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TBPN is a live tech talk show hosted by John Coogan and Jordi Hays, streaming weekdays from 11–2 PT on X and YouTube, with full episodes posted to Spotify immediately after airing.
Described by The New York Times as “Silicon Valley’s newest obsession,” TBPN has interviewed Mark Zuckerberg, Sam Altman, Mark Cuban, and Satya Nadella. Diet TBPN delivers the best moments from each episode in under 30 minutes.
Let me tell you. You're watching TBPN. You're watching. You're watching TBPN. It's Tuesday, 08/04/2026.
Speaker 1:We are watching the TBPN UltraDome, the temple of technology, the fortress of finance, the capital of capital.
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Speaker 1:We got to work on that intro. But we've been having fun making intro songs, mixing it up. We got John Quinn, the most feared lawyer. The lawyer, the lawyers all fear coming on the show live in person in the TBPN UltraDome. You know him from Quinn Emmanuel.
Speaker 1:He's a founder, a legend, a legal legend. When John Quinn stands, everyone kneels.
Speaker 2:That's what they say about him. That's right.
Speaker 1:We're very excited for the show today. Lots of guests coming on. Lots of news. Big deal, the big one that's tearing up the timeline right now is that Airtable founded in 2012 and once valued at $11,700,000,000 is getting acquired by Bending Spoons founded in 2013 at 2.7 times ARR. Once hot startup, now an unfortunate victim of the SaaS bust, says DD DOS.
Speaker 1:It raised $1,400,000,000 but only to be sold for 1,285,000,000 enterprise value because they had almost a billion dollars in cash on the balance sheet. And so the total equity value was 2,250,000,000 equity value. Just clearing the preference stack. So early employees, founders probably got something. Later investors probably got 1x their money back, but probably had it tied up for a few years.
Speaker 1:So not a good outcome, but there's some interesting silver linings here. Obviously it's good for could be good for Bending Spoons if they got a good deal and they turn it into a mammoth cash machine. Also, there's some nuance to where different pieces of the or where different pieces of the business are going because they're sort of dividing it up. But of course, Bending Spoons is a public company now. And if you want to back Bending Spoons, head over to public.com Or shorting.
Speaker 1:Investing for those. Give financial advice. Yeah.
Speaker 2:Do whatever you want.
Speaker 1:Stocks, options, bonds, crypto, treasuries and more with great customer service. Go long, go short. Whatever you do, just don't use too much leverage. That can be risky. Matt Levine has a great piece today.
Speaker 1:And actually Yeah.
Speaker 2:It really sort of exemplifies the current moment where a company can sell for over $1,000,000,000 and everyone's like, wow. That's unfortunate. Yeah. Yeah. But and and a wake up call to the to the many maybe younger companies that are at a lower revenue run rates Yeah.
Speaker 2:That are raising at much higher valuations Yeah. And basically signaling to them like you've you've got some many many years of compounding to do.
Speaker 1:Yeah. It's interesting. There's a SaaSpocalypse narrative, which is like, these companies are going away. Software won't exist. You'll just prompt it.
Speaker 1:And I think there's a lot more nuance to it than that. But one thing that it does feel like the underwriting, the financial trajectory of these single point solution SaaS products, single player, somewhat sticky, maybe not that sticky, maybe replaceable. It's not that they're going to zero. Bending spoons wouldn't be buying it if everyone was churning and it was going be a zero. But at the same time, you can't It's growing.
Speaker 1:Underwrite it
Speaker 2:It's growing 20%.
Speaker 1:Yeah. Yeah. But you can't underwrite it at 40 x revenue, a 100 x revenue anymore. And it feels a little bit like what happened with D2C e commerce, honestly. There was a moment where e commerce brands were venture backable.
Speaker 1:And you could and you could underwrite them or they were being underwritten similarly to venture startups that had true moats, true compounding advantages. They would get the same multiple as a SpaceX or or an AI company or a a social media company. And that never really made sense. It was sort of a, you know, just a weird quirk in the system for a couple of years. And then go forward a few years when there were some pullbacks, some of the IPOs went out, they didn't do that well, They traded down.
Speaker 1:And all of a sudden, it was like, okay. Well, if we're doing if we're doing, you know, in my case, like food on the Internet, we're going to VC back a food company like, has Nestle been disrupted? Like, no. And that would Yeah. Now, Unilever.
Speaker 1:Is Unilever trading down like crazy because they're facing so much pressure? And that's usually what happens when there truly is disruptive innovation. You see Yeah. This with I saw some crazy post about how people were bearish on Starlink for a while and the company that they were competing with just went bankrupt. And you see this with, you know, social media came out and yes, like the newspaper and the Internet actually, the newspaper stocks did actually trade down.
Speaker 1:That never happened in e commerce, D2C e commerce, any of that. And we're now in this new regime. So I think that there's actually a pretty safe path if you just build the business, if you're saying, look, I am in this SaaS industry, it is going be more competitive going forward. But I'm setting myself up to have a reasonable multiple so that at every point, if I'm trading at three times ARR, I'm happy because the cap table is set up for that. Right?
Speaker 2:Yeah. One thing I will say is I started using Airtable shortly after it Mhmm. Or it was 2015. Right?
Speaker 1:Mhmm.
Speaker 2:So I probably started using it a few years But the product the way that I used the product back then for my for my first business, I would a 100% just just vibe code a solution today. Because I was using like very basic dashboard functionality. Yep. I wanted dashboards that we could use internally. Yep.
Speaker 2:Share externally. Mhmm. Now it'd be very quite easy to just do all of that in Codex or your favorite agent. So I do think that business is very much under under threat over the long run, but it still has sort of compounding that it can do just given how how deep it is into the Fortune 500 and Yeah. And the long tail of of small businesses.
Speaker 1:I'd be very interested to know what is, you know, new user, new logo growth like versus just expansion within an organization? Because if you have some company that's already sort of running on Airtable, they're growing, so they're adding seats, they're adding functionality because they're sort of bought in and they're not gonna rip it out. What does that growth rate look like versus, you know, new companies actually going and signing up and saying, like, yes, this is the best tool for the job. Because you do get a lot built for free up and, like, it's not like they don't have access to AI agents that can improve their systems. Like, you might be doing a lot of maintenance on your VOD coded solution.
Speaker 1:But at the same time, a lot of people, especially in smaller organizations, were using this as, like, just one small dashboarding tool, one small database that is sort of replicable. So interesting to see where it goes. And a little yeah, just like an interesting data point in the SaaS pocalypse, late stage growth, like is it a zombie corn? What do you what term are you using for it? Jared Sleeper has some more thoughts.
Speaker 1:$480,000,000 ARR growing 20%. It's a unicorn exit. Many very satisfied customers, including Jared Sleeper for years, fantastic run. Never underestimate how much VCs love products that make quote everyone a builder. The wrinkle is that one player products are high churn.
Speaker 1:Was Airtable I mean, I feel like the whole pitch for Airtable was that it was multiplayer, but maybe that wasn't the way that people were actually using it that often. A lot of people would just be like, oh, yeah. That that guy on the team is using Airtable for that thing. But I mean, certainly from very early on the
Speaker 2:he means that you can it's more like product led, like one person at a company. Oh. Because I've only used it in a team capacity.
Speaker 1:Mhmm.
Speaker 2:Right? But one player can sign up, start using it, invite other people to the team.
Speaker 1:Yeah. But it's It's an advantage because you're bottom up. You can ramp into a different company so quickly. But at the same time, if you're not like going through the CFO and being like, there's a mandate that we're using the CRM 200
Speaker 2:seats at once.
Speaker 1:Exactly. Yeah. Is a little different. Three, his third point, gross retention remains the single greatest predictive variable of terminal value for any business that doesn't have a scale effect or network effect. It dictates somewhat mathematically what folks like Bending Spoons will pay.
Speaker 1:Great to see employees get liquid, but perhaps sad that some are learning about liquidation preferences, SaaS multiples to their disappointment. So, of course, if you had mentally marked your stock at $11,000,000,000 but then this deal happens, the investors that put in that money at $11,000,000,000 they're going get their money back first, and then you're going to have to fight for whatever's left over, the scraps. Silicon Valley can do a better job talking to employees about what stock is worth in various scenarios, but no one is incentivized to do it. Well, I mean, you can also just look it up. There's a whole bunch of blog posts about it.
Speaker 1:You can ask Judge TBPN and get a whole deep dive on run this whole scenario and play out every possible option. But, yes, I agree. No one likes to, oh, we're closing a big candidate. Let's tell them about what's going to happen if Bending Spoons comes in.
Speaker 2:Let's tell them what happens if we get our spoon banned.
Speaker 1:Bending Spoons is emerging as the Constellation software of the prosumer high churn, higher churn SaaS is a fascinating turn of events and a good thing for pref stacks everywhere just because there's more liquidity for systems.
Speaker 2:Well, it's a buyer of last resort. Yeah. Whereas Like no founder no founder is setting out, hey, I wanna be I wanna I wanna, you know, go on this generational run
Speaker 1:Yeah.
Speaker 2:And then get my spoon bent. But it's still it's still great because it allows, again, it is real liquidity. Yeah. This is a win. I think Bending Spoons.
Speaker 2:Bending Spoons will obviously end up, I would I would say, like, rightsizing the company.
Speaker 1:They're not
Speaker 2:gonna continue to run it the same way that it's been run. Yeah. But at least it allows everyone to get out and go on to do new things.
Speaker 1:Yeah. In an interesting twist, speaking of getting out, Shiel Monarch shares this about the Airtable acquisition. They spun out their AI business HyperAgent prior to the acquisition. So the company lives on and likely some cash with it probably can be recapitalized. It seems like a fantastic outcome, shed the old business and focus on AI.
Speaker 1:So I would be very interested to see who is going to be working at HyperAgent. Is this something where the founders didn't want to exit the business entirely and then just start from scratch? They wanted to take a whole bunch of the team with them and they wanted a bunch of the resources and learnings. And so they were able to package everything up and this will be something that's very founder led? Or was this just, okay, that is a more expensive piece of the business.
Speaker 1:Bending spends it's earlier in its ramp. Maybe it's working, maybe it's not, but that's not the business that Bending Spoons in. And so this is more like a Bending Look,
Speaker 2:we've had we've had both founders Yeah. On the show. Yeah. Bending Spoons is like, hey, let's take a great product Yeah. And just basically right size the team Mhmm.
Speaker 2:Run it efficiently.
Speaker 1:Mhmm.
Speaker 2:And we're not trying to get we're not they're not ever in the business of trying to get growth back to 200, 300% a year. Mhmm. Howie's been on the show. Yeah. He talked a bit about HyperAgent.
Speaker 2:That's a product that if they execute well can grow 10 x year over year. Right? Yeah. And so I could imagine again leaving some of the team to just continue running Airtable indefinitely. And then again, like you said, taking some of the talent out and saying like, let's take another big swing.
Speaker 1:Yeah. Yeah. It's a fun it's a fun twist on, like, post acquisition. What do you do in this scenario? Like, the the the team doesn't necessarily need to stay on.
Speaker 1:That's not the Bending to the Spoons thesis. There's not some crazy earn out probably for most of the team members. And so you have the opportunity to go do something new. And if you're already all set up, it's like, yeah, just just put everyone together before the deal happens.
Speaker 2:Yeah. The other the other thing that's notable is Notion, I think, just did a tender.
Speaker 1:They just did a tender or they did a tender a while ago? I thought that I thought
Speaker 2:that was important. At some point within the last year.
Speaker 1:Really?
Speaker 2:At billion, they're at 600,000,000.
Speaker 1:No. No. No. You're right. This is of 2026.
Speaker 1:Yeah. I saw this quoted as like, oh, no
Speaker 2:Do have any idea how quickly they're growing relative to Airtable? I imagine they're growing significantly faster.
Speaker 1:So the news was that in on 01/26/2026, Notion, which very much feels like, you know, easily comped to Airtable. Airtable was like modern Google Sheets. Notion was modern Google Docs. Of course, there's a ton of overlap in the capabilities and there's a lot more to it, but Notion sort of feels like a similar shaped business. But GIC, Sequoia and Index purchased Notion shares in a private tender offer January 26.
Speaker 1:The total tender was $270,000,000 and $11,000,000,000 valuation, which was the last valuation, I believe. They say, We waived a one year vesting cliff on options for current employees, so I think everyone got to participate. There's a whole bunch of returning investors. At Notion in 2025, Notion's growth rate accelerated on the back of AI adoption within our platform. As of last year.
Speaker 1:More than 50% of the ARR came from AI enabled customers. The growth over the last twelve months is happening globally. They don't share an actual growth rate, but I don't know. They they they must everyone must have been optimistic at the time because they did the deal at the full 11,000,000,000. So anyway, Bryce Roberts is laughing at the VCs, I guess, who were able to play the markup game and were able to raise one, maybe two funds on the Airtable markups alone.
Speaker 1:I'm sure there are some, but I mean most of the funds that were in Airtable were in a bunch of stuff. So I don't know how true that is. Maybe the really early stage people. I don't know.
Speaker 2:Yeah. Airtable did enough rounds back to back to back that pretty much every fund Yeah. Is in it. Yeah. Every other bunch investments that are high performing during that era.
Speaker 2:But I don't think he's making making fun. He's just pointing out Yeah. The
Speaker 1:Several. The I don't know. Liquidity is is laughing about the fact that Bending Spoons has a very soft friendly brand. Bending Spoons branding, very very simple and it just sounds like such a simple name. It's not like Cerberus Capital, you know.
Speaker 1:But and yet when they negotiate they're presumably difficult to negotiate with. I I don't know. I mean, in in a certain situation, can be very friendly and amicable and just sort of say like, yeah, we're we're we're a buyer at 2.7 ARR, you know. We're not gonna like screw you over here. We're just gonna give you this is a fair price.
Speaker 1:Take it or leave it and you can take it. You don't necessarily need to be this like crazy werewolf of like a shark, you know.
Speaker 2:Yeah. There's just not there's just not that many there's not that many buyers for a company like Airtable.
Speaker 1:Yeah. And it's a
Speaker 2:A just sort of in in this in this economy, a slow growing Mhmm. Enterprise software business. Mhmm. Right? Mhmm.
Speaker 2:There are not that many buyers. Mhmm. If Airtable had wanted to sell Yeah. In 2020, I'm sure they would have gotten meaningfully more. They probably did have offers at different points.
Speaker 2:You could imagine Airtable, you know, ending up at a at a, you know, a Salesforce Mhmm. As an example. Right?
Speaker 3:But
Speaker 2:now, Luca is saying the buyer of last resort is is like maybe maybe unfair.
Speaker 1:Yeah. Just like a value based buyer.
Speaker 2:Yeah.
Speaker 1:I don't know.
Speaker 2:Yeah.
Speaker 1:I mean, it is I guess it's like yeah. The first resort would be like the hyperscalers, but
Speaker 2:it's Yeah. Ideally, you you never sell. Yeah. You go public. Yeah.
Speaker 2:And just keep compounding compounding. Yeah. Second best would be a strategic
Speaker 1:Yeah.
Speaker 2:Right? It just
Speaker 1:feels like the the enterprise tooling market is pretty mature amongst the hyperscalers. Like, Microsoft's not gonna replace Excel with this. Google's not gonna replace Google Sheets, Meta, Amazon. They don't really wanna get into this particular thing, a whole email suite, like the Office productivity suite. And so you get to this price and it's like IPO or sell.
Speaker 1:And so Yeah. They chose sell. Anyway, let me tell you about Shopify. Shopify is the commerce platform that grows with your business as you sell in seconds online, in store, on mobile, on social, on marketplaces and now with AI agents. Snap earnings happened and Evan Spiegel was on CNBC talking to Sorkin.
Speaker 1:And it's a very interesting storyline because people are mean, people are obsessed with the specs. I mean, the job job completed in terms of, like, getting more attention for the company. But it's been sort of a weight around the company because the question is, like, okay, is is everyone gonna be buying $2,200 smart glasses from you anytime When that's not really the story, the story is actually like the revenue growth, the profit, the operating leverage that's coming back into the business. So I mean, overall, it was a good quarter for Snap, clear beat. Revenue was up 19% year over year with profitability and cash generation rising even faster.
Speaker 1:So that's that operating leverage. They're growing revenue faster than they're growing costs, and so they're increasing their margins. Advertising revenue grew 9% to one point roughly 3,000,000,000 in the quarter. But the really interesting number that was surprising to me was they're making $316,000,000 a quarter in subscriptions and paid services, up 85%. So just subscribing and being a paid power user, it's only 3% of the user base, something like that.
Speaker 1:Yep. That's now a billion dollar line of business. Obviously, very high margin, working really plays to the strengths of what Snap offers. And usage is up globally, but they're losing a step in Western markets. So the North America, I think, fell 7% and Europe fell 2%.
Speaker 1:And so that's not great for long term ad monetization because you want to be in the richer countries generally, but still revenue is accelerating. They are monetizing better. And that's probably an AI story. It's just like a boring AI story because it's like the ad recommendation system got a little bit better. Nobody really cares.
