
Speaker 1: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. Do you remember this?
Speaker 1:So they had a 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 get a bunch of blowback. They got a ton of blowback from this. We can we can try and pull it up. Do you remember this? You remember that?
Speaker 3:It it people were saying that they're, like, destroying these timeless pieces.
Speaker 1:Yeah. And it's just like the things that I instruments and stuff like that. Yeah. The thing that I love, you're literally you're destroying it for this particular oh, shots fired. Bill Bishop from the Substack stream.
Speaker 1:You need better guests to talk about China and ships, not just NVIDIA partners who are regurgitating NVIDIA's talking points. Bill Bishop, get on the stream. Call in. We'd love to have you. Bill.
Speaker 1:Bill. You're welcome. Hop on.
Speaker 3:Of course, Aaron is riding with Jensen.
Speaker 1:Yeah. He is the Jensen surrogate. He's he's he's a surrogate for Jensen the juggler. The other ad that didn't go as viral and and result in major backlash was the launch of the Apple Vision Pro. 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.
Speaker 1:And it and and Ben Thompson was like, it feels like he's divorced or something or maybe like the kids died. About? 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 and the the imagery was very similar in the Apple Vision Pro, but it wasn't an optimistic scenario.
Speaker 1:It was like, yeah. Like, I guess if my son passed away or got kidnapped, like, I would want to relive that, but that's not, like, gonna inspire me to to buy an Apple Vision Pro. 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 effect because, the the idea of of someone hanging out in their kitchen being lonely and having this be the only companion 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.
Speaker 1: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. Get the iRobot a stack of red solo cups ASAP.
Speaker 3:Apple's canceled for fraternity coded marketing.
Speaker 1: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 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 1: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 1:And share a laugh. And and and it's a heart
Speaker 3:and it's a laugh. Can 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.
Speaker 1:Exactly. Yeah. So one of the family members I can't
Speaker 3:imagine us having a Pixar lamp here on the table.
Speaker 1: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 for you.
Speaker 1:What else do The
Speaker 3:projects coded Linwood and Glenwood. Core to the new home devices are 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, an ability that was delayed due to hiccups with the current version.
Speaker 1:It should be able to do it. Hopefully, they
Speaker 3:should have a a a moonshot division just trying to solve iMessage search. They could probably
Speaker 1:start Every tech company needs that. Amazon search is rough. Google Gmail search is rough. Their search has gotten so, like, dominant.
Speaker 3:Billion dollar business in figuring out search.
Speaker 1: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 1: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 road maps.
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 Vision Pro chief who was put in charge of Siri earlier this year is overseeing both the Linwood and Glenwood efforts.
Speaker 3:Apparently, so during the development of the tabletop robot, Apple engineers have made heavy use of ChatGPT and Google Gemini to build and test features within Apple AI and Siri teams as a whole. 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. It's 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 1: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 So they have you're telling me they have the capability to have an always on camera.
Speaker 1: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 1:It's a little bit How it lasts. And the screen's pretty bright. The screen's
Speaker 3:The screen's probably bright.
Speaker 1:Yeah. The screen's But
Speaker 3:it's always on camera. How long do you think your phone battery would last if you just constantly had the camera?
Speaker 1:I I actually think I actually think running the camera sensor is a lot less power intensive than running a screen, for sure.
Speaker 3:And obviously, a bunch of different applications. So But still Yeah. Pretty powerful, pretty exciting stuff.
Speaker 1: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 a video Yep. Of her walking Yep. For about ten seconds.
Speaker 1: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.
Speaker 1:You didn't see.
Speaker 3:Because I didn't hit I didn't hit like end
Speaker 1:of video.
Speaker 3:Wow. So the battery died right in the middle of Memory gone forever.
Speaker 1: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 codecs where if you don't hit finish recording, the whole thing will be corrupted. It's very annoying. We have the debate of the century, the debate of the year, a showdown between former founder fund Founders Fund colleagues.
Speaker 3:Friends turned foes.
Speaker 1:Friends turned rivals. Everett Randall, he's been on the show before. Deleon Asperuhov, he's also been on the show
Speaker 3:They haven't been mincing words, John.
Speaker 1:They haven't.
Speaker 3:They have been throwing shots Yes. Yes. Back and forth every TBPN appearance. Yes. They're calling the other one out.
Speaker 1:Yes. And so they will need
Speaker 3:to And right now, we're gonna settle this.
