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Technology's daily show (formerly the Technology Brothers Podcast). Streaming live on X and YouTube from 11 - 2 PM PST Monday - Friday. Available on X, Apple, Spotify, and YouTube.
You're watching TVPN. Today is Friday, 04/18/2025. We are live It is. From the Temple Of Technology, the fortress of finance, capital capital. This show starts now.
Speaker 1:We're gonna take you through some of the headlines. We wanna give you the top 10 news stories that we're following, and then we'll break it down. We'll go some deep dives. We'll get some guests, and then we'll give you some timeline. So number one, AI startups soaked up a record 58% of global venture capital money in q one twenty twenty
Speaker 2:five. John.
Speaker 1:'70 '3 billion dollars flowed into AI companies, more than double their share a year ago as investors chase generative AI growth. Every founder, every every founder has found a way to wrap their narrative in AI, and every VC has decided Put
Speaker 2:a little AI on it.
Speaker 1:Little little cherry on top.
Speaker 2:And the good thing here is that there's a lot of revenue growth across
Speaker 1:this sector.
Speaker 2:I don't know, you know, the the investment is certainly outpacing Yep. Revenue by a long shot, but that is the function
Speaker 1:of risk. And we have a deep dive, story a little bit later about how some big companies like Johnson and Johnson tried a bunch of stuff with AI.
Speaker 2:Generative Johnson.
Speaker 1:And then generative Johnson. And then they and then they're starting to pull back, and that's causing churn. And so that should give us some more in kind of just insight into how the AI market and how sticky these deals are, how easy it is to get a Fortune 500 company, to buy your product, but then it's harder to get them to stick stick around for a long time. So, the second stop story is NVIDIA Jensen NVIDIA's Jensen Wong made a surprise trip to Beijing right after The US chip curbs, the new the new restrictions on the h twenties.
Speaker 2:Strange timing, but I'm sure he had to well, it it makes sense, but
Speaker 1:It is strange. I mean, in the sense
Speaker 2:that interesting signal.
Speaker 1:The yes. The the the headline from the h twenty news was basically like, look. It's over. It's completely over. It's never been more over.
Speaker 1:Yeah. Stop selling anything to China at all.
Speaker 2:But he's probably over there basically
Speaker 1:But that's not actually the rule. Like, the rule is, you know, in in NVIDIA, we've heard this again and again. If the speed limit's 55, we're gonna go 54. If the speed limit's 45, we're gonna go 44 miles an hour. But we are going to go as fast as you let us.
Speaker 1:We will never break the rules, break the law. But we're going to do it.
Speaker 2:Walking speed, we're gonna get our steps in.
Speaker 1:We're get our steps in. Yeah. And so, you know, this this this discussion could be, hey, gaming GPUs aren't banned. Can you do AI stuff on Well, can you do AI stuff on gaming? Absolutely.
Speaker 1:I trained a a custom version of stable diffusion on a PC that I built with two ten eighty, I think ten eighty TIs, like pretty old. But they had like eight gigs of RAM. It was pretty fine. There were a bunch of there were a bunch of models that you could fine tune and run locally on on gaming graphics cards. And so if if the name of the game is just is just get some sort of AI system inferencing, you can distill these down pretty pretty small.
Speaker 1:And I think that that might be a bit of a narrative going forward. I mean, Apple intelligence, you know, not a great product, but it's been able to run inference of LLMs on phone hardware. And so Yep. If if NVIDIA can still ship something to China, it still is an important part of the business, and they will continue to maintain that relationship, I'm sure. And they have employees and manufacturing and all sorts of stuff on the ground, I'm sure.
Speaker 2:And despite the visit, Nvidia was down another is down, according to public, another three ish percent today.
Speaker 1:Not great.
Speaker 2:So not great.
Speaker 1:But I also want you to check the the how Google is doing in the markets because The US Judge rules Google illegal monopoly illegally monopolized key digital ad markets. We talked about this on yesterday's show.
Speaker 2:Down 1.3%.
Speaker 1:Okay. What's the market doing overall?
Speaker 2:Probably something similar.
Speaker 1:Okay.
Speaker 2:Doesn't feel super significant.
Speaker 1:Yeah. And Google will appeal this. That was something that we talked about on the show yesterday. It does open the door to possible breakup remedies and briefly knocked Alphabet shares before a partial rebound. OpenAI and SoftBank's Stargate project eyes The UK for part of its $500,000,000,000 data center build out.