Speaker 1:People want to focus on specs, but they're $2,200 and they're bulkier than competing smart glasses.
Speaker 2:Well, felt like in that interview, Spiegel was talking about specs Yeah. But he wasn't wearing them. And so
Speaker 1:Yeah. Does he need to wear
Speaker 2:them all the think he kinda needs to wear them all the time.
Speaker 1:Wear them? I mean, you're gonna hold Apple to that? Tim Cook's gotta wear Vision Pro everywhere he goes? That'd be hilarious.
Speaker 2:No. But but the vision pro is not meant
Speaker 1:to augmented reality. It's augmented reality. It's meant to be worn twenty four seven. You're a serious person. So let's actually pull
Speaker 2:up should do a full show. If you love
Speaker 1:I could.
Speaker 2:Apple Vision Pro so much.
Speaker 1:Not be a problem.
Speaker 2:Not be Do the full show. Okay. This Friday. We'll we'll Book it.
Speaker 1:We'll test right in with Tyler. So here here here's an interesting tidbit. Specs, it feels like, oh my god. They're spending so much money. It's like so crazy.
Speaker 1:I think the rough estimate is, like, 300,000,000 a year, which is a lot, but it's only 5% of their cost. It's like 20% of their overall R and D budget maybe, something like that. These are very rough numbers, but it's not like if they just spun out specs or cut specs and they're just like, we're not doing anything there, all of a sudden, the business is like wildly profitable. It's not that big of a stone around the neck. It's more just like a distraction and a question.
Speaker 1:And it's also not great that on the earnings call they asked how many preorders have you sold and sort of danced around it and really give a straight answer on that. Because if it was good, you'd probably be like, yeah, we sold Yeah. Bleed with Yeah. Yeah. Yeah.
Speaker 1:Yeah. It's a Yeah.
Speaker 2:And even even meta selling what I think now millions Yeah. Of devices
Speaker 1:It's pretty good.
Speaker 2:Is not exactly Yeah. Like shout they don't want people to necessarily focus on that. Totally. Even though it is a proof point that there is a marketing
Speaker 1:Totally. Totally.
Speaker 2:For camera glasses Yep. Basically. The crazier thing with Snap is that this is a business even after it's Yep. Traded up 13% today. The the business is at a $6,000,000,000 a year run rate, and it's trading at under 10,000,000,000.
Speaker 1:Yeah.
Speaker 2:Right? Yeah. So which just goes to show how even even with some momentum across the business, people just do not have have faith in the company.
Speaker 1:Okay. Let's play a little bit of Evan Spiegel on CNBC. I wanna hear him talk.
Speaker 4:Snap reporting q two results after the bell on Monday. They scored an earnings beat with $1,600,000,000 in revenue. It's 19% higher than just one year ago, and joining us right now for more Snap CEO, Evan Spiegel. He did not bring his glasses on the set, but we're gonna talk about those glasses in just a minute because I think that's been a big part of the story. But you beat across the board, not just by the way on the revenue piece, but on the margin piece, which is what I think the market was actually looking for.
Speaker 5:Yeah. Well, first of all, thanks so much for having me on, Andrew. It's such a beautiful morning here in Aspen. It was a great quarter for Snap, and I think what folks are seeing is that the free cash flow in the business is really starting to inflect, which is allowing us to offset dilution, to strengthen our balance sheet, and of course, to continue investing in the future, which is so important to us.
Speaker 4:Let's talk about the
Speaker 1:future pieces of that story.
Speaker 4:And then your glasses will get there in a second. Think glasses
Speaker 1:I don't want hear them talk about glasses.
Speaker 4:$2,200 right now? $2,100 is what they're gonna come in? $21.95. Okay. So the question I keep Under.
Speaker 4:Quickly those can come to market in a way at a in a way and at a price point that people buy them, you know, en masse? And how you think about the competition coming from whatever you think Apple is ultimately gonna create, whatever you think Google is working on, and whatever you think Meta is gonna do next?
Speaker 5:Well, we've been working for more than twelve years to reinvent the computer and make it feel spending more than seven hours on average staring at screens. Specs represent the opportunity to bring computing into the world, to make it a shared experience and ultimately, to help, you know, bring all the productivity gains we saw in desktop computing and laptop computing to the real world and to real world jobs, which is the vast majority of jobs, about 60% of jobs. So I think this computing transformation is incredibly exciting. We're certainly the the leader in the space. I think specs represent a a totally new category.
Speaker 5:Right? If you look at the landscape today, you have very bulky but capable headsets, and then you have very limited but lightweight AI glasses. And specs represent the capability of some of these VR headsets in terms of the immersiveness and the ability to really have a full workstation experience, but with the wearability of some of these lighter weight glasses products.
Speaker 4:But do you say to yourself, Apple's going to come and do the same thing and Meta's gonna go mean, so how do you think about that given the cost of of putting this all out there and the amount of money that some of these big companies can actually throw at this?
Speaker 5:Yeah. Well, I think, you know, as we look at the history of of innovation, I I actually think one of the things that helps power innovation are constraints. Right? And and one of the things that makes Snap so unique is that we've been so laser focused on specs for such a long period of time. So I think this focus, our history of innovation, you know, and our first mover advantage in
Speaker 3:the space
Speaker 1:It feels like it should be a different company. If if you wanna be laser focused, it feels like the benefit would be like
Speaker 5:millions of lenses
Speaker 1:do the Elon thing, start a separate company that is laser focused on it. The investors in that company are laser focused on that. The employees
Speaker 2:Yeah. Have a deal with Snap.
Speaker 1:Yeah. You know, like like, just just have this, like, you know, gets we're we're we're good on this video. Just get Snap to a really polished, oiled machine. You own all the equity. You you you have the founder control.
Speaker 1:It's your, you know, your your your financial backstop, your your your credibility
Speaker 2:Yeah.
Speaker 1:For to actually go and truly laser focus because, like, it's weird to be laser focused on a thing that's not your core business. And then Yeah. Everyone's just constantly asking you, like, we'd love for you to laser focus on the main business that's making billions of dollars every year.
Speaker 2:Seems pretty solid.
Speaker 1:Yeah. It's like making $6,000,000,000. Well, what do you think, Tyler?
Speaker 2:Yeah. I mean, earlier this year, they did spin off the AI video company. Yeah. And that seems like much more related to the main, like, you know Yeah. Snapchat app than glasses.
Speaker 2:Right?
Speaker 1:Wait. What what is the AI video company?
Speaker 2:I think it's called Dotmo. It was like their internal Okay. Generative video Oh. Team.
Speaker 1:Interesting. Yeah. I I feel like having in
Speaker 2:Yeah. It it also he was talking about enterprise use cases for the glasses.
Speaker 1:I mean
Speaker 2:Like workplace use cases. It's so hard to imagine. It's it's it's as an independent company, you make a really great device. Yeah. I can imagine that company having its own go to market motion saying, hey, Amazon.
Speaker 2:Yeah. We want you to use, you know, our devices across your workforce and maybe they do a pilot. Yeah. But trying to sell in like Snapchat glasses into the enterprise Yeah. Feels like just gonna be a tough sell.
Speaker 1:I also wonder I mean, I I don't know if this would actually be a good strategy for such a big company, but I would be interested to see if there's a an opportunity just for another another physical product that could actually get to scale that's may way cheaper. I'm thinking, like, some sort of, like, disposable camera that that that doesn't have a screen on it. You take the photos and then they upload to Snap in the app and it's, like, this special way of, like, disconnecting more on theme, but way cheaper because it's just like a basic camera in a in a shell or something. Or going into, like, you know, a ring or a wristband. Like, there's been so many companies that have figured out how to get a wearable or a hardware device actually in the hands of millions of consumers.
Speaker 1:Like, maybe do that first and then grow from there as opposed to taking, the straight shot. I mean, it's a straight shot to to full immersive augmented reality, the most challenging thing, which is which is just it's it's just a really, really tall order. Yeah. Anyway, let me tell you about MongoDB. What's the only thing faster than the AI market?
Speaker 1:Your business on MongoDB, don't just build AI, own the data platform that powers it. Well, OpenAI is firing back at Apple. A little little glazy though. They say Apple is one of the greatest companies of all time. What a funny way to kick off a blog post firing back at a lawsuit.
Speaker 1:Apple just cooked OpenAI just cooked Well,
Speaker 2:they say and built a reputation for obsessing over the smallest details. True. And then they go on to say Yeah. Maybe there were some details that were missed.
Speaker 1:Yes. So what what were the key things that they said? They accused Apple accused OpenAI of ignoring them. Turns out the lawyers emailed the wrong Asian guy because two Asian last names look similar. They claimed you discussed the allegations with OpenAI's general counsel that they admitted that that conversation never happened, accused ex ex an ex employee of improperly accessing files.
Speaker 1:They forgot to mention Apple employees were allegedly asking him to access those same files after he left. So there there seemed to be some scenario where like the guy had left but he had so much internal knowledge that someone at Apple was just like, hey, like can you remind me where this thing is or something?
Speaker 2:Yeah. When reading through the initial complaint
Speaker 1:Yeah.
Speaker 2:Apple made it seem like the employee or the former employee Mhmm. Was just running wild through his old laptop. Yep. He had sent a message to someone at Apple Mhmm. Saying something to the effect, I'm paraphrasing, but I still have access to my computer LOL.
Speaker 2:Mhmm. But the reason that Yeah. In the text messages that they shared, you can imagine the reason that he was there and sending that message. Why would he send the message if he was doing something that he was that he that was wrong Yeah. That he would feel guilty of.
Speaker 2:Right? He was helping his former teammates
Speaker 1:Weird.
Speaker 2:And they say, there's 10 other people I could ask you, but you're the smartest or something like that. Yeah. And and so when you have all this context, the story looks quite a lot different.
Speaker 1:Yeah. They're sharing a lot of text messages. You can go read the blog post. But there's Yeah. Like full back and forth iMessages between Chang Liu and Apple employees were Chang, whose last day at Apple was 01/22/2026, is being asked by his former colleagues to help them locate files and information to assist them with their Apple work.
Speaker 1:Note, other individual names and Apple confidential information has been redacted. So certainly another another wild
Speaker 2:Yeah. I'm still I'm still just very surprised that that Apple, during the middle of a, you know, a a year long talent raid
Speaker 1:Mhmm.
Speaker 2:Would know that someone significant had quit and that would not go through the process of actually Mhmm. Taking back their their their laptop and making sure that, you know, the the separation was, you know, really finalized. Yeah. People people have been saying stories how historically, you know, maybe call it fifteen years ago, if you quit Apple, someone would show up to your house immediately and take back any prototypes that you may have had or anything anything of the sort.
Speaker 1:Yeah. I'm excited for prediction markets to get on this, honestly. It was very helpful during the the Elon Musk OpenAI case. Currently, call she has a few here. Will the OpenAI Johnny Ive device have a screen?
Speaker 1:No. It's at 82%. When will OpenAI release Astra? There's some dates here. What else are they?
Speaker 1:Will OpenAI increase the cost of ChatGPT? No. At 87%. No market on the Apple lawsuit because it's it's still very early. There's not even, like, a court date yet.
Speaker 1:But we'll keep tracking it because it's an interesting story. Let's move on to the next story. But first, let me tell you about Railway. Railway is the all in one intelligent cloud provider. Use your favorite agent to deploy web app servers, databases, more while Railway automatically takes care of scaling, monitoring, and security.
Speaker 1:So is BMW forcing owners to watch a Spider Man brand new day promo when they start their cars up? That's the question. A lot of people were upset about this. Jordy this morning is like, this is awful. There's some nuance here.
Speaker 1:So BMW owners are debating the company's latest in car promotion after videos spread across X showing a Spider Man brand new day animation appearing on their vehicle's infotainment screen at startup.
Speaker 2:And the reason why this fake news triggered me was back in the day in college, I was getting a Kindle. Yeah. And on the checkout page, it was like, do you wanna save $10
Speaker 1:Mhmm.
Speaker 2:And get the ad supported Kindle? Mhmm. And as a college student, I was like, saving $10 sounds pretty nice. And then I had to live with a Kindle that would sit on my bedside table just blaring ads in my face constantly. And it wasn't like I would have actually appreciated ads.
Speaker 2:Can you just flip it upside down? True. Wow.
Speaker 1:One simple
Speaker 2:trick. Jordy hates this one trick. And but it wouldn't be ads for like Spider Man. It would be ads for random
Speaker 1:Books. Right? Yeah. Books.
Speaker 2:That and the targeting wasn't good. So again, people don't like ads Target was good. Anyways, what happened here, John?
Speaker 1:Okay. So venture capitalist, Sheila Monat wrote quote, when you start a BMW, it shows you an ad for Spider Man. Really cheapens the BMW in my opinion. A 16 z partner, Josh Allman added, of all the brands I thought I might I thought might bombard you with in car ads on screen right when you start the engine, I had BMW pretty dang low on that list. This seems the opposite of luxury and performance.
Speaker 1:Is BMW a luxury brand? I thought they were premium.
Speaker 2:I yeah. I think it's a premium brand.
Speaker 1:Premium brand. Even Paul Graham weighed in though reposting Monat's video and saying, I'm never buying a BMW. He's never buying a BMW. What about an old BMW? They can't show you ads in a e 39 f Wait,
Speaker 2:but what actually happened? You have to So opt into
Speaker 1:community notes added important context. According to OneNote, the Spider Man promotion is an optional startup banner available on compatible BMWs from July 27 through 08/10/2026. The banner does not automatically play a full screen ad. Instead, owners must tap it to launch a themed animation featuring music and synchronized vehicle lighting. BMW has offered similar limited time startup experiences in the past, including holiday themed animations.
Speaker 2:Jordan? Very, very, very different. You can just see the pop up there. Surprise. Spider Man just dropped into your BMW.
Speaker 2:And that's an app.
Speaker 1:If you press the button, you have to actually turn it on. It it's not Yes.
Speaker 2:Yes. But I'm saying there's a banner ad.
Speaker 1:Oh, there is a banner ad.
Speaker 2:It's just a banner. Look at the video. Start it over. Start it over.
Speaker 1:Let's see. Let's let's be the judge of this.
Speaker 2:Look at this banner. It's a banner.
Speaker 1:Oh, okay. Then
Speaker 2:you click banner then it plays an ad. So it's a pop up that you click
Speaker 1:Okay.
Speaker 2:And it's like, wait, what is this pop up? Yeah. Why does my car have
Speaker 1:a pop into a setting somewhere. There should be an icon that's like promotions or themes.
Speaker 2:That didn't look anywhere. Was the that was the main
Speaker 1:because I'm fine if you if there's a if there's a theme and you're like, I want red lighting in my car. I want blue lighting. I want Spider Man theme. I want Christmas theme. Saying surprise.
Speaker 2:A Spider Man ad. And they're not even like, they should just say, hey, we have an ad for Spider Man here if you'd like one.
Speaker 1:Okay. This is right on the line.
Speaker 2:But this this is this is this crosses my line. This crosses your line. Because you're like, what does Spider Man have do with my car? And then you click it and you get an ad for Spider Man.
Speaker 1:But I just think of the consumer surplus. This is making BMWs cheaper. This is making this is bringing bringing BMW
Speaker 2:price of inflation.
Speaker 1:Yeah. Also, not not necessarily the best deal.
Speaker 2:Yeah. Let's look at BMW inflation. Yeah. Anyways, yeah. Really, really bad move.
Speaker 2:I wonder how much they actually made.
Speaker 1:I think just judging it because it's it's I think you would feel completely different completely differently if you if you saw a banner and it was Nitro Circus. It would just take over your car. Or if it was just a a full takeover of Sam Sulik at the at the Arnold Classic, something like that. That would be much better received. It's not it's not a pin
Speaker 2:Surprise. Spider Man trademark just dropped into your BMW.
Speaker 1:Okay. The ultimate driving machine. Yeah. Not not super well executed. But BMW has been going back and forth with stuff like this pretty consistently.
Speaker 1:Like, aren't they the ones that have the subscription to the heated seats? Isn't that BMW? You know what I'm talking
Speaker 2:about? So Yeah. I remember something
Speaker 1:like They put the wires to heat the seats in every car and then if you want to use it, charge you monthly. And this is just like a it's basically just a nerd sniper like a like a I don't know, like a treasure hunt for for hackers. Because if you're a DIY hacker and you can get into that and and and unlock it, jailbreak it, you just get well, not furry because you already paid for it, but you don't have to pay the subscription.
Speaker 2:Yeah. Techno chief says, wait, I thought we loved ads here. I Yes. Do love ads.
Speaker 1:That's true.
Speaker 2:But I think buying unless unless BMW I think I think if they gave the option at purchase saying, do you wanna buy the ad supported? Oh. Manual transmission BMW m two? Or do you want the the ad free premium version there Yeah. Bit of a price difference?
Speaker 2:Yeah. Then it just feels it feels wrong. They didn't Sort do
Speaker 1:of like a Ferrari tailor made program. Oh, like what stitching did you get? Oh, did you go ad free or ad supported? Like, oh, you went you went manual? Cool.