Speaker 1:Strategies. We're gonna settle it today on the stream. The slop versus steel debate. Team death match. Which is better?
Speaker 1:High margin software or CapEx intensive Delta team. Reindustrialization efforts.
Speaker 3:That's right.
Speaker 1:We will bring in Deleon and Everett into the studio. Welcome to the stream. How are guys doing?
Speaker 4:I like that background. Very good. Energized.
Speaker 3:Here we go. We're gonna be breaking it down live here.
Speaker 1:Yeah. We're gonna be breaking it down live.
Speaker 3:I'll I'll every time one of you gets a point, I'll I'll put a
Speaker 1:We'll put a little point
Speaker 8:on reality star.
Speaker 1:If if things get out of hand, we'll be banging the gong and bringing order like it's a gavel. But I'm sure I'm sure this will be I'm sure everyone will be civil.
Speaker 3:Oh, I'm sure. And keep
Speaker 1:the name calling to a minimum. Good to have you both. Thanks so much for being here. Let's let's kick it off with
Speaker 3:Let's start off. What's your least favorite thing about the other
Speaker 1:person? I'm
Speaker 4:kidding. We could kick it off with the original story. Like, how did this all start, basically?
Speaker 3:Yes. Give us some backstory.
Speaker 4:You wanna you wanna give it? Yep.
Speaker 8:I I'm I'm happy to. So we were back at Founders Fund. We were starting to beef up our our like CRM and data science efforts.
Speaker 1:Mhmm.
Speaker 8:And so we were we were integrating some external data into our CRM, figuring out how we could filter opportunities better to each of the each of the investment team professionals. And we were looking and we were looking at the different data. I was like, oh, it'd be really nice if we could filter this by gross margin so that all of the negative gross margin companies that come into our CRM, we could give them all the Delian because it seems like those are the types of companies that that he loves to invest
Speaker 2:in. The
Speaker 8:the rivalry between you
Speaker 1:know,
Speaker 8:the low gross margin side of the house and the high gross margin side of the house was born then.
Speaker 1:Okay. And Deli and justify why why do you like these businesses? Is What's true that even a fair characterization?
Speaker 4:Fair characterization. I think, you know, my sort of one liner would be I'm not sure that, you know, sort of gross margin is actually like the right thing to sort of focus on in a business, especially, you know, sort of early on. What you want to be thinking about is obviously EBITDA margin, in particular terminal, you know, EBITDA margin. And so when I think about the, like, at least Foundersville and ethos to, you know, sort of investing, we think that that terminal EBITDA margin mostly is determined by ultimately how much of a, know, monopoly your company can, you know, be in the long term. And so if you look at, you know, sort of MagSafe today, obviously, there's a decent chunk of them that, you know, have some phenomenal, you know, sort of gross margins and those tend to be the ones that are a little more software oriented.
Speaker 4:If you look at the one that is at the biggest scale and has the best EBITDA margins, it's the one that is the most, you know, basically hardware oriented. For sure, some of it propped up by like CUDA and they're like, you know, sort of software side of the house. But like NVIDIA is the one that is performing the best of all those. And then even if you study within those, you know, which of those, you know, companies on the hardware side have monopolies versus, you know, sort of not, you see it's the one that with the monopoly, you know, clearly outperform the ones that don't. Right?
Speaker 4:So Tesla obviously in that, you know, sort of mag seven, but a part of why they sort of suffer much worse margins than like an Apple or an Nvidia is because they actually do have competition. And so my general characterization of sort of SaaS is people always sort of study their original sort of gross margin but weren't burdening in the sort of cost of sales, marketing, etcetera. And because you just have much less of a monopoly typically in SaaS, that ends up totally, you know, hurting your EBITDA, you know, margin profile. So take, like, the, like, the favorite, you know, terminal scale thought of as a monopoly, you know, sort of SaaS company that, you know, I'm sure loves, Salesforce, their market share in all things CRM is 25%. And so that's why you end up seeing, like, yeah, gross margin profile is only burdened by, like, you know, cloud, you know, sort of cost.
Speaker 4:But their EBITDA margin profile that is, like, you know, sort of 40%. And so, the reason that I like these negative gross margin businesses is yes, they're like tougher to start. They may be more equity intensive at the beginning, but end up with way better sort of terminal margin profiles versus, you know, to invest in the AI Slopcos that might have early gross margins and revenues, but the
Speaker 1:So, Ev, what's the bull case for for software? What's the bull case for SaaS? What's the bull case for AI Slopcos?