Speaker 1:This is kind of an interesting twist because the whole pitch for Stargate was like, we're gonna spend a half a trillion dollars in America.
Speaker 2:America.
Speaker 1:It was announced They
Speaker 2:even got the president Yep. Of America Yep. To, you know, come out and basically do a keynote for So, anyways, fascinating. I mean, it makes sense. Yep.
Speaker 2:The UK is an ally, so they should have great data centers as well.
Speaker 1:I guess. I I I don't really understand exactly where this is going. We'll have to dig into that more.
Speaker 2:But It could be a it could easily be a capital Play. Play. Right? If they're trying to raise $500,000,000,000
Speaker 1:Yep.
Speaker 2:That's a huge number.
Speaker 1:Yep.
Speaker 2:If they went to variety of sort of institutions in The UK and say, hey, we'll make The UK a part of Stargate so you can have you guys can have some type of AI narrative Yep. But you need to put out
Speaker 1:I guess the $1,000,000,000. Yeah. The 1 the one thing that we've seen time and time again is these deals are extremely flexible. Right? And so Yeah.
Speaker 1:It it can be it can be you we're buying from you. You're buying from us. You're getting equity. You're getting tokens. You're getting all sorts of different stuff.
Speaker 1:And so could you see a world where Europe is trying to develop AI supremacy, and so they pay for a huge portion of this AI data center, but there's kind of like a rofer where they can buy it out and use it for their own model in the future, and that it justifies. And that meets their their goal of, like, you know, nationalist power around AI. Just having the the mega project built in their country, even if that's, you know, serving American company right now, maybe it grows into something bigger over over time. I don't know. Yeah.
Speaker 1:But on the other side of the yeah.
Speaker 2:Yeah. Did you did you were you diving into this too? Just that it it could be, like, an EU wide thing where everybody's kind of pitching to get get a part of the project.
Speaker 1:Yeah. Yeah. No. No. It makes sense.
Speaker 1:OpenAI also debuted flex processing to have API costs for nonurgent jobs. We saw this with the with the o three and o four mini models. This trade slower responses and occasional occasional downtime for a price cut. We saw Mike Newpe over at Zapier and ArcPrize talk about this a little bit with the when they beat when a when OpenAI beat Arc AGI one, the precursor eval, it cost something like I forget. It was like it was like thousands of dollars per task.
Speaker 1:They had to really, really throw a ton of reasoning tokens at it to get it done. And so a lot of these models, there's always this they're always trying to be better. And people really only care about the better models, but they're also trying
Speaker 2:to cut costs. A lot of work.
Speaker 1:There's like a huge amount
Speaker 2:of work gets done that doesn't need to be done in real time. Totally. Like, it's amazing that these models can do, like, a deep research report Yep. In, you know, a minute. Yep.
Speaker 2:But it's great. It's it's equally valuable to basically, you know, send a request and just say, like, yep. Sometime, you know, tomorrow morning would be great. Just have it have it to me by tomorrow morning, but, like, you know, deliver it in the most efficient way. So I can easily see that becoming a huge amount of of their kind of like, API calls over time.
Speaker 1:Totally. Databricks bought incremental computing engine, Fennel, to turbocharge real time feature engineering. We've talked about Databricks a little bit. They the the the goal here is to promise faster model iteration and lower compute bills for streaming ML pipelines, somewhat related to the flex processing going on in OpenAI. I'd to dig into more more into Databricks as they prepare to potentially go out.
Speaker 2:Yeah. And Fennel's only a three year old company.
Speaker 3:Haven't been
Speaker 2:around for a long time. Once you go on long a lot more of this happening. Right? It just makes sense. Windsurf is a, you know, the most prominent recent example, but I can see a lot more of these deals happening where, you know, great great early teams realize that they can do a lot more as part of a much bigger platform.
Speaker 1:Yep. Two two Apple headlines today, the iPhone 16 e was successfully made in Brazil. And so this is kind of a leak, but there were some retail boxes that were spotted by Mac Magazine showed assembled in Brazil, signaling that Foxconn's Sao Paulo plant is producing the latest entry level model to hedge tariff risk. And so Apple and Foxconn have been Yep. On the case for a long time.
Speaker 1:It is interesting
Speaker 2:because Yeah. And this is a Taiwanese company going international. Right? I think people have this idea that they they always associate Foxconn
Speaker 1:With China.
Speaker 3:With China.