Speaker 2:Yeah. Went manual, but ad supported.
Speaker 1:Yeah. Manual ad supported. Yeah. I got a manual s p three ad supported. I mean, the ads in an s p three s p three driver are probably very hard to reach, so pretty valuable.
Speaker 1:I would I would love ads there. But it's gotta be ads for the the most elite products. It's gotta be you're you're getting your you're getting your s p three and it shows you an ad for a mangiri or something. Spider Man's doing well, though. So the ads are working.
Speaker 1:So, you know, maybe the BMW show owner showed up in droves because the new Spider Man movie scores Hollywood's second biggest debut ever. That's actually huge. The Sony film grossed $932,000,000 through Sunday, topped only by twenty nineteen's Avengers Endgame. That is massive. Did you realize that this movie was making that much money?
Speaker 2:I mean, if you would ask me an hour ago, is there a new Spider Man movie coming out? I would say, haven't heard of anything.
Speaker 1:Yeah. I I haven't seen that much energy about it. I've been aware of it, but I have not I've not seen like a massive takeover. But also But I'm not driving an ad supported BMW, so maybe that's the problem. Spider Man spun a massive weekend for movie theaters flouting superhero fatigue and giving a major boost to Hollywood summer block, box office.
Speaker 1:Sony Pictures Spider Man brand new day open to an estimated nine
Speaker 2:We got some good ideas here in the chat.
Speaker 1:Yeah. What what what we got?
Speaker 2:So ad supported cars that get you free self driving. Where they the the the the ads take over the whole entertainment system in the car. So you're sitting there relaxing, you know, the car is driving itself. But then it's just blaring high volume every
Speaker 1:I'll take it a step further.
Speaker 2:Every five minutes, one thirty second ad
Speaker 1:What if there was a
Speaker 6:whole volume.
Speaker 1:What if there was a whole company dedicated to building self driving cars that was funded by an advertising company? Like a company that just prints billions, hundreds of billions of dollars in advertising. Like their DNA is advertising and then they
Speaker 2:go into the self driving done car this before?
Speaker 1:They would have a huge advantage in terms of
Speaker 2:done this before?
Speaker 1:Yeah. Or they could even have a video platform where they're making a lot of money running video ads and they could take that
Speaker 2:YouTube.
Speaker 1:Yeah. Exactly. So you could have like, you know, a huge ad network, YouTube ads, and then you could have a self driving car company put them all together. That's synergy
Speaker 2:right there. And maybe you could spin the company out at some point and raise some venture capital too.
Speaker 1:Spin the company out, Wayne. They secretly still advertising. No. I don't think Waymo will do crazy ads. I think I don't know.
Speaker 1:Maybe.
Speaker 2:A major streaming executive just texted me and says, okay. Going to get to be to build a car right now.
Speaker 1:You gotta build a car. You gotta do it. What else is going on here? Okay. Let me tell you about CrowdStrike real quick.
Speaker 1:Your business is AI. Their business is securing it. CrowdStrike secures AI and stops breaches. The owners of MySpace say they're planning to relaunch the once dominant social media platform. And I feel like this has happened multiple times.
Speaker 1:I'm having deja vu here, we'll dig into it. In a recent documentary called MySpace about the company.
Speaker 2:We got another app loving cars. Axle AI.
Speaker 1:Axle. Axle AI. No. It's it's self it's
Speaker 2:a self driving car but you have to play mobile games
Speaker 1:to keep
Speaker 2:it going.
Speaker 1:That's a feature. I mean, you get a Tesla, you can replace play Politopia the
Speaker 2:steering wheel.
Speaker 1:Yeah. Why not Classic Which is
Speaker 2:a big iPad and you're just playing mobile games.
Speaker 1:90 if you stop percent of the way there.
Speaker 2:If you stop leveling up, the car just pulls over.
Speaker 1:And you got to keep playing. Okay. We're getting somewhere. This is good. So, in the recent documentary, Myspace, Chris and Tim Vanderhook, the brothers who acquired Myspace in 2011 after its decline, said they intend to relaunch the platform with a new vision.
Speaker 1:There's no launch date that's been announced, but they say they want to build a social network that feels different from today's algorithm driven apps. They don't believe in preference falsification. They think when people say they don't like algorithmic feeds, they actually don't like them. We'll see how it pans out. So, MySpace launched in 2003 and quickly became one of the world's largest social networking sites.
Speaker 1:It became famous for customizable profiles, music discovery and its iconic top brands feature before Facebook eventually overtook it users and became the dominant social platform. At its peak though, MySpace attracted roughly a 150,000,000 monthly visitors worldwide. That's not necessarily people that had profiles, but just visitors you'd land on a MySpace site. So huge for the day, but not huge by modern standards. So the platform's ownership history mirrors its dramatic rise and fall.
Speaker 1:In 2005, Rupert Murdoch's News Corp acquired Myspace's parent company for $580,000,000. It was like a man I'm pretty sure it was a fantastic outcome at the time. Now, by social media standards, it's like, what are you doing? Just six years later in 2011, News Corp sold MySpace for roughly $35,000,000 though. So completely, you know, got racked to specific media.
Speaker 1:Led by brothers Chris and Tim Vanderhoek, Justin Timberlake invested in the company and became a prominent creative advisor during the acquisition. In 2016, Time Inc acquired Pacific Media's parent company in a deal valued at about $87,000,000 Three years later, Meredith Corporation acquired Time Inc briefly inheriting Myspace before selling its stake back to the Vanderhook brothers that same year. All told, Myspace went from a $580,000,000 trophy acquisition at the height of the social media boom to a roughly $35,000,000 distressed sale. Just six years later today, myspace.com is still online, primarily serving as a music and entertainment website while its parent, while its owners prepare what they hope will become a second act. Are you bullish?
Speaker 1:What do you think they should do? What's the advice for the owners of myspace.com? Nostalgia. You gotta call Bending Spoons. Right?
Speaker 1:Is it making any money?
Speaker 2:That's the issue for Bending Spoons.
Speaker 1:You get one Italian teenager to run this whole thing.
Speaker 2:They're like, if you were making $500,000,000, we would love to buy you for 1,200,000,000. Yep. But since you're making less than
Speaker 1:I don't I don't know if they're making any money. They must be making some money just as, you know, a website with some ads on it or something. Who knows? Anyway, let me tell you about Cisco. Critical infrastructure for the AI era unlocks seamless real time experiences and new value with Cisco.
Speaker 1:Our next guest is here already, I believe. We have Grace Lee from Intelligence, the co founder raising a seed round from Index Ventures. Brought you in a little bit. What's going on? How you doing, Grace?
Speaker 1:Good to see Great
Speaker 7:to meet you.
Speaker 1:Thank you so much for taking the time to come chat with us. Please introduce yourself and the company.
Speaker 7:Well, I'm Grace. I'm the CEO of Intelligence. We just launched yesterday. We've been the team behind Design Arena. Yes.
Speaker 7:Actually, the company started because we were making games. We're trying to make a game engine. We noticed that the models could make playable games, but the games were not fun at all. Like, nobody wanted to play them, and we thought, you know, building a harness probably doesn't seem like the right move. What if we could turn it both into a product for people to build games, but also a product for the models to figure out what it is that humans like to play, like what are playable games that are fun.
Speaker 7:And then we started that. We we just one of our friends linked it on Reddy. He didn't even tell us about it, and it got, like, 3,000 users overnight. We're like, well, that's more than the game engine has ever gotten. And since scaled that to, oh, man, 5,600,000 people across a 192 countries.
Speaker 7:So every country in the world is Central North Korea. We've been told that there are sanctions there, so so we can't go in there yet. And then on the Frontier Lab side, we pretty much work with all the major players to help improve their models and hard to verify domains.
Speaker 1:Amazing. Can you walk me through how Design Arena works, the various incentives that happen to actually get people to review designs for models and just the whole it feels like a product that would have sort of like a cold start problem. How do you solve that? How do you scale it? How does it function, like, in equilibrium?
Speaker 7:Oh, yeah. A really good question. So we we took a look at the optimal form factor for these cases where users are trying to do something Mhmm. But you don't really know what the optimal end end state is. So designers.
Speaker 7:Right? What do they show their clients? They actually they get the client prompt, and then they show the client multiple versions of maybe what they might want to see. That's exactly what the user interface looks like for our users. So they don't actually need an incentive because it's a design tool for them that does what they want because they show them multiple versions just like in the real world.
Speaker 7:Yeah. Like, how does a singer figure out if a song resonates? It's not that they cook in a room really I like to study their they just release multiple songs. Right? Yeah.
Speaker 7:They see what hits work. How does a a game developer figure out what games are are playable? They release multiple games and they see what works. So for the user, they actually don't need an incentive to be on the platform. They want to design something or make a game or make a website, and the form factor perfectly fits that.
Speaker 7:The the models, the intelligence doesn't exactly know what the user wants, but then they'll get multiple versions. And through feedback, you can get closer to the end state. And that just happens to be in the perfect shape that the intelligence layer needs to improve more to what it is that humans want in the first place, the preference signal, the the user behavior, etcetera.
Speaker 1:Little bit of, like, a, I don't know, philosophical question, but how do you think about optimizing design for the user and what the user thinks looks good versus what is good for the business? Because I've been like I've just been bombarded with products and websites that feel like they're horribly designed. I understand that they are economically valuable. John Gruber was on the show yesterday. He wrote a blog post recently about the Timu app being a mess.
Speaker 1:And if you go to Timu, it's like so many pop ups and spinning wheels. It is the epitome of terrible design
Speaker 8:Yes.
Speaker 1:In the aesthetic sense. But I'm sure every design decision that they've made has been economically justified and I don't think that they like never thought to make it clean, right? And so how are you thinking about those two tensions like actually instantiating themselves in the work that people do when they go to an AI model and ask for a design?
Speaker 7:Yes. Very good question. So, it is our job to figure out what better means for this person. Mhmm. If you are on the platform to make a beautiful portfolio, then you are going to give us feedback that hints us in that direction.
Speaker 7:Mhmm. Through a couple of interactions, we can figure out, okay, this person is actually just in it for the visual preference. Mhmm. Right? But if you are on the platform to build a highly performing website, like a team website, for example, you're probably optimizing for dollars converted at the last screen.
Speaker 1:Yeah.
Speaker 7:And so the end signal that you're tracking is different. The way that we like to think about it is we're almost doing the work of a PM. Right? What a PM does is they sit in the product, and they took a look at the analytics of what people are doing, and they have an end goal in mind. The PM's job is to figure out what is the right KPI to be optimizing for, and then to bring that to the table of engineers and and to the resource allocation and to try to get it in that direction.
Speaker 1:Mhmm.
Speaker 7:So it is our job to figure out for this particular user, what does better mean for them? And then measure those bright signals to then label correctly and then provide that as feedback to improve the models.
Speaker 1:How do you Jordy, please. You got a follow-up.
Speaker 2:I have a I have
Speaker 1:Okay. Yeah. Just following up on on Design Arena. How are you balancing the various downstream business opportunities that come from having a product platform like Design Arena? Because I could imagine you can sort of become a model router in many ways.
Speaker 1:You can do forward deployed work and be an expert and partner to companies that are picking tools. Like, there's services as a software. There's going down the financial side. Like, there's so many opportunities. It must be hard to like, you're sort of stuck in the idea maze longer than usual even after you have traction and fundraising and revenue.
Speaker 1:There's more opportunity. What have you looked at? What's not interesting? What has stuck out as the obvious path?
Speaker 7:Oh, my. Okay. That is the best question, by the way, to be asking in this space. Like, there are so many downstream opportunities that come from figuring out what it is that people want. What we found to be the most interesting, actually, is an intelligence marketplace.
Speaker 1:Okay.
Speaker 7:Right? There are some, this is a little bit kooky, but I do believe that there will one day be as many suppliers of intelligence as there are currently suppliers of information. This feels like the early days of the internet, Like, where anybody can make their own intelligence. I don't care if that's a foundation lab with a main API or something that's post trained or something that's totally off the shelf with a skill, but there's like a million different suppliers of information. And if you can be the person that best matches the supplier of information with somebody supplier of intelligence, I should say, with somebody who's asking for intelligence the same way that PageRank for Google search was the critical bottleneck to get the Internet into everybody's hands.
Speaker 7:That is the position that we actually wanna be in. So whatever the work it is that we do, we want it to fit into this flywheel that we have, and we want to make sure that we're not just good at value creation, like not just good at improving the models, but also good at value cap value capture. Mhmm. Once the models get better at design, it's not like our work becomes less useful. Mhmm.
Speaker 7:It actually means our product can reach more people because they're better at design. So we care about doing things in, like, the opportunities that are coming our way, which we're lucky to have a ton of inbound from from yesterday, that it feeds into this overall flywheel. But if the models get better, we also get better.
Speaker 2:Yeah. Jordan, please. Almost $60,000,000 of revenue. I think I think a lot of people were quite surprised, not because the company isn't like significant and at the center of this, you know, explosion of creative intelligence, just because it's you guys had kind of flown under the radar. So first, I wanna hit the gong for 60,000,000 ish of revenue.
Speaker 2:There
Speaker 9:you go.
Speaker 2:It's a great hit. Thank you. A very in a very like I like the ratio of the fundraise to the revenue, you know? Yeah. Normally when somebody comes on with this much revenue, they're like, you know, raising a billion.
Speaker 2:I'm sure that's up next for you. But I wanted to ask like what what do you think creative super intelligence looks like? Because with, like, images, I think I think images are gonna be solved. Right? At least, like, photo real images are pretty much here.
Speaker 2:You can imagine with a couple more turns, like, at least making images with AI will be solved. And Yeah. It's getting a lot easier to prompt, and then harnesses will get better at at editing and modifying and getting better outputs and all these things. But, like, photo real images will be solved. What does, like what does what does creative intelligence look like in one year or two years down the road?
Speaker 7:Creative superintelligence to us is whatever you can think will exist. In fact, things that you can't even have the scope to think of can exist. So, one one thing that we like the the distance between an idea in your head and it being in the real world right now is, like, very far. Let's say you have an idea for a new pen or what a new pen might look like. There's a very long distance that you have to travel.
Speaker 7:You have to know how to design the pen. You have to know how to process CAD. You have to find a manufacturer. Have to build like, there's a very long there's a very long and because of that, we have to localize on a couple of pen form factors that everybody uses. Like, it just it becomes standardized.
Speaker 7:Mhmm. But what if creative superintelligence makes it such that you can sustain infinite varieties, kind of like how you can have infinite versions of the same information being represented in in different formats? That's the way that we view creative superintelligence, which is any idea that you have, the instant that you have it, it is visible in the real world. And there's no latency and friction between your ideas and and them being born in the room.
Speaker 1:That sounds different than the models coming up with the ideas, which is interesting. I I I don't disagree. I think you're I think you're right. We were debating this yesterday about will a model be
Speaker 2:Yeah. Yeah.
Speaker 9:Yeah. Think I think have question.
Speaker 1:Before you even think of it? What is the timeline for that? That's
Speaker 2:Yeah. Yeah. The next thing? Yeah. We we were talking about this because it feels like, you know, mathematicians have been having somewhat of an existential crisis for for a while now, but especially over the weekend.
Speaker 2:Yes. And and I was just thinking, I was joking to John yesterday just saying like, you know, they're coming to us. Right? Us
Speaker 10:next time.
Speaker 2:Like, we're like like, I'm I'm I'm, you know, I consider myself a creative person.
Speaker 1:Yeah.
Speaker 2:And right now, when I look at AI generated outputs, the ones that really resonate are ones where there was like a fundamental creative idea.
Speaker 7:Yep.
Speaker 2:That then the model did a good job of instantiating it. But it's not like the original idea was that complicated. The example we always use is like Harry Potter Balenciaga. Right? Like, it's not a complicated idea.
Speaker 2:But to me to me, what will be interesting, and I'm surprised no one has like really built some type of like effectively like loop around this Mhmm. Which is like Yeah. Combining two random ideas and then creating We're the visual sort of output. And just doing that over and over and over because it will end up mimicking like the full pipeline of human creativity which is like original idea which is combining two things, Harry Potter, Balenciaga. Combining these two things and then just creating the output.
Speaker 2:And then once you get that, then you're just running on this loop where already it feels like there's no there's no real new ideas in the world. Like for Yeah. Like a hundred years, we've just been as humans, like recombining different things that already exist. And it's sort of sad that we can't come up with, very many new ideas. But then eventually, the machines will have just created every possible variation of every idea that there could ever be.
Speaker 2:And a human will have an idea and and and then they'll be like, oh, well, actually, the machine, you figured this out like two years ago and here it I is on a
Speaker 7:mean, I think something that's pretty incredible in in, you know, is people don't know what they want until they see it.
Speaker 1:Mhmm.