Speaker 8:Look. So to to quote the godfather Neil Neil Mehta himself, the laws of great businesses are the laws of great businesses. The job of a business
Speaker 1:in a society
Speaker 8:maximize and find the efficiency frontier for three things. ROIC, a k a return on invested capital, the amount of capital you can actually deploy and how long you can deploy that amount of capital at and above market ROIC. 's a lot of different framings for the paths to do this and how companies can actually do this. The one that people like in tech circles is Hamilton Hemmler's Seven Powers. A company accumulates power in the form of scale economies, network effects, whatever whatever power you wanna take and then uses that power to produce above market ROICs for as long as possible and with as much capital invested in the business as possible.
Speaker 8:There are great atoms based businesses that do this. There are terrible atom based businesses that don't do this. There are great digital businesses that do this. There's great or there's terrible digital businesses that don't do this. I mean you want to hear about great atoms based business that does this.
Speaker 8:Listen to the acquired pod on Costco. Like it's certainly not like a atoms versus saas thing necessarily. The advantage that digital businesses have is that in like in this process of producing above market ROIC for a long time is that their product form factor and the way that they distribute their product lends itself more to the the process of creating power, I'd argue, than most Adams based businesses. So if you think about like network effects, the best place to create network effects is in a digital marketplace like an Uber, an Airbnb or a DoorDash. And so there's a lot of these forms of power that naturally lend themselves to digital products and the scalability of digital products tends to be a lot a lot greater than than physical products and so you can see these these rapid growth trajectories like we're seeing from OpenAI, Anthropic and many others.
Speaker 3:When did you guys find common ground? Was it in the e scooter era, the the sort of fifteen minute delivery era? Were you ever able to kind of come together and say like, yeah, this is, you know, we can both agree that this is
Speaker 1:this is We're not good. We're good. I mean, to be fair, Kleiner Perkins, Founders Fund have both invested in Figma, Stripe, Airbnb. There is some portfolio overlap.
Speaker 8:Rippling too, right?
Speaker 1:Rippling as well. Rippling. There's a couple Modern Health I believe as well. There's a few others. But, yeah, to to Jordi's point, where else is the common ground and where else is the divide or the consensus in in the disagreement?
Speaker 4:Yeah. As you say, you know, everyone were texting before this of, you know, what are, you know, sort of two companies that I think, you know, both of us were enthusiastic about in, you know, sort of 2021 that actually both have, you sort of trended well, are, you know, sort of counterpoints our two arguments. The ones that we kind of came up with were, you know, 2021, I was really, you know, sort of, you know, high conviction on Hadrian in 2021. Was super, know, sort of high conviction on Rippling. Both those investments have, you sort of performed quite well the last But couple of look, you know, sort of wildly different in terms of, you know, profile.
Speaker 4:You know, Rippling, like many other, you know, sort of SaaS companies, does end up having, you know, an initial, you know, very high gross margin but does still have to spend a lot on sales and marketing to bring in, you know, sort of net new customers. Hadrian, on the flip side, deeply, you know, sort of negative gross margin to start, but now as they've gotten to scale, they actually have, like, super limited, you know, sort of sales and marketing spend because there's only, like, you know, ten, fifteen customers that matter, and the moment that you're delivering for them, they just proactively start sort of throwing revenue at you. And so, I think there are times where, both of our user stories obviously can play out. The thing that I'd be curious to hear from sort of Everage is to actually like compare and contrast. You're bringing up some of these digital businesses that end up having these network effects.
Speaker 4:I would kind of argue that like, you know, the like 2010s negative gross margin businesses, like, you know, the like Uber, DoorDash, you know, types, think I of as more as like, you know, Adams businesses, but there was a whole set of investors in like the mid-2010s that were generally unwilling to approach both Adams based businesses that started with negative gross margin, but even some of these local marketplaces that started with negative gross margin that, like, swore off of the Ubers, the DoorDashes, etcetera. You know, it's very clear that Uber, DoorDash through, you know, lots of investment, through building out these local, you know, sort of networks of, you know, both supply and demand were able to and, you know, drivers were able to eventually get to a point where now they actually, you know, have very attractive, you know, sort of financial profiles. Today, the equivalent of that is like there's all these investors that, you know, back in the 2000s would have refused to invest into any company that had negative gross margin and are all now pouring cash into both the, like, AI application layer companies and those, like, you know, foundation models that all have, like, ridiculously, I mean, forget, I think it's Girly is nonstop, you know, not my favorite person in the world, but Girly is nonstop talking about, like, you know, what is going on here?