Speaker 7:Right? And oftentimes, it's not even the new idea that is like the the it's showing it to a dozen people and then two dozen people and then a 100 and a thousand and seeing what sticks. Again, this is kind of the creative process. Right? Like, you you will draft up a 100 version versions of of the same script and then see what are the gem moments that actually resonate with people.
Speaker 7:And the resonating with people, like, that's the verifier part. Like, that's where humanity comes in. Right? Like, if you're trying to give something to people, you need a way to measure whether or not it actually it actually resonates with them.
Speaker 2:That said, companies similarly who just raised Yeah. A big round might make, humans unnecessary to even judge what what will resonate with I
Speaker 1:think we're safe. Every AI lab I talk about is working on this thing called super intelligence. I haven't met a single AI researcher working on room temp intelligence. And so like they're not even trying to displace me. It's ridiculous.
Speaker 2:Actually there's probably a Neo lab called normal intelligence.
Speaker 1:Probably. Probably. Last question. Gaming arena. We got design arena.
Speaker 1:You have gaming DNA. What about models building games? The games go up against each other. Which one did you play longer? Which one did you have more fun?
Speaker 1:This feels like the next thing. Is this you? Is this another company?
Speaker 7:What's This is that.
Speaker 1:That's you.
Speaker 7:This is that. So we've actually been working on this for a while. Screw it. Thought Here
Speaker 1:we go.
Speaker 7:Game dev is incredibly hard to verify and that's Yeah. Why it's so much fun. Right? Because you don't just need a really good storyline. You need a way to verify if something is fun.
Speaker 7:Yeah. Possible to do, you know, without people on the other side. Exactly.
Speaker 1:Yeah.
Speaker 7:And so for a while now, we've been we've been helping companies try to get better at at this domain, and it doesn't just involve, like, the strategy and then being able to save game state. You've also got to have beautiful graphics. You have good multi processing. It's a very hard frontier.
Speaker 1:Yeah. Yeah. That'll be a lot of fun. Yeah. Yeah.
Speaker 1:Very very interesting to think about like, oh, I'm going to go and review my models on gaming arena. See you in four hundred hours because I need to decide which Yeah. Game is better. This hundred hour game or that hundred hour game?
Speaker 7:Yes. Yes.
Speaker 1:That's kind of what's gonna happen. Yeah.
Speaker 7:Yeah. You literally just need to put it like the way to think about it is you put it on the equivalent of the internet and you need to see if it gets picked up by people.
Speaker 1:Yeah. Yeah. Like the algorithms, like the Steam store, the Instagram Exactly. These are the final bosses of the arenas perhaps in many Exactly. Very interesting to think about.
Speaker 1:Well, congratulations on the round. Congratulations on all the progress. Thank you
Speaker 2:for thank you. I think you're doing a a public service. Right? If you can get if you can get all these AI companies to make better outputs, the world will become a more beautiful place.
Speaker 1:Yeah.
Speaker 2:And I think it's important.
Speaker 1:Cool. Have a great rest your day.
Speaker 7:Great rest your day, guys.
Speaker 2:Great to meet you.
Speaker 1:We'll talk to later. Goodbye. Let me tell you about Console. Console builds AI agents that automates 70% of IT, HR, and finance support, giving employees instant resolution for access requests and password resets. Our next guest is Samir Kaji from Allocate.
Speaker 1:He's the cofounder and CEO. Samir, how are you doing?
Speaker 2:What's going on?
Speaker 10:Good. Good, guys. How are you guys doing?
Speaker 1:We're doing fantastically. Fun day. Do you drive a BMW? Have you been getting bombarded with Spider Man ads?
Speaker 10:I I wish. No. I don't drive a BMW. No. You're lucky.
Speaker 10:You're lucky.
Speaker 1:You're lucky. That's Apparently apparently it's not even opt out.
Speaker 2:Does allocate take a couple weeks off in August as a company? No.
Speaker 10:No. There's no taking any time off. Like unfortunately, like a lot of our clients are taking time off.
Speaker 2:That's I'm saying. If you wanted to plan like a like I think it can be good to for at least for smaller companies to say like, hey, we're all gonna take vacation in this general window.
Speaker 1:Sort of collusion.
Speaker 10:Yeah. Well, I will tell you though, I did go to Cafe Venetia the other day, so I don't know if that counts as a vacation, but it was it was nice to kind of get away. But yeah, no, it's it's crazy busy right now as you So guys much is happening in the market. So many funds are raising. So many companies are raising.
Speaker 1:Yep.
Speaker 10:And having been in this market for twenty seven years, this is like the craziest I've seen it.
Speaker 1:Yeah. So talk to Does that scare you?
Speaker 2:Because obviously it's good. It's obviously great for for your business Yeah. Which we should let you introduce. But maybe introduce Allocate first and then I wanna get into the Yeah.
Speaker 10:I'll give you the quick sort of thirty seconds sort of, you know, pitch on Allocate. So, you know, having been in, you know, the venture market working with private funds, kinda realized a few things. Private funds are now more numerous. Like we went from 3,000 asset managers to 30,000 within fifteen years. Wow.
Speaker 10:The amount of capital that's being raised by these funds It's amazing. Is enormous too, right? Yeah. You had Grace and raised $15,000,000,000.
Speaker 2:You had
Speaker 10:Thrive raised 10,000,000,000. So these companies are staying private so much longer. So the private markets grew from a trillion to 17,000,000,000,000. And when you look at that, where is that money gonna come from? Well, historically, the funds were capitalized by pension funds, endowments, foundations, and then it became clear that they needed to find new ways to capitalize themselves.
Speaker 10:And one way was family offices and high net worth individuals. The problem is it's kind of a headache to operationalize those small checks. And for the people investing, they can't write $10,000,000 tickets into name your top fund and so they go through the wealth advisor. So we create basically the bridge between the wealth advisory world and private funds. And for the wealth advisors, they have one place where they can discover, access, execute, and report on private assets.
Speaker 10:So there's $10,000,000,000,000 of capital being right now managed by these independent wealth advisors. If you guess what percentage is in alternatives?
Speaker 1:Less than five?
Speaker 10:33%.
Speaker 2:Good guess. K.
Speaker 10:Well, endowments, foundations, pensions, 20 to 50%.
Speaker 1:20 to 50%.
Speaker 8:Yeah. Yeah.
Speaker 1:Exactly. The Yale model. Yeah. We gotta get everyone on the Yale model.
Speaker 10:Yeah. Well, you know, you you gotta be a little bit careful on that for sure. But, you know, look, I mean, reality is like you can't ignore the private markets yet. Anthropic, OpenAI worth almost 1,000,000,000,000.
Speaker 1:Yeah.
Speaker 10:SpaceX goes public for 1,770,000,000,000. Like, it's crazy.
Speaker 1:Yeah. Yeah. Yeah.
Speaker 2:Yeah.
Speaker 1:Yeah. And and it would be it just feels like from just like in not even the financial numbers, but just the idea of just being in the American economy and being bought into the next iteration. Like, there's been this discussion of going going public earlier. It's very onerous, etcetera, etcetera. But there is another world which is just broader exposure through funds and and that's a lot of what's happening here.
Speaker 10:100 agree.
Speaker 1:Yeah.
Speaker 2:Once a week, maybe twice a week, sometimes three times a week or four times a week or or even five. There's a company that I've never heard of that comes on and raises $500,000,000 and, you know, they're maybe like one or two years old. That I get a little bit wary because I sort of like My career came online, let's say, in 2018. Yeah. I've been paying attention to startups prior to that, but like really was paying attention in 2018.
Speaker 2:And we went through this sort of crazy period, and then we saw a pretty massive correction. I got
Speaker 7:to Yeah.
Speaker 2:Sort of be on that roller coaster. And so now, while we're back in boom times, I'm just like much more wary than I was before because I was young and maybe overly optimistic. Right? And so today, I'm just when when you look at the public markets, there's a lot of a lot of valuations seem relatively reasonable. In the private markets today, there's, you know, we saw Airtable.
Speaker 2:If Airtable was a was a was just like, I know a I know a SaaS company that has a tiny tiny tiny fraction of Airtable's current revenue that that is doing a new round well beyond Airtable's valuation. And it's just because they're squarely serving other AI companies. Mhmm. And ultimately Yeah. They're they're just as much of a software company as Airtable was.
Speaker 2:Mhmm. And so you see this like massive kind of disconnect between exits and private valuations. Mhmm. And so my I have like I have a lot of alarm bells going off, but I'm curious how you see it and and LPs on the platform are seeing it.
Speaker 10:Yeah. One of the most dangerous things to say in the investing world is this time's different because rarely is it completely different. So, you know, similar to you, I've had some scar tissues built up. I actually, you know, started my career in '99. Was at Silicon Valley Bank.
Speaker 10:Was at SVB and I was lending into the .com. And back then, you know, companies were going public based on one metric, which is eyeballs. Right? Like, how many eyeballs? How many people are visiting your site?
Speaker 10:Well, today, it's AR, which, you know, as we know, can be a little creative in terms of how people are actually saying AR. What's actually true right now? So I think we have to disassociate, you know, AI as, like, this technology innovation, which I think is gonna be bigger than anything we've ever seen, bigger than the Internet, bigger than mobile and cloud, and maybe the biggest innovation since the railroads. The challenge though is when you have a new technology of this size and scale, especially moving this fast, the supply and demand for those companies changes. So you have so much capital being raised.
Speaker 10:People are incented. Like, you're a VC, you're incented to invest in the next hot AI company, which has grown from, let's say, 1 to 10,000,000 to 100,000,000 in revenues, knowing that full well that if you catch the tiger by the tail and you get the Anthropix or you get the OpenAI, your career is minted. And so a lot of capital goes into these companies. And every single time that I've been through one of these, the companies that do win are bigger than ever by a massive degree of magnitude. The issue is so many expensive mistakes.
Speaker 10:You mentioned Airtable. That was like 2021. I think their peak valuation was $11,700,000,000. They raised almost 1,500,000,000 and they sold for to Bending Spoons for $1,250,000,000. Right?
Speaker 10:That means common shareholders get nothing. Mhmm. And the people that came in at the end, they may get a return on capital, but that's a horrible opportunity.
Speaker 2:I think common shareholders were getting something because the actual The total price equity value is 2 point something billion.
Speaker 1:Yeah. 2.2
Speaker 2:It's roughly 800,000,000.
Speaker 1:But again, it's a tiny
Speaker 2:fraction of what what they would have probably marked it themselves.
Speaker 10:If that's if that's the case, that's great. But that's not the case for a lot of those 2021 companies that raise that. Sometime I I was saying 50 to a 100 x multiples for these companies. Now the multiples aren't that crazy this time around, and these companies are growing. The bigger challenge is, like, which one of these companies is actually durable?
Speaker 10:Like, I mean, is a big frontier model gonna subsume you? What happens with open weight and open source models?
Speaker 2:Yep.
Speaker 10:It's still too early to tell. Mhmm. So I think you're right in that you should be somewhat nervous. But at the same time, venture has always been a parallel industry. 6% of total companies that actually return over 60%, that's historical.
Speaker 10:I think it's even more amplified right now. But I'm, you know, in the mindset right now that I've been through these periods and people always have short memories. Like, 2021 was, what, five years ago. And, you know, it's almost like we forgot 02/2223. Things do not go right when you just plug so much capital with such speed.
Speaker 10:And so I expect the same thing to happen. I don't know when this changes and when gravity comes back in the private markets. Six months, twelve months, two years, maybe it's even five years. Maybe we're all wrong. But I would I would actually be willing to bet that within the next few years, we're gonna see some kind of pullback And then we'll kinda see, you know, what they say when the tide goes out.
Speaker 10:You see you see who's wearing the swim trunks. And I think we'll see that next year or the year after.
Speaker 2:Right. Don't you see oh, okay. Yeah. That's a better way to put it. Yeah.
Speaker 2:Who's wearing the swim trunks? See who's swimming swing. Said. Well said.
Speaker 1:I want to know how how are how are new venture firms changing in their construction? What what you you mentioned the the the boom from 3,000 managers to 30,000. But what are you noticing over the last few years that might look different in the way a new fund gets built? Maybe it's more interns or more or less banker crossover types or more operator, more founders. Are there any trends that you've noticed that you're seeing, okay, that's clearly working at certain funds, more people are following this, even in the way they're structuring or the pacing or anything trend wise around new fund formation?
Speaker 10:Yeah. And and new fund formation slowed down, you know, you know, for sure over the last few years. Right? You it was at a fever pitch in 02/2021. In fact, everyone felt like it was cool to be a VC without understanding that it takes forever to know if you're any good, to get paid, all those things.
Speaker 10:Fundraising is really tough.
Speaker 1:Yeah.
Speaker 10:And you know, lot of it what came down to when you have so many funds in the market, everyone's searching for differentiation.
Speaker 1:Mhmm.
Speaker 10:And so they create these things which is like, I'm gonna create a talent team. I'm gonna going to create, you know, a AI sort of way to vet things. And I think these are all around the edges. But any venture firm at the end of the day, all that matters is, you know, sourcing, picking, and winning. And you gotta do two of those three things really well.
Speaker 10:If you're a really small firm, it's sourcing and winning candidly. Like, I have no clue if you're a good picker and there's so many false positives. Right? So I think people sometimes lose the plot a little bit and say, let me create something really unique that I can tell my LPs versus focusing on, am I gonna see the greatest companies or the right entrepreneurs in the thesis? And once I see them, am I going to win given sort of the competitive arena?
Speaker 10:And I think that it's really tough to be an emerging fund. I mean, raising capital, I think it's a great time to start if you have like a a reason to win and a reason to exist. Yeah. Now big funds are different. Like, let's they're playing a different game.
Speaker 10:Yeah. You know, somebody raising a $10,000,000,000 fund is just trying to get into the very best companies and plug a billion dollars into that company.
Speaker 1:Mhmm. Has had how often do you see someone coming across and pitching sort of a a new firm that feels like an old firm in the sense of we're going to go and compete and win $20,000,000 series a's and b's or something around there as opposed to the early fund manager 50,000,000, solo GP. They're going to do a 100 k check into this and like little add on that feels more winnable to your point about the importance of winning. The the Mount Everest of winning and picking is probably you're going to go, you know, lead that major that major round without the signal from a tier one.
Speaker 10:Yeah. I mean, look. If you're gonna do a $20,000,000, you know, series a, which is not gonna be like a big frontier lab type of company or, you know, one of the big mega rounds, you have to, raise them in a you probably want to raise $350 to $500,000,000 And who is going to give you the money? It's people whereby you have a track record somewhere else. We've seen a few, and this is all public now, but chemistry is an example of one where you had three people, one from index, one from and one from Bessemer, right?
Speaker 10:They come together, they are clear series A will lead, and they kind of sit in the middle between the seed funds and the big mega shops who are doing different types of series a's
Speaker 2:Yeah.
Speaker 10:Or different types of series b's. I I see very few of those now. I because the bar for those is pretty high.
Speaker 8:Yeah.
Speaker 10:And if we look at 10 funds, maybe one falls into that bucket.
Speaker 1:Yeah. Yeah. It it does seem like it's maybe an underrated white space because there's so many funds that can't they're so big at this point even though they might be able to win. They're also not that upset if they lose that round because they're like, yeah, okay. We'll just come in with a 100,000,000 later and get our position.
Speaker 1:Like, it seems fine. Anyway
Speaker 2:What how have you how did you looking back, like, what's the takeaway from the solo GP, I'll call it meme? Because it's interesting because it was something that became, like, very desirable and was and it was something that I think LPs were were interested in. It's something that, certainly people that aspired to be venture investors. I think a lot of people have this idea of like, oh, it'd be amazing to be like a solo founder, solo GP. Right?
Speaker 2:You get all the glory, all the economics, or whatever. But it's interesting because it just feels like a solo GP, when it works, it's amazing. Right? I think of a lot, you know, gills of the world as, you know, the the top of the mountain there. But, there's so many cases where for LPs, it's like, well, it'd be great if you had, like, a solo GP would be cool, but what if you had three or four partners that were all fantastic Yeah.
Speaker 2:And just increases your luck surface area. And then for a founder, it's like, yeah, you wanna basically pick one partner at a firm to partner with, but it's awesome if there's a few other partners at the firm that can maybe make an introduction or open up their network or whatever. So it feels like something that impractic like, is it was like a cool idea and there was this moment around it. But now, if you wanna win, why would you why would you even like brand yourself in that way?
Speaker 10:I I mean, look, I think it's can still work. And I'd rather back a solo GP than somebody that, you know, decides they wanna start a venture firm and decides that to raise capital, I just need to bring on a partner and they've never worked with that partner. Because, you know, the problem with partnerships too is, like, there's a lot of politics. Right? Like, you know, do we really you know, are we aligned?
Speaker 10:You know, how does decision making work? If the deal is not consensus within the partnership, does it get done? And those can actually create you know, Bessemer, for example, has this great anti portfolio. If you go to their website, all the stuff they miss. And I guarantee some of those misses were, you know, one person had a ton of conviction, but they couldn't get it through the partnership.
Speaker 10:Right? And so, you know, solo GPs at least can move really quickly. They don't have to go through a committee. Even Elon, you mentioned, he has a team actually. Right?
Speaker 10:So he's solo GP from an investing standpoint.
Speaker 1:Stolen Valor.
Speaker 2:Yeah. Stolen Valor. Oh, he has a has an he has an amazing team. But, like, you can't I can't
Speaker 1:name also any the solo GP branding was very much, like, foisted upon him. He was not like, I will never hire anyone. It was more just, like, something that was fun to talk about.
Speaker 10:A guy like Orin Zev. Right? So Orin, I don't know if you've Orin has been doing it, and he will say, I'm a solo GP. I have no admin. I have no other partners.
Speaker 10:I have no one on it's just me. And that's what you're gonna get. And, like, he's done, you know, candidly very well for himself. You know, you've seen everything's public on him. And so I look at it and say the bar is higher, and a lot of solo GPs realize it's pretty damn lonely.
Speaker 10:Right? So you're you're basically doing the raising. You're you're working with companies. You're trying to do everything. You're running the firm.
Speaker 10:And then you're, like, four years into it, and you're like, wait a second. You know, my fund is trading at a 1.1 x because I went crazy in 2021. No one's giving me money. I'm I'm pulling a salary of the $20,000,000 fund that I could probably get in a in a quarter working somewhere else. You're like, why bother?
Speaker 10:What's the purpose of doing this?
Speaker 1:Yeah. Yeah. Have you seen anyone try and tap the traditional venture capital backers, the LP base for something that looks like more competitive with a Thrive eternal. Like, I'm gonna go buy a baseball team. And Yeah.
Speaker 1:I want to tap Yale for that or something like that. You you as an as an example.
Speaker 10:Not not that much. I mean, Thrive is pretty unique in everything they do. I think they're really progressive and Josh and team have done a, like, fantastic job. I mean, DC is also general catalyst. They've done some pretty interesting things.
Speaker 10:I mean Yeah. They've gone into hospital systems. Right? So they've done things that are like a PE and credit.
Speaker 1:Yeah.
Speaker 10:And, you know, that that is more like private technology finance and going into these adjacent areas to create competitive advantages. Because when you're raising $10,000,000,000, guess what? There's about 15 firms that you're gonna compete with. So what is the differentiation outside of your partners?
Speaker 1:Yeah. Do you think the situational awareness story changes RIA consideration?
Speaker 10:I don't think so. I mean, look. It I mean, you know, it's supposed to that was a very unique thing. I mean, the guy had I mean, the guy is incredibly smart and, you know, he's he's still is up, you know, overall from, you know, the day of. But when you drop that much and use that much leverage, like, it's gonna be a big blow up.
Speaker 10:RIAs themselves, like, you know, are we talking about RIAs from the asset manager side or RIAs from the wealth manager side?
Speaker 1:There was just a there was just a conversation a while ago about, oh, VCs, like, they often have really great deep understanding. Sometimes board seats in these public companies, they take the company public, then the stock trades down, but they know that there's a really great thesis. Maybe they should be holding on behalf of their LPs instead of distributing. The RIA sort of sets you up for that. I'm less talking about RIAs as like going long crypto or going long secondaries.
Speaker 1:I'm talking about playing in the public markets. Someone in the tech community just got their hands sort of burned. Does that change, like, the appetite from LPs to allow venture capitalists to play in the public markets at all?
Speaker 10:Yeah. I don't think most LPs want their VCs to play in the public market. Obviously, Sequoia, everyone knows, you know, has a long hold only. Then there's crossover funds that do it. But it's just a different skill set, honestly.
Speaker 10:If we're an LP, or somebody else is an LP, you're at the end of day paying the GP to you know, invest in private companies Yeah. And then exit those private companies at at some portion where we can make the decision on what to do with the public stock.
Speaker 1:Yeah.
Speaker 2:You were at SCB in 1999. Any good stories of venture capitalists using leverage?
Speaker 10:No. But what people because I'm surprised
Speaker 1:I I like John
Speaker 2:and I were talking about this yesterday because, like, you know, the venture capitalists or at least there was some that were kind of doing a little grave dancing
Speaker 1:Mhmm.
Speaker 2:On Leopold last week and and we were talking yesterday after the show being like, yeah, it's funny that VC funds can't blow up, you know. It's just like a slow death.
Speaker 1:If if they die.
Speaker 2:Yeah. If if they die.
Speaker 1:Yeah.
Speaker 2:But I'm wondering if there was ever a period in Silicon Valley history that Silicon Valley was like, you know, we should be using leverage. And then and then some some sort of set of events that led to
Speaker 1:Yeah.
Speaker 2:That not being very common.
Speaker 10:Now now fortunately, not too much. Right? So not in terms of true leverage. Now there are people that have used nav lines, but you haven't been an RA. Most VC firms are exempt reporting advisors, so they're not able to do those things.
Speaker 10:What we did see, and this is less than '99, but 2008, right before kind of the GFC started, there were some funds that did warehousing. And what they would do is they would go to a bank like SVB and say, we're raising a $200,000,000 fund. We are going to start making investments before our first close. Can you lend us the money to make those first few investments? And guess what?
Speaker 10:There was a couple that did that, more on the fund to fund side than, you know, the, you know, direct side. And guess what? The market changed. They couldn't raise capital, and they had this huge warehouse sort of facility that they they had to pay off with no capital.
Speaker 1:Interesting. That is a crazy scenario. Yeah. So it has happened technically. Thank you for the history lesson.
Speaker 1:This is exactly what we were looking for. Perfect guess for our earlier debate.
Speaker 2:Very cool. Well, it's super fun. Really, really fun hanging. Great to finally meet. And, let's we're we're trying to get pulse on what's happening.
Speaker 2:We think what Yeah. What's happening in your world ends up sort of
Speaker 1:Echoing.
Speaker 2:Echoing later on Yeah. With a lot of the coverage that we do.
Speaker 1:Yeah. So we'd love to do a new game.
Speaker 10:Guys do a great job. Big fan of the show. Great cast. Actually, my board member was on your show recently, Carter Rain.
Speaker 2:Oh, Yeah.
Speaker 10:Nice. Yeah. Carter from m thirteen. Great And whenever you want me back on, I'm happy to do it.
Speaker 1:That'd be amazing. Thank you so much. Have a great day.
Speaker 2:Thanks here. For
Speaker 1:We'll talk to you soon. Let me tell you about the New York Stock Exchange. Wanna change the world? Raise capital at the New York Stock Exchange. Up next, we have John Quinn, the most feared lawyer.
Speaker 1:Welcome back to the show. Great to see you.
Speaker 2:So we we have a video that we'd like
Speaker 1:to play. You wanna play this?
Speaker 2:I wanna play I wanna play for John. We
Speaker 1:made a heavy metal song about you, the most feared lawyer.
Speaker 9:It's about time. About time.
Speaker 2:About time. Can we get it up on the big screen?
Speaker 1:Play play the play the last forty five seconds, man.
Speaker 2:This is what John was spending like probably an hour last night working on.
Speaker 1:Burning the midnight oil.
Speaker 2:Burning the midnight oil from this.
Speaker 1:We go.
Speaker 2:You can turn around and
Speaker 1:We got the full the full AI rendering version of
Speaker 2:get it louder, please.
Speaker 1:Here we go. But I think this really captures the spirit of what you bring to the courtroom, what you bring to the legal perfection. Just total fear and chaos.
Speaker 2:Yeah. Not me. That's our for
Speaker 1:your taste. Yeah. The first. Of course. Of course.
Speaker 1:Thank
Speaker 9:you very much.
Speaker 1:Yes.
Speaker 2:We'll send it. You can you can circulate it with the team.
Speaker 1:Yes. Good to see.
Speaker 9:So we're gonna talk about agentic AI
Speaker 1:Let's do it. Law? Yeah. I wanna talk about But
Speaker 9:I have some news this morning. Give us the news. Do you mind if I do if I reveal something? Please. The general press doesn't have you?
Speaker 9:Absolutely. Yeah. It's a case that our firm has Yes. And that I personally worked on. Okay.
Speaker 9:Within the last two hours, I got the opinion from the Ninth Circuit Court of Appeals.
Speaker 8:Okay.
Speaker 9:The case is Amazon versus Perplexity. Woah. And it's a very interesting case right at the intersection Yeah. Of agentic AI and e commerce. Yeah.
Speaker 9:So we represent Perplexity. Yeah. Amazon sued Perplexity. Mhmm. Because Perplexity has an agent, the comet that and that users can deploy.
Speaker 9:Yeah. Go shopping and doing whatever. Yeah. Didn't like agents' comment going to its website Sure. And buying stuff.
Speaker 9:Yeah. I think because it doesn't have eyeballs. Yep. Can't see ads. Yep.
Speaker 9:Can't be, you know, can't be upsold.
Speaker 1:Can't be manipulated.
Speaker 9:Amazon sued Perplexity under the Federal Computer Fraud and Abuse Act, which you can bring a civil claim under that for damages. Mhmm. It's also a criminal statute. What it requires, the elements are that you access a computer without permission, that, you know, you take information, you get information and you cause damage. Mhmm.
Speaker 9:Amazon's superplexity saying, your agent is being deployed. We don't want that to happen. We've told you we don't want your agent on our website shopping and whatnot. Very unfortunately, and they moved for a preliminary injunction to shut it down immediately. Yeah.
Speaker 9:Very unfortunately, the district court up in San Francisco entered a preliminary injunction a few months ago. I mean, we lost at the trial court level. Mhmm. But there's nothing a trial court can do wrong that a court of appeals can't fix.
Speaker 1:Okay.
Speaker 9:And just two hours ago, we got the opinion from the Ninth Circuit. And the Ninth Circuit understood that perplexity is not accessing the Amazon's computer.
Speaker 1:It's the user.
Speaker 2:The user.
Speaker 9:Yes. The user downloads the comet Yep. Deploys it Yep. And tends it to go shopping. Yep.
Speaker 9:Justice prevailed. Fantastic. But that's I mean, it's an interesting question What's
Speaker 1:going on?
Speaker 9:At the intersection of agentic AI. There you go.
Speaker 2:Alright. Thank you. Alright. Yeah. Very, very interesting.
Speaker 1:How foundational is this? Because it because the the the Perplexity is just one company that is trying to do this type of thing. I think there's a lot of consumers that want the ability to deploy AI, whether it's self hosted open source. There's not even a company behind it. They want to be able to do these types of things.
Speaker 1:At the same time, there's going be corporate interests that don't want business.
Speaker 9:Of course. I mean, we're very early stages in trying to understand how traditional legal principles
Speaker 1:Sure.
Speaker 9:You know, apply to agents and agentic AI. Yeah. I mean, take this subject, it's something very basic, contracts. Yeah. I mean, it's well known established that, you know, and you can establish a contract between electronic interaction of agents.
Speaker 9:To be a human being. You know, you can have a binding contract.
Speaker 1:Okay.
Speaker 9:But things can go wrong.
Speaker 1:Yeah, of course.
Speaker 9:I mean, the agent may not follow instructions or optimize for the wrong thing. Yeah. For example, you tell the agent, go out, I need some cloud computing time. You know, go out and buy some compute for me at the cheapest possible price. Yeah.
Speaker 9:And the agent does that and goes and enters into a long term contract
Speaker 1:To get a huge price.
Speaker 9:Cancellation penalty.
Speaker 1:Yeah. Sure. Sure.
Speaker 9:I mean, that's Yeah. That's a problem. Nightmare. Yeah. So and just the sheer number of contracts entered into by agents.
Speaker 9:Agents can enter into thousands of contracts. But first, somebody's realized there's been a mistake. You know, something's gone wrong. It is certainly
Speaker 1:So disaster.
Speaker 9:I mean, do you do? Mean, if you out your agent has gone out and entered into a contract that's not not what you're interested in, not what you intended. I mean, one thing we know is you can't say it's the AI's fault. Okay. It's not my fault.
Speaker 9:I mean, there's even a law in California I think it was enacted this year. Mhmm. Civil code section seventeen fourteen Mhmm. That says you can't blame the agent. Mhmm.
Speaker 9:You know, it's it's your agent, you're responsible.
Speaker 2:What's the human precedent? Because big companies, I'm sure, for a long time have had issues with an employee entering into a contract, you know, signing, maybe they have I mean, it's it's very interesting.
Speaker 9:And it's kind of the same concepts I think that are gonna apply in the agent context. That is, did the employee have authority? Yeah. And even if they didn't have authority, did they have a parent authority? Yeah.
Speaker 9:If you deployed the employee, they had a job title, they had the card, seemed like they had the ability, the authority to enter into that contract, you're probably going to be bound by that. Mhmm. Similarly, with an agent, I mean the presumption is the agents out there in the marketplace buying things. Yeah. The presumption's going to be that the contract they entered into is binding and you're stuck with it.
Speaker 9:Yeah. But there is a concept of mistake Mhmm. That can come to the rescue. If the agent goes out there and buys, you know, because of a parsing error or something, the software buys 10,000 of something, which historically you've only been buying 100 of. Yeah.
Speaker 9:That may put the counterparty on notice that, wait, something's gone wrong
Speaker 2:here.
Speaker 9:Yeah. And if the counterparty is on notice that this is a mistake, the counterparty, you you may be able to get out of the contract.
Speaker 2:Yeah. I mean,
Speaker 9:so that's just kind of a kind of an example. So what is these traditional legal concepts about authority, apparent authority Yeah. I think are gonna come in play in agentic AI as well.
Speaker 1:Yeah. Are there any what precedents are are people drawing on to understand where electronic contracts go? Is there are there any learnings from, like, smart contracts and what the whole discussion around cryptocurrency? Or is it more like what what's been built up over terms of service? Because, yeah, this is like an almost entirely new paradigm and I I don't know exactly
Speaker 9:mean, call it the the problem of new wine in old bottles. Okay. And whenever there's a new technology Yeah. We see this. We have traditional concepts about contracts.
Speaker 9:Yeah. How you form a contract. Yeah. What is agency? Yeah.
Speaker 9:And then we have to adopt it to this new era where you have electronic agents that are interacting with each other.
Speaker 1:Yeah. What do you think the equilibrium is? Do you think that there's going to be a flurry of lawsuits and settlements and then sort of a new new establishment of, like, standards, norms, default contracts? Because Silicon Valley has been through a whole turn of contracts where there used to be equity financings, then there were a lot of convertible notes, then there was eventually the SAFE contract, which is a much lighter version of a financing that moves a little bit faster but can still hold some of the weight. And so, like, is is there a do you think there's a there's going to be demand for some sort of standard contract that agents can sort of execute that that builds on the shoulders of all the contract law but still allows for
Speaker 9:I the flexibility of think we are going to see contracts like that.
Speaker 1:Okay. For sure.
Speaker 9:Yeah. I mean, but still we're always going to have the potential for the rogue agent. Yeah. That does something, that does it, exceeds the permissions. Yeah.
Speaker 9:But that's all the problem is what's built into the software. Yeah. So it's important to build in safeguards like caps, spending limits and the like.
Speaker 2:And for
Speaker 9:important and novel transactions, getting a human in the loop. That the transaction can't actually close, money can't change hands
Speaker 1:Yeah.
Speaker 9:Until some human being has actually looked at it. Yeah. So I think that's very important. And then also people need to audit, you know, the history of transactions. As I said, you can have thousands of these contracts being entered into and performed before somebody realizes anything's been going wrong.
Speaker 9:You need a system where you're actually auditing them and catching
Speaker 1:Yeah.
Speaker 9:And catching those errors.
Speaker 1:Do you do you know where DocuSign came from? Was that a legal innovation? Because we think of it as this software company that it says a lot of employees, they've built this program for A lot. E signatures. They have a lot of employees, but What
Speaker 9:would we do without it
Speaker 1:these days? Was there a moment where e signature was illegal, was not binding, and then it flipped? Or did they sort of adapt to the conventions of what counts as a binding legal signature and sort of slot in and then establish themselves.
Speaker 9:Yeah. Don't know the specific history on that. I mean, the guy who founded that company, I'm blanking on it. Yeah. He's actually a client of ours.
Speaker 1:Oh, no.
Speaker 9:Yeah. Okay. So I'm blanking on that. Yeah. So I don't know what the history of that is actually.
Speaker 1:Yeah. I'm just wondering if there's like learnings from like other times when we've had to take something that happens in the real world and adapt it to the Internet and and thinking through like the other foundational cases maybe net neutrality, these different debates because you have to imagine that consumers will want AI to go shopping for them. And they like and that's going to happen but they're gonna want it to be safe and and then companies are gonna want
Speaker 9:They don't want surprises. They wanna realize they got 10,000 toothbrushes and Yep. Instead of the 10 that they wanted.
Speaker 1:Sometimes that that happens just on, you know, Instacart. You order one banana and you get one truckload of bananas. It happens.
Speaker 9:I I think there's also gonna be issues in tort law. Sure. If you deploy an agent that causes harm or causes damage.
Speaker 2:Yeah.