Speaker 4:They're selling a buck for 90¢. Yeah. And so I guess
Speaker 3:Well, so I think I think it's it's an important example because you had that, you know, plenty of examples of these chain losses during that era where a restaurant was selling something below cost to a platform that was selling something below cost to a logistics provider, an individual contractor that like maybe wasn't actually making money if you factored in depreciation and fuel cost of their vehicle. And that ultimately worked out, right? DoorDash is a is a massive fantastic business based on the power of the American consumer. But when you compare that to today where a lot of the conversation on the timeline this week has been the margin profile of this new generation of software companies that has to pay a lot for sales and marketing, but also inference. And so I think like the debate should really be, you know, continue to be around just how quickly will the cost per token fall.
Speaker 3:And I think a lot of people have a lot of confidence around that. But I think that that is the the key thing that Evertz sort of like broad investment thesis right now is dependent on.
Speaker 4:Yeah. Like, do you think there's going to be that same path of like Uber for a while had a bunch of negative gross margin people going into it? Like, do you actually think that
Speaker 1:it's that equivalent? I want to pull this post up. Everett actually posted this Jan 01/31/2024. So over eighteen months ago, he said, I'm making a real effort to not take for granted the $3 Uber across town era of AI, and I hope you are too. And so I I I guess the question is, because then then a bunch of people I I I thought it was a good point.
Speaker 1:I thought it was a hot take then, and I think then, you know, a bunch of people kind of parroted that take all over the timeline. Stole your whole flow as you like to say. But but but I guess the question is, are we in some sort of different regime right now where the the traditional gravity and, like, fundamentals of software investing have changed because we are out of the zero marginal cost era? And does that impose risks to the strategy that, you know, have you've sort of employed or, like, we're kind of putting you in this in this box. But if the if the fundamental structure of zero marginal cost era is going away, that that presumably forces like a rewrite of your logic around investing, I would imagine.
Speaker 8:Yeah. I I think that I think that the biggest variable that's changed from the twenty ten's SaaS era to today is that in the twenty ten's and and you you basically made this this point without making a Delian though is that the thing that that was missing from from your talk track is that the competitive intensity of SaaS during the 2010s was much, much, much lower than it is today. Yeah. Like during the 2010s, there was an entire crop of companies. In the 2000s, but then especially in the 2010s, you could basically pick either a vertical segment, you know, like HVAC or car dealerships or you could do a horizontal function like the CRM or, you know, some very niche workflow for like the finance team.
Speaker 8:You could build a software product around that workflow, around that vertical and you really only had to deal with typically like two to three competitors. Like there really wasn't that much competition relative to what there is today. And there was less just just like general pricing pressure, competitive pressure, just the general pressure that you actually had a lot with with some of the digital marketplaces early on. And so so, like, I think there was a whole crop of investors then and, the SaaS investors then were like, well, we don't need to we don't need a bunch of cash burn. And it's actually it's a really unhealthy indicator if these SaaS companies are producing a bunch of burn because they're not competing with anybody.
Speaker 8:So if they can't, like, sell their product for good unit economics on day one when the competitive intensity isn't very high, then they're probably not a very good business. I think the thing that's changed now is one, you have the change from zero marginal cost to actual meaningful marginal cost in the form of inference and it's also just a hell of a lot more competitive than it used to be. And so you are and by the way, there's an immense and there's probably 10x more capital than there was fifteen years ago to go into these companies. And so like every single category now has become like mini rideshare or like mini Uber market where it's like, hey, there's probably a really big pot of gold at the end of the tunnel and we need to be the ones that get first to scale. And in a lot of these categories, the ones that have gotten first to scale have gotten a lot of brand equity out of it and have gotten a pretty resounding lead.
Speaker 8:I think the only other piece I I would say oh, I lost my train of thought.
Speaker 1:So Yeah. Yeah. But it's gonna be basically, it's gonna be like a capital fight now on the on the SaaS side. I I wonder if it if, if the contrarian trade around hard tech is is, is entering a similar era where it's become consensus. And so we're gonna see more capital fights.
Speaker 1:And when a founder goes out and says, yeah. I'm gonna do something crazy, but I need to spend a billion dollars of CapEx. People are just like, yeah. I this could be the next space. Yeah.
Speaker 1:Sure.
Speaker 3:You you made sense to have a, capital war in rideshare, but now we have capital war in, like, this niche agentic workflow in some industry that that most people have never heard
Speaker 1:of. And then also capital
Speaker 3:war Here's $200,000,000
Speaker 1:funding military boats and UAS and and UAP, like, all these different sub segments are gonna wind up. If if capital wars start popping up there, that could potentially be a headwind to Dalian's model. Is that is that roughly correct? How would you how would you would you fight back against that?
Speaker 4:Look, I think it's it's always, you know, sort of important to talk about, you know, sort of specifics here, right? Yeah. You know, one of Av's sort of major investments in the last year is this, you know, company called Captions that basically does AI captioning of, you know, various sort of videos on social media. When I think about, you know, handing, you know, sort of two Stanford grads and $100,000,000 to go try and, you know, sort of replicate that, yeah, feels like, you know, they could, you know, go do something like that. There's like, you know, clear, you know, voice recognition models.
Speaker 4:They can go sort of pay on ads on TikTok, etcetera. And you could probably go and replicate that. And so, you know, our one liner at Founders Fund is competition is for losers. And so, you know, I think I was a loser for investing in food.
Speaker 1:Shower shots weren't fire. Enough and you just delivered, Deli. So thank you. Now,
Speaker 4:you know, if you take, you know, sort of two Stanford grads and $200,000,000 and tell them, hey, I need you to go replicate this manufacturing facility and go start building a bunch of, you know, sort of satellites, reentry vehicles, you know, bioreactors that can actually survive the environment of space. Tricky. Most, you know, sort of Stanford grads, you know, can't go, you know, ask Chad GPT how to go do that. Yet, But I haven't really faced significant competition, irrespective of the fact that, you know, all things space factories are thought to be, you know, sort of the hot new thing. To be
Speaker 1:clear, we use captions here on clips. We enjoy the captions app. We thank, for making it possible and subsidizing our
Speaker 3:And there is a YC there is a wise, a Varda esque YC company. So Yeah. I'm in for you.
Speaker 4:You know, Indian Varda, I think, will be a little bit less competitive than, you know, sort of Indian captions. Also, if you're the caption CEO and, you know, founders fund is trying to invest in your next round, please don't let us do that. That's a helpful counterpoint for me.
Speaker 8:Delian, you were you you were correct that it was getting it was getting too friendly of a debate. Yeah. I did wanna make sure I could I could pin this one on you. If you can recite the equation for return on invested capital, I will send victory to you and I will donate $5,000 to a charity of your choice.
Speaker 1:Woah. Good go. Hopefully,
Speaker 3:he's got Cluelly running.
Speaker 1:Yeah. You have Cluelly.
Speaker 4:Exactly. My, like, you know, equivalent for Everett will be if you can explain, you know, basically why you can't create microgravity down here on Earth, I will also donate $5,000 to a charity of your choice. But don't I think you've you know, I may not have the, you know, basic understanding of business physics, but, you know, basic understanding of physics and what's more important about understanding the universe around you?
Speaker 3:Okay. Okay. I mean, I'm I'm pretty fixated on the 2,035 Midas list. Yeah. That's really kind of the final
Speaker 1:It's the bigger.
Speaker 3:Bigger. This Bigger. That's Have
Speaker 1:you been
Speaker 4:on Midas brink yet or I forget whether or not you've made it
Speaker 1:up there? Oh, I'm taking shots. Tom's not even on
Speaker 4:the brink yet. You know, we rejoined, you know, KP after you
Speaker 8:and she beats laughing me.
Speaker 1:It's okay. It's okay. Eventually, we're gonna we're gonna bring back the extra names in Kleiner Perkins. It used to be Kleiner Perkins, Caulfield, Byers. It's gonna be Kleiner Perkins, Randall Braswell eventually.
Speaker 1:Once we're on it. We're working on it. We're pitching it. Where where where should we go next, Jordy?
Speaker 3:I guess, Everett, how are you how quickly like, how much should people be fixated on the cost per token with these frontier models over the next six months? Like, how how long can can venture capital sort of like backstop these chain losses?
Speaker 8:Yeah. I think that the the way to delineate the the whole so so obviously, like, think there was this kind of consensus narrative that like every, you know, twelve to eighteen months token costs were going down in order of magnitude. I think that did hold for a while. I think what you've seen now is like actually for frontier models, that started to peter out a bit. And like pricing has actually started it's still going down.