Speaker 9:How does tort law apply to that? Concepts of negligence, products liability. Yeah. I mean, it's an unsettled question in the law whether software is You know, like we talk about products liability for defective features in cars and So the there's a whole body of law surrounding that. Should that apply to agents that go out and do something that causes damage.
Speaker 9:I mean, we're seeing cases being filed where, you know, the allegation is that the agent persuaded somebody to engage in self harm.
Speaker 1:Sure. The model did. You know?
Speaker 9:And so Is
Speaker 1:that a defective product? That's the question.
Speaker 9:So concepts of negligence Yeah. Products liability and the like will apply. Yeah. And then people, you know, like in this case, Amazon tried to keep the perplexity out from its sight saying, you know, we don't, you don't have permission. Yeah.
Speaker 9:We're not we're not permitting that. But I mean we've all read about instances now where agents have gotten loose Yep. Entered in sites. Yeah. So what are the legal ramifications of that?
Speaker 9:There's a concept called trespass to chattel. Like, you know trespass on land. Yeah. A chattel is a thing.
Speaker 1:Okay.
Speaker 9:So there's also something called, and this is traditional, traditional concept in the law of trespass on a chattel. Chattel, it's trespass on a server, computer and the like hasn't gotten very far, but there's some cases where those types of claims are being raised as well.
Speaker 1:Okay. Yeah. How how have you been processing all those cyber security incidents? It feels like these they haven't I haven't seen lawsuits filed. It feels like these will be discussed as settlements.
Speaker 1:Already the CEO of Hugging Face was sort of outlining what a non legal recourse could look like. Where do you think this all goes? Do you think there needs to be some precedent setting legal case to create the template for how these things get worked out if they happen more and more?
Speaker 9:I mean, way the way this, you know, we live in a common law country, of course. Yeah. So we have legislation
Speaker 1:Mhmm.
Speaker 9:And maybe there'll be a need for legislation at some point. But until the legislators act, and it's hard to get legislators act and act in this country, the courts will be deciding these on a one off basis Mhmm. And establishing precedents. So courts will look to what other courts have done. Sure.
Speaker 9:I mean the issue that's been teed up in dozens of cases and that everybody's familiar with is that copyright infringement
Speaker 2:Yeah.
Speaker 9:Train a model on copyrighted material. Yeah. I mean there are dozens of cases that are teeing that up. We have some indications from a couple of cases so far suggesting that that's not infringement, but it's what's called fair use.
Speaker 1:Fair use, yeah.
Speaker 9:I mean ultimately all these new issues that are being teed up, we're going to have answers to them. Mhmm. But it'll take time. It'll just take time. It depends on the persuasiveness of the judge's opinions and the precedents.
Speaker 9:And some things will end up in court of appeals and maybe even the U. S. Supreme Court to make new law.
Speaker 1:How is the legal industry grappling with questions of liability around AI? If I have a law firm, my lawyer uses AI, are there is there any nuance there? Or has the legal industry had to grapple with what liability, what what the services delivered might look like in a world where there's AI agents that are going off and doing discovery or all sorts of different things.
Speaker 9:Well, lawyers are going be responsible for what the AI does. Yeah. I think there's no question about that. You've heard about these cases where lawyers have filed briefs in court that have hallucinations. Yep.
Speaker 9:Cite two cases that don't exist. Laws that don't exist. Or cite two cases that exist but don't stand for that proposition.
Speaker 1:Yep. Courts don't have What
Speaker 2:do judges think about that?
Speaker 9:They're not very happy
Speaker 1:with it.
Speaker 2:It's like when I'm when I start reading something and I realize that it's just been just a prompt Yeah. Effectively?
Speaker 9:No. I mean, the lawyers have been sanctioned for doing that. It's something that I think every law firm has to be vigilant about.
Speaker 2:Yeah.
Speaker 9:Because, I mean, you can't get the models. I mean, you can try to tell Claude, you know, don't make anything up. Yeah. I only want double check. Yeah.
Speaker 9:Make sure the case really exists. Yeah. And it'll kind of be apologetic and say, you know, I'm just an LLM. I can't guarantee that. Seriously.
Speaker 9:Yeah.
Speaker 1:Yeah. That It's funny.
Speaker 2:How are how are the lawyers that you talk to at your firms and and just other friends in the industry processing just the progress of AI? We had the breakthroughs from one of OpenAI's new models on Saturday that kind of rocked the math world. But I'm curious how lawyers are just processing the models sort of broad set of abilities today?
Speaker 9:Look, lawyers are among other things, wordsmiths. Yeah. I mean, so we have targets on our back.
Speaker 1:Mhmm.
Speaker 9:It's amazing how much, you know, how much quicker we can get to a finished product that we'd actually want to use, serve on the other side, or file with a court. And, you know, I personally think most of our profession is whistling in the dark that they don't realize what's going to come. There's a bit of an innovator's dilemma here because big law firms are doing really well.
Speaker 2:Yeah. All these AI.
Speaker 9:Why change? What's the issue? So
Speaker 2:Well, also, I'm assuming a lot of the most high profile cases are AI related. So at least in the moment, it's creating this sort of surge in demand.
Speaker 9:Yes. There's a lot of cases relating to AI. These novel legal issues like this perplexity case we never would have had eighteen months ago, the dispute between Sam Altman and Elon. Just on many different levels it's generating new work in addition to new types of issues. But I think it's fundamentally going to change the legal profession and the way law is practiced.
Speaker 9:Mhmm. I mean, most law firms bill by the hour. And if I can press a button and get a work product that's 80 or 90% there, think of all the time, the hours that have been saved. Mhmm. And that really needs to be passed on.
Speaker 9:The client expects that. They're expecting to see that that savings.
Speaker 1:You said big law is doing well right now, financially? I see.
Speaker 9:Yeah. I mean the the law firms, you know, the biggest law firms are doing very, very well.
Speaker 1:Doing very well. Yeah. What was the hardest year financially for Big Law or Quinn specifically?
Speaker 9:So we only do disputes work.
Speaker 1:Yeah. So I imagine it's not very cyclical, right?
Speaker 9:There's not it's not a lot of people think that litigation is cyclical. Yeah. There's more litigation when there's a downturn in the economy.
Speaker 1:Yes. Less when
Speaker 9:things are going well. I don't think that's true.
Speaker 1:Okay.
Speaker 9:I mean, you'll have more of a certain kind of litigation when there's downturn. Stress related Sure. Reorganizations, bankruptcy related litigation. But when and when there's a downturn, you know, people can't perform their contracts. Mhmm.
Speaker 9:You know, so you have those kinds of issues. But when things are going well and there are profits, companies will
Speaker 1:I know
Speaker 9:bring claims that they might pass on. Yep. You know, they'll pick up the nickel, you know, on the floor and say, okay, we're gonna we're gonna pursue that.
Speaker 2:Mhmm.
Speaker 9:So, I mean, the disputes world in in America Mhmm. Is is generally pretty good. I mean, we we live in the most litigious country in the world. Our our legal culture is leads the league in that respect.
Speaker 1:Is that good?
Speaker 9:I mean, depends on who you ask. I think that it's a feature of our individualism. It's a feature of people's feeling of entitlement that I have rights.
Speaker 2:Mhmm.
Speaker 9:You know, I can get my day in court. Yep. I can get a hearing.
Speaker 1:Yeah.
Speaker 9:So those are good things about
Speaker 1:it. Mhmm.
Speaker 9:But on the other hand, there's a point of view that it's really a lot of litigation is a tax on on doing business. Mhmm. And and we know that there's a lot of frivolous claims that are brought as well. So you ask different people, you'll get different responses to that.
Speaker 2:Mhmm. Right now, you have these, you know, gigawatts of compute being brought online. And in a lot of instances, there will be, like, a hyperscaler that is signing up for a long term contract. And when you look at some of these neo cloud businesses, a lot of people like to look at them and say, well, look, you know, this is a contract with a major, you know, trillion dollar company. That trillion dollar company is definitely good for it.
Speaker 9:And NVIDIA's back there somewhere guaranteeing performance
Speaker 2:as well and it's playing. Yeah. NVIDIA's usually usually involved. But in actually playing some of these things out, let's say in the future there's a a compute glut. And there's I think you should debate when that will happen.
Speaker 2:Maybe it happens in ten years. Maybe it happens in one year. Maybe it happens in two years. No one no one knows. There's a lot of indicators that, you know, you're just gonna see demand outstripping supply for a long time.
Speaker 2:But what do big companies do when they're in a contract that they really don't like and they wanna get out of it even though they signed on the dotted line and it's a bulletproof contract? Because because it's not like, you know, the biggest company in the world that people are, you know, has amazing credit right now that signed the contract, people are like, oh, it's you know, it's fully guaranteed. But there's a lot of things that companies in that scale can do if they're in a situation that they don't like.
Speaker 9:Well, I mean, it's tough. They can look, if you're if there are big obligations on both sides, big commitments on both sides, and one side doesn't want to perform, a lot of times that precipitates a negotiation. Because they need each other, right? They've each made commitments to each other.
Speaker 2:Yeah.
Speaker 9:So if you and I have one of these contracts and I have a problem, then you have a problem too.
Speaker 2:Yeah.
Speaker 9:So we gotta try to find some way to work that out. And oftentimes that's what happens. But I think a lot of these structures, financial structures, especially for data centers, are incredibly complex. You have a SPV at the middle of it, has a deal with a tenant, you have all kinds of financing, bond financing, securitizations, private credit, with cross default provisions. So if defaults, you know, the whole thing potentially goes down.
Speaker 9:I think on some of these data centers, we're probably going to see some reorganizations. You know? Everything, everything, look at all the money that's going into this and all the data centers that are being built. Are all of them a 100% going to come online when they're supposed to come online and everybody's going to do exactly what they contracted to do? You know, I don't I don't think that's going to happen.
Speaker 9:So there'll be some workouts. And the challenges that those data centers face from, you know, I've been told by one neo cloud that the biggest problem they face is electricians. Just getting the electricians to do the work. So it's it's there's a shortage of everything from electricians to power to chips, you know, to compute. So I mean, it's it's not gonna end perfectly for everybody.
Speaker 2:Yeah. But you would predict billions of dollars worth of billable hours dealing with all of that?
Speaker 1:You know
Speaker 2:Is that a safe prediction?
Speaker 9:I I don't
Speaker 2:Like, if you have a trillion dollars of of this kind of like complicated CapEx investment, then you're probably gonna get at least a billion, couple billion of of billables.
Speaker 9:Those are a lot billions are a lot of hours. I I don't
Speaker 2:seems like, you know, you have thousands and thousands, you know, of these projects.
Speaker 9:Look. And And If some of them go into reorganization and the equity gets wiped out, there will be negotiations. There will be what are called liability management exercises. There may be bankruptcies as well. And yes, lawyers will be very involved
Speaker 2:Yeah.
Speaker 9:In those workouts.
Speaker 2:There was some reporting recently that one group that is pushing back against the rollout of autonomous vehicles are trial lawyers or or sorry, not trial lawyers, sorry, personal injury lawyers who seem to be worried that in a world with, you know, full autonomous driving across The United States, there'd be less accidents. Does that surprise you at all if that were to be true?
Speaker 9:I hadn't heard that. But I guess nothing would surprise me about what the plan of tort bar might do.
Speaker 2:Yeah.
Speaker 9:You know?
Speaker 2:How would you reform?
Speaker 1:It'd be considered
Speaker 2:law If you had So if you monopoly,
Speaker 1:so no corporations can sue each other.
Speaker 2:Would What you kind of reforms would you push for if you were king of The United States for the day? Around specifically around personal injury law. Because when you drive around LA, it's honestly very depressing. It's like, if you look up, you'll see a billboard that's basically saying, hey, do you wanna see someone? Yeah.
Speaker 2:You know? And that signal to me is that there's just, you know, billions of dollars of revenue
Speaker 9:Look, there's no doubt. I mean, are personal injury mills Mhmm. Lawyers that process high volumes of claims. I've never worked in one of those factories, but I sometimes wonder whether lawyers, there's ever lawyers eyeballs on what's filed and the discovery and the like. I think a lot of those are, those cases are brought to settle Yeah.
Speaker 9:As quickly as possible. Mhmm. So sometimes you wonder whether the client's interests are really number one. But this is I don't work in that field.
Speaker 2:So
Speaker 9:Yeah. My speculation.
Speaker 1:And it does feel like it would be a very different situation if every automobile accident involved going up against Waymo with perfect camera footage from every angle for every there's no testimony of this person said this person, this person did this, this person said that. You have the perfect footage, the GPS, everything that happened in that moment.
Speaker 9:Well, I I think I think AI, I mean you know there are early stage companies Mhmm. Early stage, maybe somewhere beyond early stage
Speaker 1:Mhmm.
Speaker 9:That hoover up all the data available.
Speaker 1:Yeah.
Speaker 9:Like permits, ingredients.
Speaker 1:Sure, sure.
Speaker 9:You know, compliance certificates, whatever. Hoover all that up.
Speaker 2:Yeah.
Speaker 9:And then it also ingest all the regulations and rules. And they will identify claims and class actions.
Speaker 2:Yeah.
Speaker 9:And you can subscribe to this. And they'll serve it up. So mean, AI is in itself generating more of that kind of work But as I also have the hope that it'll mean that cases are resolved sooner. Because there's more transparency sooner. As you were saying, like the Waymo situation where you have the record.
Speaker 9:So people hopefully will be able to identify the merits of their claims. Everything's more transparent. Identify the merits of their claims, you can underwrite the risk, And people may be able to get together with settlements sooner.
Speaker 1:Mhmm. On the next generation of lawyers, do you think aggression can be taught?
Speaker 9:I don't know if aggression can be taught. Don't know if it should be taught. Mhmm. You know? Aggression in the law and litigation isn't an end in itself.
Speaker 9:Mhmm. Know, I I generally think it's good to be the first mover.
Speaker 1:Mhmm.
Speaker 9:I mean, have a saying at our firm that the side that figures out first what will ultimately matter wins.
Speaker 1:Mhmm.
Speaker 9:So as a default position, I believe you should try to get ahead and stay ahead. Now that doesn't necessarily mean you're aggressive. Mhmm. But in some cases, you don't want to be aggressive. I mean, you might want to adopt a, know, a rope a dope strategy.
Speaker 9:Yeah. You know, come get me. You know, and let the other side play their cards first.
Speaker 1:Can you tell if someone's bluffing?
Speaker 9:So you know their, if you have a sense of what their case is and what it's worth and what the strengths and weaknesses are, you sometimes get a demand that you think either they're bluffing or they don't understand their case.
Speaker 1:Mhmm.
Speaker 9:So, you know, it it it really very much depends on the I think on the situation.
Speaker 2:How did you how good how good were you at reading people early in your career?
Speaker 9:Not for
Speaker 2:And how much how much how much did you improve? Like, did you have some sort of like baseline above average ability you think and then you got, you know, significantly I
Speaker 9:think I think with experience I I got better. I think as a younger lawyer I was probably too aggressive too often and didn't sort of modulate my approach. Over time I think I got better of understanding, not just understanding the other side and reading them, but myself as well. Where I was coming from
Speaker 2:Mhmm.
Speaker 9:And what my strengths and weaknesses were.
Speaker 1:Well, thank you so much for coming on the show.
Speaker 9:Thanks. Thanks for having
Speaker 1:me, Matt. Wish you
Speaker 2:had more time.
Speaker 1:Let's play you off with the final Yeah. Outro We're playing this all morning. Think every one of our guests needs an intro like that.
Speaker 2:Metal song.
Speaker 1:I think we're I think that might be a new bit for us. First, let me tell you about Figma. Agents meet the canvas. Your AI agents can now create and modify your Figma files with design system context. We've been keeping our next guest too long.
Speaker 1:We got Nikhil Reddy from Kaizen coming on the show. Let's bring him in. How you doing?
Speaker 2:What's going on?
Speaker 1:What's up, guys? What's up? Legendary outro for John Quinn. Yes. Hopefully, have to hire him but if you do
Speaker 2:Honestly, I was gonna say hopefully you get a chance.
Speaker 1:Yes. The opportunity to work with him.
Speaker 2:Is a no. It's hopefully you don't Yeah. Have him sending you emails ever.
Speaker 1:That's for sure. That's for sure.
Speaker 2:Except maybe a client intake form.
Speaker 1:Yeah. Well, thank you so much for taking the time to come chat with us. Kick us off with an introduction on yourself and the company. Yeah, man. Thank you guys
Speaker 9:so much
Speaker 3:for having me, Jordan. John, big fans.
Speaker 1:Thanks.
Speaker 3:Quick background on me. Started Kaizen in 2022. Before that, was a early engineer at Anderol. Joined from The Bay. Joined Androle right out of school in 2019.