Speaker 8:It's not going down nearly as much as it as it used to when when like when when we were kind of in in the in the like the meat of the curve of of capability improvements on frontier LLMs in terms of of pricing curves. So I think that the way that you wanna delineate it is like there's a certain like what I always tell everyone is that like there hasn't been a chat GPT query since GPT four that like my mom hasn't been able to ask and have it answered by the model. So there's like the mom test of models where like there's a growing subset of tasks like economic or knowledge tasks that the models are tasked to do that no longer need frontier intelligence. And when you're not on the frontier, either through open source or just the dis like the the cheapening and the selling of of older models, like the price still falls off a cliff.
Speaker 1:Sure.
Speaker 8:And there's going to be a very very large set of tasks that models do that are not on the frontier and those are gonna continue to get dirt cheap. Actually I think that at the frontier, you're probably gonna see continued price decreases on a per token basis but nowhere near what you saw before which was like this this order of magnitude decrease on a very regular cadence. And so I think I think for for like depending on the company, it's gonna depend on one, if you've actually built a company that has enough power where you have pricing power where you can price above the the kind of marginal token price from the actual model providers. And then two, how much of your inference actually needs to be at the frontier? Like how much of your inference can be an older model that's much much cheaper versus how much do you need to do on on the actual frontier?
Speaker 8:I think that's what you're seeing like, you know, everyone loves to talk about Cursor and Chris Paket over at at Pace Capital had this really great kind of like mini essay, I think only like last night or a couple nights ago and he talked about like no one knows if Cursor has power yet because know, coders and developers, they're very, very, like they're taste makers. They're very good at understanding the quality of the models and how much inference they're getting and there's a lot of price sensitivity for them because they have a really good understanding of how much inference they're getting. And so no one really knows. I think no one can definitively say whether a lot of those types of companies have actual power with their users or if they're just drawn to an interface for frontier models or not. And so I think that's what everyone needs to be looking out for is those two things like, do you actually have power?
Speaker 8:Like will people give you margin above the marginal cost of tokens? And then two, like do we even need the frontier inference for the vast majority of your product or is that or is there a lot that you can offload to cheaper models?
Speaker 4:Yeah. I mean, guess your counter, you know, said there, Everett, is that, you know, a majority of what the foundation models are providing in terms of, you sort of value to their end users is starting to be, you know, sort of obviated by the, like, you know, the historical generation, even some of the ones that are, you know, sort of open source. So it seemed to imply that where value is accruing and where you'd expect, the highest revenue growth wouldn't necessarily be at the foundation layer, but you'd see it more at the application layer since those folks can swap models out. But like in reality, that's literally just not what actually is happening. Like if you look at which companies are sort of fastest on user revenue growth, user growth, etcetera, it is the foundation model companies.
Speaker 4:It seems like a part of it is that they also have sort of the most pricing power where, yes, your mom uses GPT-four, but like she's not the one that's necessarily paying like $100 $1,000 $10,000 per month versus the true frontier capabilities on like AI coding, the pro users, the one that actually do care about you know, maybe your mom is fine with a 115 IQ model and that's, like, fine for the rest of her life because she's just, like, not asking that difficult of questions versus the people that actually are willing to, you know, pay are the ones that actually do care about the 140, 160, 180 IQ. Again, maybe at some point that gets you know, should commoditize as well. But my sort of counter to you would be, you've made this argument that it seems to imply, hey. You know, things will accrue to the AI application layer, which if I understand your guys' portfolio is largely where you guys invested. But in reality, that's not what's played out.
Speaker 4:The places that have captured the most revenue growth, the most market share have been the ones that are actually pushing the true frontier of technology forward. And so, so far, at least in the last eighteen months, your thesis is not playing out at all.
Speaker 3:Well, be clear, isn't it somewhat widely understood that Anthropic has negative gross margins as well? So it's not like they're doing
Speaker 4:Like, Adam's point was that you want to invest in these companies that the, you know, seven powers and like, you know, in the, you know, days of like Uber, you know, DoorDash, etcetera, that did end up user translating.
Speaker 1:It seems
Speaker 4:like NVIDIA used the most power then the fact that
Speaker 1:they should Labs maybe then the application layer. We'll see how much power develops in the application layer. But, Evan, we'll let we'll let you respond.
Speaker 8:Oh, yeah. I was gonna say that that, basically what Dalian said was just wrong because even though it is even though like, if you if you if you think about okay. Like, let's take, like, whatever OpenAI and Anthropix recently reported revenue run rate is, the majority of all of that or at least the plurality of all of that is ChatGPT. And ChatGPT, even though it is served by a foundation model company, is an application. It is a consumer subscription that has an immense amount of power.
Speaker 8:It has immense amount of branding. Like, you know, it is the only it is like the first billion plus user consumer application that's been developed by a new company in a really long time. And so I think that like, you could put whatever models you wanted through ChatGPT at this point and it would not knock it off of its perch. I think that is power. Like, you could you could run Claude three Sonnet through ChatGPT and I guarantee people, like the average user wouldn't actually know the difference.
Speaker 8:And that to me is power. And just because the foundation model companies are producing apps themselves doesn't mean that it's not the application layer that is accruing the value.
Speaker 4:Okay. Then my question is, you know, you've got, you know, OpenAI with the best possible consumer application layer. You've got Anthropic that like shifted over to positive gross margins and those margins are expanding and yet Kleiner's not investing into either of those foundation model leaders or companies. Why?
Speaker 8:I cannot comment on our current investment activities.
Speaker 3:Okay. So you're switching gears to which how
Speaker 8:much money is on? I
Speaker 4:mean, look, I mean, you like making money or do you like, you know, know, know, know, going
Speaker 1:to where all the Can you comment on on Donald Boat? Have either of you bought anything for Donald Boat, the notorious e beggar on x.com, the everything app?
Speaker 4:Like my little brother, you know, you know, played the universe card and I tried to get Don Pope to buy him something.
Speaker 1:Oh, smart.
Speaker 4:To the contrarian esprow of nature.
Speaker 3:Let's talk about revenue quality because I think that you guys run into this in your respective domains every single day. Just like in AI, you can have low quality revenue, like that might be the explosion of like consumer prompt to app activity, you know, might not be the highest quality revenue. Meanwhile, on the hard tech side, if somebody gets like a random like, SIBR or like experimental gets like experimental budget from some branch of the military and it's like a fine, you know, fixed length contract, it's not necessarily the right strategy to slap like a 50x revenue multiple on it. So like, what's your view on both of those? Then I want to talk about if we should get into if accounting rules even matter at
Speaker 1:this point. Yeah, yeah. For sure.
Speaker 4:Yeah. I mean, hardware land, we think about this all the time of like there's clear differences in quality of revenue, everything from like, you know, defense, you know, program of record, have to value that very differently than even like a $50,000,000, you know, SBIR. And so it has been interesting to see a bunch of investors coming into this field where I think there's a lot of preexisting ten years of rules around software of like what healthy revenue looks like, rule 40. There's all these things that like, know, even if you're somewhat unsophisticated, infinite blog posts. When you look at that in the world of like hardware and defense, you know, sort of investing or aerospace, there aren't like infinite blog posts for people to study.
Speaker 4:And so I admit that I'm sometimes amazed when I watch people come in, even for I should never, you know, sort of trash my own portfolio. But sometimes even my own portfolio companies, I watch people invest in them. And I'm like, wow, like you just have a deep underappreciation for just like how long this company has until gross margin flips to like positive, how long it's going to be until they're actually, you know, sort of ready to go scale revenue. Even if it, on the back end, it might be attractive, it may be years and years for them to, you know, sort of get there. And so, yeah, I see huge variation on that and then mostly what I end up sort of seeing is people just come in and like slap a 10 to, I even saw 100x rev rate multiple on this like hardware company recently and I was like, holy shit.
Speaker 4:Wow. People like not having IRR for a long time.
Speaker 1:Yeah.
Speaker 8:Think so Delian's hero and close mentor, Bill Gurley, had an essay a long time ago called the 10x Revenue Club. And I think it's like a good abstraction for kind of like tech revenue quality and like what makes up revenue quality and it's things like, you know, how durable is the revenue? Like if you sign a customer, are they
Speaker 4:going to stay for a
Speaker 8:year or twenty years? You know, how much contribution profit is going to come off of that revenue stream over time? All the basics. And I think you can like take those same building blocks and apply it to AI. I think there's several things that are worse for AI than the at least than than relative to SaaS for now.
Speaker 8:So generally, gross like gross margins are lower, means contribution profit coming off is lower. I actually think that, like, depending on the category, you could have customers that are more sticky or less sticky. Like, know the meme is that everything's experimental run rate and none of these customers are actually sticky. I think we see something very, very different among the the our group of portfolio companies. I think the the biggest lever that didn't exist in SaaS, that exists in AI that could be a huge call option boon for the revenue quality of AI is the actual contract sizes as people start to eat into potential labor budgets.