Speaker 3:Spent two and a half years there as a FDE, so worked on the web interfaces for a lot of the early hardware products that are now flying and doing wonderful things. And before, needed a UI and UX to sort of power some of those assets, and it was amazing opportunity to just go to a bunch of military bases and build really quickly for the warfighter. And then started Kaizen at the end of twenty twenty two, specifically with the the fire to modernize all constituent services. I think that experience showed me how broken and disconnected government application layer systems were. But when you think about it beyond the context of just defense, I know we're here announcing a DOW project, but globally across all governments, all public institutions, I think the worst part of everyone's day is that 08:30AM when you go to the DMV and you have to use the tech stack to renew your driver's license or pay for a permit really quickly or do the basic fundamental task.
Speaker 3:And if you can make that experience 10 times better, an order of magnitude better, then I think everyone sort of leaves those buildings feeling like their taxpayer dollars are being spent appropriately and that they're being taken care of. And that was the vision, was to go to every single public institution and modernize their application layer that citizens and individuals interact with, I think, more in a volume perspective more than any of their government service and make them 10 x the quality. And that's sort of what we've been up to the last four years selling to city, county, state, and now federal government and announcing a big project with the Department of War.
Speaker 1:Yeah. Congrats.
Speaker 2:Okay. Very cool. Lot lot I wanna understand on on that side of the business. But but, yeah, talk about the the contract Yeah. And and, yeah, parlay this into what you're announcing today.
Speaker 3:Yeah. So we're announcing the launch of the counter drone marketplace that is run by Jaida four zero one, the counter drone task force within the Pentagon. The problem that we're trying to solve is that counter drone assets are being manufactured by American OEMs, many of whom that you've spoken to and have have had on the show. And the threat profile is changing so quickly. The hardware is being manufactured at lights out pace.
Speaker 3:But then actually think about the process Now that there's an amazing OEM product that needs to be fielded out into a forward deployed region of the world, think about the paperwork, the process, the structure, the 50 different software platforms that someone within the building needs to use to authorize budget for it, get contract vehicles established, then go back and forth with the KO, negotiate that contract, then find the right logistics and management partner to get it on a pallet and get it delivered. You're talking about potentially weeks to months of delay when the warfighter needs that capability and that asset delivered on the pallet tomorrow so they can actually use it in the fight. And that was sort of what for us was the most exciting problem to solve, and four zero one put us on contract in in nine weeks from a blank slate. We designed, developed, and deployed a true two way ecommerce marketplace that looks stunning, rivals whatever you'll see in the private sector where American OEMs can sign on, establish their vendor profiles, upload their products, sell them directly to three different buying groups, department of war capability and offices, people with budget within the department of war that wanna buy now, state local law enforcement, because think about the intra government or intra United States case where you're a state local law enforcement leader and you're protecting MetLife Stadium for FIFA World Cup, you also need to buy counter UAS.
Speaker 3:So it's a centralized platform for those buyers to log in and purchase those assets. And then partner nations. Allied nations want the best technology. American OEMs make the best technology, and they wanna be buyers on this platform as well. So it's a two way marketplace where buyers can come in, register and validate their profiles.
Speaker 3:Vendors can do the exact same thing with their products back, and then being able to have the Pentagon have one core centralized source of truth. We've built the entire front end architecture for vendors to post and publish their products, buyers to come in, purchase their transactions, a ton of agentic tooling where even if you're not the expert, you open up our capability planner, you specify in free text that you're protecting a stadium for FIFA World Cup. Here's my threat profile. Here's how much money I'm willing to spend, and immediately suggest a bunch of assets that you can purchase, add it to your cart in one click. And then on the back end, we're working to simplify all the tough, difficult, very frustrating procurement processes to actually get hardware on a pallet sent to the war fighter and to end up and running in nine weeks.
Speaker 2:Uber for drones.
Speaker 1:As as a taxpayer. Sorry. Exactly. Sorry. Had to
Speaker 2:say I had to say that. Every once in a once a year still, I'll see a pitch that's just like we're building Uber for x.
Speaker 1:Wait. Really? You've seen an Uber for x?
Speaker 2:Still see that. Wow. See It's gonna come back. Now and then.
Speaker 1:Dutch East India company for drones. How about that? As a taxpayer, do I want you to win, or do I want a monopoly in software delivery for the government? Because everyone's run the business, and they've had a bunch of different point solutions. And there's a different world here where I'm like, like, this is cool that you're doing this.
Speaker 1:It's good that I'm happy for you, but also, like, couldn't this just be like one extra module in a Palantir system that's already deployed? Like, why do we need obviously, besides the competitive dynamic, just from a technology perspective, is it okay that we're going have proliferating systems? Is systems integration here not a particular problem? Are you addressing some problem that is too low for other contractors and primes to go after so it would get neglected? And so that's why you're doing this project.
Speaker 1:Like, help me understand how you fit into the landscape of other prime contractors.
Speaker 3:Yeah. Fantastic question. I mean, like, the answer is actually a little bit of all of the above, actually. Mhmm. From the data layer perspective, our goal is to build application software that is capable of integrating into a seamless, unified, coherent data fabric.
Speaker 3:I want to write data to a Palantir or a Databricks or an AWS because Got it. Yeah. That fabric is well built Secure. Thoughtfully constructed, secure, compliant. But then you actually look at the market landscape, you're right.
Speaker 3:Most of the market, I think it's actually dominated by two extremes. When you're thinking about the city, county, state level, largely what we see is super old, janky, private equity owned point solution for blah that hasn't received an update in fifteen years. The engineering team is a bunch of Java developers that found
Speaker 1:Just to steal man, it's some of those businesses are real cash flow machines. Okay. So Yeah. Let's not take They're they're they're businesses. No.
Speaker 1:No. No. But as a user as a user and not a shareholder, I Yeah. I I I share the frustration with the DMV system every once in a while.
Speaker 3:As a taxpayer, you're you're you're asking yourself, like, what are we doing here? And then on the federal side, most of those platforms are run by a bunch of low margin services companies that are selling hundreds and hundreds of heads and overcharging the government hundreds of millions of dollars, and then we'll spend eighteen, twenty four months trying to build a thing, deploy it as a pilot, largely accomplish nothing. And I think the model that we're trying to apply is, yes, we should own as many application layer solutions as we can. And that's obviously sort of why Kaizen exists. But our goal is to charge based on the outcome and quality.
Speaker 3:And I would actually argue if we can make those application layer systems in order of magnitude better for the taxpayer from a user friendliness perspective, easier to use, more simple to log in, adjudicate your information, have it approved by an administrator on the back end. And then for the administrators that are spending eight hours a day logging into these platforms trying to triage and do all the paperwork. For them, if you can make their lives in order of magnitude better, I think we're actually solving the real problem. This is why taxpayer money is appropriated to these kinds of services so that we can actually provide a quality of service for our citizens that they deserve. And so for us, the number one goal is make every application layer product across these institutions as good as possible and move away from the point solution for x model and rather go to our customers and say, what is your need?
Speaker 3:Are you actually trying to make the DMV licensing process better? Or in Jada four zero one's case, they need a Shopify style system for counter drone procurement, and then we should have the technology stack and the set of modules that we can use to rapidly configure against those capabilities and deploy in ninety days or less. And still, I think you can move very quickly and build very quickly as we're seeing in the world today, but also hold a high standard for compliance, security, good guardrails, testing. I think you we live in a world where I think you can have both things, and and I think that's sort of what's been super exciting about our federal progress.
Speaker 1:Love it. Well, congratulations, and thank you so much for coming on. Thank you
Speaker 2:for your service.
Speaker 1:We'll talk to you soon. Thanks so much, guys. Yeah. Appreciate it. Goodbye.
Speaker 1:Up next, we have Art Levy, the new vice president of global partnerships with Cognition. We got Russell Kaplan, the president of Cognition. They're coming in to the TBPN Ultra Dawn. Very excited to have some forks joining. Congratulations.
Speaker 2:There they are.
Speaker 1:The trade
Speaker 2:In the corner office. In the corner office. For a new vice president.
Speaker 1:Corner office. Yeah. Where are you guys in the South or Bay Area?
Speaker 8:We're calling from Austin. Yeah. Calling from our Austin, Texas office.
Speaker 1:Austin, Texas.
Speaker 8:We got a we a great team out here. Cool. Yeah. Super excited to be having Art on the team.
Speaker 1:Okay. What is a global partnership? Does it have to be global? Is it just a sales deal, or is there a deeper partnership that happens with these companies like AWS, Apple, Slack, Nivon, Oracle, Capital One? Blur break it down.
Speaker 11:John, you nailed it. Global partnership means it's not just a sell to deal.
Speaker 1:It's Okay.
Speaker 11:Something where we're both selling to the business. Potentially, there's an investment. Potentially, we're co selling to their customers. We're selling to them. We're selling to their customers.
Speaker 11:We're doing co marketing. We're doing a a press release. Potentially, there's a product integration. It's about deeply connecting to businesses who share common goal around, you know, acquiring same customers or we build inside of them a product that is just better for their customers, and then both parties win. You know, classic partnerships, one plus one is three.
Speaker 1:I think of cognition as an AI lab, maybe a neo lab, a harness developer, a consulting firm in some world.
Speaker 2:I think of it as a source of geopolitical power. Guess. That's just me personally.
Speaker 1:Yes. It's it's birthing a new god as well. But but what what is the conversation that you're having with Fortune 100, these huge companies? How are you positioning your role in the AI ecosystem, in the business ecosystem? How what what what is this full scope of the value that you can deliver
Speaker 8:to customers? As as we've as we've grown up and evolved, you know, we've I think we've really realized our our role is to be the independent agent lab. Yeah. And so we're an applied AI lab. We're focused on building agents.
Speaker 8:And we want to give every company the best possible agents to go solve all of their software engineering problems. And so whether it's a Fortune 500 or it's a small, fast growing startup, people have a lot of needs for software. And Devon, from the beginning, has always been designed to work with all the other tools you already use. Right? It shouldn't be, you know, it's the Devon way or the highway.
Speaker 8:Like, Devon should join you like a teammate. And I think that's one of reasons I'm super excited that Art is joining us. Art built an amazing alliance and partner ecosystem at Brex over his, like, very long career there from employee thirty's chief business officer. And we see an opportunity in competition to bring not only, you know, it's a it's not just a, hey. Here's the tool.
Speaker 8:Go figure out. It's like, how does this work super well with every piece of technology you have inside your organization?
Speaker 1:Are large corporations that are maybe they don't have an in house AI lab, are they generally of the view AGI is real, AGI is soon, but we're going to go through a sort of slow takeoff, diffusion adoption will be a big problem, and cognition can help sort of realize that thesis?
Speaker 8:I think the pace of progress in artificial intelligence is dramatically over the pace of progress of internal organizational redesign, for By the way, this is true not just at the big Fortune 500s. Even the sort of startups or tech companies we would consider as fast movers, everyone is asking, do I really need to rethink everything now because of AI? And I would say it's actually one of the things that's been lucky for us at Cognitions. We only incorporated it in January 2024. So our internal team setup and structure, it's very AI native.
Speaker 8:But every company is trying to figure this out for themselves. And I think if you froze capabilities today, you have at least a decade of crazy progress in the full enterprise world just to get this stuff really rolled out and operationalized.
Speaker 1:So what are like, when you're talking to an enterprise, is is it better to position as the the, you know, you're gonna help with this diffusion, this value creation? Or are we still in that sort of, I maybe it was, like, May, June, July, like, woah. We went a little bit too far with the token maxing. Maybe Cognition can help me rein in this budget, actually make sure that we're getting ROI. What's resonating there on the on the on the cost of benefit position?
Speaker 8:I think I think it's both. Think it's the third tier. So first, you know, all the models have been getting better. Right? Yeah.
Speaker 8:And so as the models get better, the capabilities keep improving. Mhmm. Yeah. People are starting to ask the question, hang on. Like, do I need to drive the Ferrari to the grocery store?
Speaker 8:You know, can I can I use an open source model for parts of these workloads? Can I use cheaper model, faster inference? Yep. And so that's definitely one of driving
Speaker 2:a Ferrari to the grocery store.
Speaker 1:You're like, I don't believe
Speaker 2:But continue.
Speaker 8:If only we could all be Jordy.
Speaker 2:All your
Speaker 8:help, Jordy. But guess one part of it. I also think there's a separate thing that's emerging, which is if you actually want to have true frontier capabilities, different models have different spikes. Right? Like, we've seen, for example, we've seen the the OpenAI models, for example, are are the best in the world right now for, for recall of security vulnerabilities.
Speaker 8:Like, if you wanna catch if you wanna catch as many as possible, the OpenAI model series is best. There might be others where actually the anthropic ones are a little bit better on precision, getting it really, really tight in. So I think there's, in addition to the price performance angle, for enterprises, there's this element of, well, do I use the best tool for the job, for each job to be done?
Speaker 1:Yes.
Speaker 8:And then there's the people change side, which we try to help with too. I'll give you one story on this. We had a customer, global 2,000 customer, tens of thousands of engineers, and they deployed Devon across the entire organization. And they were seeing crazy productivity gains. But one organization they deployed to was the product management organization.
Speaker 8:And so every product manager now had Devon. And what they were doing was that this organization's job is basically taking customer requests and turn them into Jira tickets, roughly. It's like scope out what the customers want in of Jira tickets. So they were using Devin to they took those requests, and then they had Devin actually go prototype to fix. And then once Devin prototyped the fix, they said, Devin, can you summarize this fix in a Jira ticket?
Speaker 8:And then they deleted all the code. And we asked them, guys, what are you doing? You already had fix. And the product manager we talked to said, that's not my job. I'm part of the product manager organization.
Speaker 8:I'm not part of the engineering organization. And so I think for really large companies who've been doing things the same way for a long time, there is a total rethink that needs to happen in just literally how you design your structure.
Speaker 1:Yeah.
Speaker 2:How are you guys thinking about M and A? You bought Poke I think it was surprising, but made a lot of sense. It was surprising to me because I figured someone like an Apple or something would would see Poke's, you know, talent and their kind of consumer insights and all that kind of thing, try to pick them up. But how are you guys thinking about m and a from like where the value really comes from? You guys are very good at building software.
Speaker 2:That's your whole pitch. Right? Is where you help you build software. So I can imagine a world where product acquisitions are like less interesting because you're looking at your own road map and you're looking at what someone's built and thinking like, well, how quickly can we build this ourselves? Is it is are we should we expect, like, more sort of, like, talent style acquisitions?
Speaker 2:What where where what's your general framework, and and maybe what's share as much of your mandate as you can, Art.
Speaker 8:Yeah. I mean, would say all of the above. I mean, we have today in Cognition, 97 former founders working in the company to an after all startup. And we are we are, like, aspiring for Apple hiring. One one team a week probably right now.
Speaker 8:Oh. So if you're if you're a Trump value team and you want to be part of rocket ship, get in touch. Love bringing on founders. But we also think there's bigger companies out there with products, with distribution, with learned insights that are really useful for us that we want to bring in as well. I think how you do that successfully, a lot of companies screw up M and A.
Speaker 8:We kind of learned learned it trial by fire acquiring Windsurf in the course of a weekend as a company that was four times our size from, like, first call to executed reading from Friday night to Monday morning. So it's something that I think we're only going get better at. And one reason I'm really excited artists here is to help us level up that process and be the best destination in the world to be acquired by.
Speaker 11:Yeah. I think one of the things I've seen work well in my career is a lot of times partnerships can be a a preempt in m and a. So a bit of a try before you buy. You make sure that the cultures really make sense to do companies build an integration or a partnership. And suddenly in those conversations or after you delight a few customers, you both decide, hey.
Speaker 11:Actually, maybe it'd be better if we work together. And I think given the scale of cognition or rate of growth, the impact that founders can have when they come here is really gonna be generational. So I'm really excited to, you know, talk to a bunch of founders and hopefully bring a bunch more of them onto the Cognition
Speaker 2:team. Awesome.
Speaker 1:What country internationally outside of The United States is punching way above its weight in terms of AI adoption, AI diffusion? You always hear that story about Estonia rolling out high speed bandwidth for the entire country, and they just went way forward in terms of GDP per capita. What country are you having, like, surprising success in?
Speaker 10:Japan. Japan.
Speaker 8:Yeah. I would say Japan, number one. We love Japan. Look, we're a global company now, so we have people all around the world. We have customers all around the world.
Speaker 8:But I a got a shout out Japan in particular. Even from the beginning of when Devon first became available self serve, cloud agents were just at the edge of possible, we had an enormous uptake of users in the Japanese market. And I think there's a few reasons. I think one of them is our Japanese customer base, everyone is incredibly conscientious and detail oriented. And whenever we get a support ticket from Japan, it's a very thoughtful essay of every single issue that has been tried, every piece of debugging information you would need.
Speaker 8:And like they just found a bug. They they just found a bug. They if they could have solved it on their own, they wouldn't. And so I think the user base in Japan is super sophisticated, really early adopters, and and it's been exciting to see all the growth there.
Speaker 1:I prefer the American style of just fix it. Fix it. No. It seems it seems like really beneficial. Sorry.
Speaker 1:Are you you were gonna say something?
Speaker 11:No. Was gonna say, as I'm digging in, also ironically on the channel sales side, we've actually had the most success with sell through with partners in Japan who seem to just deeply understand the product and the value prop and be able to sell it to to their customer bases.