Speaker 8:I know this is like still kind of like inning one and inning two and it's also like a little bit of a meme where everyone's like, it's gonna replace labor and labor's 10 times SaaS and it hasn't really happened yet. But I think if you look at some of these coding tools and you look at something like Claude code, that is the first place where you can really actually say like, no, this is replacing the labor that a developer would do and it is paid for on like a metered consumption basis. And the monetization numbers we're hearing around developers using Cloud Code are pretty crazy in terms of like, wow, that's like, you're paying like one tenth of like a developer's full in cost to a company on an annualized basis for this product. And so I think that the like, the the thing to watch is like durability of revenue plus the amount of actual revenue that a customer can give you. And I think that gonna end up or the amount of gross profit that a customer can contribute over time.
Speaker 8:And I do think as some customers crack these agentic products that look and monetize more like labor, AI revenue could actually exceed the quality of SaaS revenue just because you're getting so much more gross profit per customer or or, like, customer relationship than you would on the SaaS side even though there are clearly things that are worse about AI revenue at at this current point in time than there are about SaaS revenue.
Speaker 1:Dylan, how do you think about the the the moral imperative of a of a venture capitalist to invest in positive sum versus zero sum markets. This idea that, you know, you're re industrializing America, you're saving the West versus moving
Speaker 3:chips You personally. Around
Speaker 1:versus moving chips around the poker table, taking taking from some legacy, you know, web one point o company and putting it into a AI company. What what's your what's your thinking and argument there? Is is is a market beating ROIC all that you need?
Speaker 4:Yeah. You know, I think Peter always reminds us, like, you know, our number one job is to deliver returns for our LPs. And so I actually tend to not try to, you know, sort of overly moralize when, like, analyzing the things that I want to, you know, sort of invest into. For sure, when it comes into, like, policy and I'm in DC and I, like, need to sort of report to the Security Council that Bill Gurley is a sort of Chinese spy and that, like, the investments that he's making should probably be banned from The United States, yeah, for sure there I have sort of moral imperatives and things that influence that may end up shifting ROIC, right? Sure.
Speaker 4:So, you know, but when it comes to, you know, like which literal investments are we making, I think of it as just like, yeah, just have to, you know, sort of make the, you know, sort of best possible investments, of, you know, sort of moral imperatives. But in some ways I tend to think it turns out actually if you either go too immoral then that ends up, you know, sort of affecting ROIC. So, yeah, maybe and the last thing that I would at least, you know, sort of close on, you know, for my, you know, sort of question, you know, for Everett is, you know, of the upsides of Founders Fund is, you know, we're very, you know, sort of, let's say, non centralized, distributed, you know, not many sort of rules which, you know, Everett for some reason, you sort of chose to leave. And so I know nowadays everything that he says publicly probably has five comms people and five compliance people that need to sort of approve it. And so my only request to you is to blink twice if somebody's got a gun behind the camera, threatening to shoot you if you ever say anything that goes through the screw off script.
Speaker 4:All That's you gotta tell us, brother. Yeah. Let let us
Speaker 1:know. Hey.
Speaker 8:Our wonderful marketing partner, Ali, is is is behind the camera with a green and red paddle and she hasn't the red paddle yet. That's That's great. Great.
Speaker 3:Thank you both Are you worried about Uncle Sam potentially having sharp elbows now that we're hearing about Intel. Yeah. The federal government taking a stake in Intel? Any any both out of stack into the into the early stage game competing for those seed and and series a allocations?
Speaker 4:Look, if Trump Capital wants you, you know, sort of mark up some of the, you know, re industrialization companies, I'm all for it, baby. Cheap cost of capital.
Speaker 1:You're all for it.
Speaker 8:See, I'll say I'll say two things. I would say one, I think that the EV of like the enterprise value of Founders Fund probably three x the night that that Trump got elected. So I don't I don't think would would complain about that. And then two, just as as a parting gift, Dalian, you know, I think this conversation's been great and it's made me realize why you wanna build factories in space because your math on earth doesn't make any sense.
Speaker 1:Well, thank you both for joining
Speaker 3:this this fantastic good sports.
Speaker 8:We'll have
Speaker 3:to do this again.
Speaker 1:I think it might be a draw. We'll have to have you both back soon. Thanks so much for hopping on.
Speaker 3:Great stuff.
Speaker 1:We'll see you guys later. Cheers.