Speaker 2:Interesting. Do do the Japanese love otters by any chance? Could that be a factor?
Speaker 8:That's a good that's a good question. We we definitely
Speaker 2:see the plushie.
Speaker 8:Yeah. Yeah. Got a lot of we got a lot of otters fighting with There was a big debate in Japan of the right honorific for Devin. You know, is it is it Devin Son, Devin Koon, Devin and then we we learned that the community in Japan has settled on Devin Koon as the right honorific, you know, your your friend, your buddy, your your sidekick who's who's helping you out. I think it's a it's a fitting name for
Speaker 1:a And that came from the community. This was not internal?
Speaker 8:Came from the community. Yeah. We were informed. We were informed. Ground out.
Speaker 1:Ground out, man. Amazing. Okay. Well, thanks for breaking down. That's very
Speaker 2:Love it. Well, I'm excited to see everything that you guys do together.
Speaker 1:Yep. Deals. Deals. Deals. Very excited.
Speaker 1:Awesome.
Speaker 8:Great to
Speaker 2:see Talk
Speaker 1:to soon.
Speaker 2:Great hanging, guys. I'll see you there. Congrats.
Speaker 1:Goodbye. Let me tell you about Codex. Codex is a powerful workspace for getting work done with AI agents, whether you're writing code, analyzing data, creating content, or automating business workflows. Codex helps you move projects forward from start to finish. We have Brendan Carr from the FCC joining the show shortly.
Speaker 1:It's his first appearance, but we met years ago. I've always been fascinated by his perspective on everything that the FCC does. There's obviously expanding five g. We can talk about satellites and space Internet, what it takes to launch a rocket. I know you've been thinking about the TBPN satellite cluster.
Speaker 1:He's the guy to talk to.
Speaker 2:Perfect. TBJ over on the X Chat says literal art of the deal right here. Wow. Insane Who? Nominative determinism.
Speaker 1:Art of the deal. While we are waiting for chairman Brendan Carr to join, we gotta go through this crazy historic analysis from Ed Zitrin.
Speaker 2:Ed Zitrin, 07/29/2024 gave Sam Altman the perfect road map. He said, I am hypothesizing that for OpenAI to survive for longer than two years, it will have to. And then he laid out pretty much
Speaker 1:Exactly what happened.
Speaker 2:Exactly what went down.
Speaker 1:But looking back on them, they did seem like crazy crazy things that had to come true.
Speaker 2:I think Ed should join an AI lab and
Speaker 1:With these predictions.
Speaker 2:Maybe as like a chief strategy officer. Maybe. Because he's imagining everything that could go wrong. But Yeah. Through that, he's imagining everything that could go right.
Speaker 1:Well said.
Speaker 2:And so, if he put his optimism cap on Yeah. He might make a great chief strategy officer. Yeah. Maybe at a deep mind. Maybe they could pick him up.
Speaker 1:That'd be great. Well, chairman Brendan Carr is in the waiting room. Let's bring him into the TBPN UltraDome. How are you doing, Brendan?
Speaker 6:I'm doing great. It's
Speaker 1:Long overdue. Thank you so much for joining. How are you?
Speaker 6:I know. I'm so glad to be with you guys. I love the show. Love what you're doing. I dressed down a little, no tie.
Speaker 6:I kept one extra button compared to you. I didn't go the full There
Speaker 1:you go.
Speaker 6:You know, preview.
Speaker 1:But take three down.
Speaker 2:The Kugan preview. The Kugan preview. That's that's an amazing line.
Speaker 6:As a bureaucrat, you know, as someone that regulates broadcast airwaves, not you guys, but airwaves, you know, decency still matters where I come from.
Speaker 2:Well, we wanted we wanted to have you on because we wanted to push for podcast safety. Yes. We think that it might be a little bit irresponsible for the US government to allow just anyone to grab a microphone Yeah.
Speaker 1:And get Yeah. What's it gonna take to airwaves? I want I want a, you know, multi year approval process for new RSS feeds I do.
Speaker 2:And maybe like annual, you should maybe need a million dollar fee annually Yeah. I mean sort of maintain that TBPN
Speaker 6:is doing so well. We need to build a moat around you guys. It'll make it harder for others to to do this.
Speaker 1:Yeah. I think they call it regulatory capture.
Speaker 2:That's what I wanna do. Let me let talk about podcast regulatory capture.
Speaker 1:No. We are here to talk about robots first or where do we wanna start? China, different supply chain pieces? What's newest in your world? Well, probably some
Speaker 6:of the newest stuff we've done. When we started, we stood up a new council on national security. We've been doing top to bottom review of all bad actors, foreign adversaries. Most recent thing we did just a couple of days ago was we added to our covered list. Yeah.
Speaker 6:So the FCC, there's no piece of electronics that you can use without going through FCC processes. Yeah. Putting on the covered list means new models of that thing can't be imported or sold in The US. So we've added a couple of things to that. Mhmm.
Speaker 6:We did advanced robotics. So think humanoid robots. Mhmm. Think those quadruped robot dogs. And the idea is if you look to the future, those advanced robotics are gonna be key to our economic security, to our national security.
Speaker 6:And president Trump is looking around the corner and saying, you know what? It's probably a good thing if we don't become dependent from a supply chain perspective on a foreign adversary nation or a bad actor for that stuff. So we're trying to onshore that. We've done similar stuff before with drones, for instance. At the end of last year, we added all foreign produced drones.
Speaker 6:But it's a balanced approach, meaning it's new models, so we're not gonna take anything out of your hands right now. You can still buy, quote unquote, new versions of existing models.
Speaker 1:Okay.
Speaker 9:But it's
Speaker 6:a way of signaling to the market, like, it's time to adjust, guys. We need, you know, a safe domestic supply chain. So it's good from a Nasdaq perspective, but it's also great for investment in jobs in terms of onshoring domestically as well.
Speaker 1:Yes. So you said it it it's good for the market or the market will adjust. I'm interested to know what is your process for assessing the capability of the American supply chain to actually step up to the call when there's, you know, basically there's going to be a gap in the market around drones, humanoids. Fortunately, it feels like we're not in a situation where I'm talking to entrepreneurs who say, look, I set up this business years ago. I am dependent on buying this particular thing from China or internationally on an ongoing basis and this ban is going to throw me way, way off like what might happen with other pieces of the supply chain.
Speaker 1:So there are there isn't a whole industry that's dependent yet. But what are you doing to actually understand how quickly and how capable the American industry is to fill the gap that that will be created by this?
Speaker 6:Well, there's a couple ways we take that into account, and I'll I'll walk through them. But just as as context, for instance, when we added drones to the covered list, we saw something like $5,000,000,000 flow newly Yeah. In The US domestic drone manufacturer. They're not making drone motors at scale in The US, which we've never really done That's crazy. Before.
Speaker 6:But the balanced approach is this. So, again, if you're buying a motor or a battery from overseas today, you can still continue to buy that because the prohibition is only on new models, and the the companies overseas can continue to produce the old ones. And then, again, there's also an exemption process. So for instance, on drones, we went through the the relevant agencies went through and exempted toy drones, for instance, from Sure. The ban.
Speaker 6:And so it's balanced that's forward looking. Let's not develop too much dependency. Okay. Maybe there's a couple thousand of these. Not a huge deal.
Speaker 6:We don't want a couple million. So the entire regulatory structure allows for exemptions plus transition. And then look. We can come back afterwards and remove the, quote, grandfathering for existing models. And in fact, we're doing that now Mhmm.
Speaker 6:For things that were added to the cover list before 2024. So things like Huawei Mhmm. ZTE, that type of equipment. Again, one, it's not consumer facing as much. Sure.
Speaker 6:But two, you had multiple years to adjust to to where we think the market's going.
Speaker 1:Do you have any optimism around these, frontier AI models have incredible cybersecurity capabilities? I could imagine a world where before there was a lot of fear, uncertainty and doubt about certain pieces of electronics that are made internationally potentially having backdoors or spyware. And if you can hammer one of these, you know, one of these systems with every possible test, are we going to wind up in a world where we can more confidently say yes or no? Does something have a backdoor? Or is this just, you know, everyone will just be stuck in a never ending race and we'll be back to where we were?
Speaker 6:Yeah. I I do think it's helpful from that perspective. And, obviously, there's telco companies that are on the early release list for a lot of these models, help identify any patches that might Oh, yeah. Be necessary. Yeah.
Speaker 6:But we're doing a couple things that are new as well. So it used to be if you wanted to sell electronics in The US, you had to go through a lab, and the lab would test it for power levels and interference, very basic technical stuff. We're now inserting national security checks in that lab process. In fact, we stood up something called a bad labs proceeding because it turns out that something like 70% of all electronics that ultimately arrive in The US are tested at labs located inside China. And some of those labs themselves were, you know, linked or controlled by or tied to the PLA.
Speaker 1:Yeah. That's
Speaker 6:fine. So not necessarily the most trustworthy. So we're kicking many bad labs out of the testing process. And again, it's helping to onshore some of that testing process. We do want to make sure throughout all of this that there's much more trustworthiness checks along the way.
Speaker 1:That's very interesting. Jordy, do have anything else on this?
Speaker 2:No. I'm I was I was very excited to see the news from last week or or maybe it was the week before just because I even processing the drone industry and even the consumer drones personally personally, I think drones are are great. I've seen drones that that have captured some cool footage of snowboarding or surfing and all these things. But the idea of having, you know, millions of, you know, if you could ask any foreign adversary government, hey, would you like to have millions of, you know, flying cameras in in one of your geopolitical adversaries within within their borders, they would say like, absolutely. That's that sounds that sounds great.
Speaker 2:Let's do that. And so the idea that let that we were gonna let the same thing happen that we the the the thing that we let happen in drones, that we would let that happen with humanoids, are much more of a risk to me. They can actually have the the, you know, they're not they're not they're not very significant today, but they can have a real effect on the world. And the idea that we would allow, you know, millions or eventually even billions of these into our borders just was very concerning. So personally, I'm I'm glad that you guys took action.
Speaker 1:I'd love for you to explain the e rate program, what's going on there with school Internet. I think it's under discussed story. What what sounds very good on the face of it. You want students in America to have Internet. How are things changing?
Speaker 1:What's the history of the program? What's the story going forward?
Speaker 6:This one's interesting. So this country over the last couple of years, I think we really experimented with going all in on screen time for kids, and the results of that are starting to show themselves. And the results aren't great. I mean, we have actually gone through one of the most significant losses of sort of human capital from a learning perspective that we've basically ever seen. I mean, going back to almost the the dark ages when you look at some of the the decline in test scores.
Speaker 6:And and to some extent, I don't know if it's, you know, correlation or or otherwise, but it it it coincides with this big uptick in screen time. And the FCC has a role to play. Mhmm. We fund Internet connections and, to some extent, internal connections at schools all across the country, multiple billions of dollars a year. And so we've done a top to bottom review of our program to make sure it reflects the current research on screen time for kids.
Speaker 6:And it's not just us. Obviously, you're looking at a big movement around the country. Different states, different school districts are all starting to say, you know, maybe put the smartphones away. Maybe put the screens away. When you got young kids, kindergarten, first grade, they're just swiping all day.
Speaker 6:Idea of this
Speaker 2:program this school nearby me, elementary school in PE, they spend more than half the time on iPads looking at physical exercise like diagrams. I'm like, these are children. Maybe just let them run around outside. Stupid. Yes.
Speaker 2:Exercise. Yeah. Odd. It's like we've gone too far.
Speaker 1:Get us up to speed on what's happening with Starlink and other space based internet connectivity programs. It feels like much to the benefit of the American Internet consumer, the race is heating up. There are more companies launching constellations. What are your KPIs? What do you want to see?
Speaker 1:Is it faster approval times for new constellations? Clarity around who owns what spectrum? Smoother auctions? Like, what is on your to do list for the next couple of years?
Speaker 6:Yes. A little bit there that we're doing on every of the points you hit. So for one, president Trump came in and gave a very clear direction. He said he wanted the The United States to lead the world again in technology. And in space in particular, we're now seeing that.
Speaker 6:So there's this new technology called direct to device where you can go straight from your smartphone right to a low Earth orbit satellite. You don't even need that little Starlink Mini or other satellite provider dish near you anymore. It's just starting to emerge. But we're putting the regulatory framework in place at the FCC for that to succeed. One, that means more spectrum.
Speaker 6:You need new airways for that technology to work. We've been facilitating many transactions to do that. Starlink, that was a big chunk of spectrum. Amazon is buying another company called Globalstar to basically take their spectrum and use that for their own version of direct to sell. And then inside the FCC, we're taking our space bureau, which historically processed applications for a lot of this stuff, and they would review individual applications and long narratives.
Speaker 6:It'd be very subjective. We've scrapped that entirely, and we've replaced it internally with an assembly line where we give you clear rules of the road. If you hit these targets, your applications will be on the fast track, and you're gonna go. Because, again, look at the the launch cadence. Look at the amount of mass going into orbit.
Speaker 6:We gotta keep up with that. And this is some place that I'm just super excited for the country, this hard tech area, these you know, the kids from the Gundo that are now everywhere outside the Gundo as well. I mean, what they are doing right now is a, I think, a huge part of the future of this country, and we wanna make sure the FCC is not sand in the gear when they continue to innovate the way they are.
Speaker 1:Does what does the FCC have any other roles to play in that? I mean, we've seen like every day there's a company, a startup that's coming on to announce an LOI or some sort of deal with a different piece of the government. Are there any other ways for the startup ecosystem or the tech community to interface with the FCC beyond, okay. I got approval for this thing.
Speaker 6:Yeah. We're working across the board to make sure that, you know, whether you're big or you're small, medium sized company, that you can get a yes or no answer from the FCC. And part of that is just getting rid of dead wood. So we started this proceeding at the agency called delete delete delete, which is about going through every single page of our rule books and getting rid of anything we don't need. Mhmm.
Speaker 6:We've obviously sort of resulted in, you know, thousands of words being taken out. I think 400 pages have been removed from our code of federal regulations already just so that, you know, whether you're small or unsophisticated, it should be much easier to engage with the government. We've cleared the application backlog in space, you know, by about 50%. So we're seeing some good results there for everyone to engage with the agency.
Speaker 1:That's very exciting. Jordy, anything else?
Speaker 2:Not for now, but let's do it again soon.
Speaker 1:For coming on the show. Have a great Honor to
Speaker 2:have you.
Speaker 1:Day. Have a great week, and we'll talk to you later.
Speaker 6:Good to see you guys. Thanks.
Speaker 1:Good to see you. Bye bye.
Speaker 2:SpaceX had earnings. Oh, yeah. How'd they do? Let's see first ever earnings as a public company.
Speaker 1:I Up 10% right now?
Speaker 2:Nope. Down Down Well, 5%. Was 9% today. Point 4% Down. Four and a half percent after hours.
Speaker 1:Okay.
Speaker 2:First up, SpaceX announces a new partnership with NVIDIA to design its Starmind AI one payload, bringing data center class compute into orbit. That makes a lot of sense. Let's find some actual numbers.
Speaker 1:So revenue was 7,810,000,000 versus 6,930,000,000 expected. Loss per share was 9¢. Average analyst estimated a loss of 26¢. Revenue jumped 92% from $4,100,000,000 a year earlier. So huge, you know, you're, even at this scale, still doubling the revenue.
Speaker 1:And it's the first time Elon Musk's reusable rocket maker will face Wall Street in this capacity, and investors are jittery. SpaceX stock has dropped 12 per 16% since opening at a $150 a share on June 12. And SpaceX lost 4,900,000,000 last year largely due to heavy investments in artificial intelligence, which we've discussed. The company merged with Musk's x AI in February. CNBC reports saying that at the time, the vision was to build data centers in space, but the launch business, which counts on large contracts from NASA, is losing money.
Speaker 1:Most of SpaceX revenue for the year and its only source of profit came from its connectivity segment, which consists of its Starlink Internet service. Starlink is sold directly to consumers. So here's how SpaceX performed in the three key segments. For space, they brought in nine sixty two million dollars versus $835,000,000 which was expected. So they beat in space.
Speaker 1:On connectivity, they brought in $4,290,000,000 So the Starlink business is four more than four times the size of the actual launch business. They brought in 4,290,000,000 versus 3,830,000,000 that was expected, so they beat there. And on AI, they brought in 2,560,000,000 versus 2,180,000,000 expected. So beats across the board and very interesting to see that the thing that they started doing, space, of course, launching rockets, is now their third largest line of business. Connectivity is, of course, bigger and also AI is bigger.
Speaker 2:Everything is computer, John.
Speaker 1:Everything is computer. That is a good summation of it.
Speaker 2:And that's good place to end our show.
Speaker 1:Let's play you out with the most feared lawyer, John Quinn. Leave us five stars in Apple Podcast and Spotify. Sign up for our newsletter at tbpn.com, and we'll see you tomorrow at 11AM Pacific. Goodbye.