Speaker 1:Yep. Exactly.
Speaker 2:Foxconn is out of Taiwan and still headquartered in Taiwan Yep. And has, you know, global ambitions, which I think is good. Right? It's for Foxconn to set up production somewhere new than, you know, a new kind of, like, subcontractor.
Speaker 1:It's also interesting be honest. Brazil specifically has not been in the conversation that much. People are talking about Vietnam, India. But if you go back to, like, the original BRICS report that was put out by Goldman Sachs, that was Brazil, Russia, India, China. These were the emerging markets that Goldman said would be major, major contenders in the coming two decades.
Speaker 1:Yeah. And then you I think that that report was probably published around 02/2005 or something. And it looked like they kind of got it wrong because it was just China, China, China, China, China. Yeah. Like like Brazil didn't really do too much.
Speaker 1:Russia obviously kind of turned inward. And India did okay, but no was nowhere near on the same scale as Yeah. As China in terms of like You were
Speaker 2:a dominant big gong.
Speaker 1:Exactly. Yeah. Big gong. Have a we have a giant gong in the studio now, but we are
Speaker 2:not really We're not debuting it today. Can I debut maybe the
Speaker 1:The sound?
Speaker 2:No. Just the
Speaker 1:Oh. Oh, yeah. Yeah. Show show the mallet. You have to show.
Speaker 1:So this is the this is the old mallet. This is the old mallet. And that's the new mallet. It gives you an idea of of where we're going with the gong, the scale of
Speaker 2:the
Speaker 1:gong.
Speaker 2:Look at the Yeah. I mean this thing is
Speaker 1:were up at at 06:30 in the morning and Jordy was I was waking up all
Speaker 2:of Los Angeles with this gong.
Speaker 1:It was so loud. It's great. Anyway, I'm very excited to roll that into the show as we as we keep improving things. Anyway, the other Apple leak, a lighter Apple Vision Air headset will use titanium and launch in midnight black. Not a huge leak.
Speaker 1:We kind of knew this was coming. Obviously, they need to make it cheaper and lighter. Carmack has said this. Everyone knows this. But it but they are working on it.
Speaker 1:And every time you see these leaks, it's just a reminder.
Speaker 2:Hey. Lighter and cleaner. They're dropping the pro Yep. Branding.
Speaker 1:Yep. And they should definitely there. Yeah. I I wonder if titanium is really the lightest thing. Like, I've I've with this, I think it's just like light at all costs.
Speaker 1:Like, if titanium doesn't sound super light, but I don't know. I would probably go aluminum or something. But We'll wait till they get more shine than I do, for sure. And we'll have to have big screen back on when when it drops to give his the founder of big screen to give his take as he dukes it out in the VR market. Yeah.
Speaker 1:Anyway, new Dwarkash Patel show dropped. Very interesting. Taking the exact opposite approach as the AGI twenty twenty seven.
Speaker 2:AI twenty
Speaker 1:twenty seven. AI twenty twenty seven.
Speaker 2:Yeah.
Speaker 1:So the AI twenty twenty seven guys came on, they're like, this is happening in in eighteen months, I get I mean, 2027 is is is eighteen months away. Yeah. It's it's so close. And they forecast it all out, and it's very, you know, kind of doom and gloom. But then he he he dropped this three hour episode, which you should go listen to, talking about how AGI is really more like 02/1950, more than thirty years away and whatnot.
Speaker 1:And it was very interesting to hear about some
Speaker 2:of And the big argument I haven't been able to listen to the whole thing yet is that reasoning is not intelligence.
Speaker 1:Yeah. I was thinking about that because the we love to reduce these things down into, like, very pithy statements, like attention is all you need. I was thinking about that. Like, the attention mechanism of the transformer, it allows the it allows the neural network to focus on specific subparts of the input. So you give it a picture.
Speaker 1:Typically, most image generation algorithms, like, all the compute is spread across the image equally. But that doesn't make sense because as soon as you get an idea that it's like, oh, I'm trying to actually identify if there's a cat in the corner. So I know that there's a blurry animal in the corner. Let me zoom in on that, essentially. It's essentially zooming in is like kind of what attention is.
Speaker 1:Somebody's gonna correct me, but it's close. It's this idea of attention allows the neural network to focus on the most important aspect of the computational problem. And it's very clear that attention is not all you need when you're talking in the context of AGI, like just the transformer. We scaled up the transformer. That's the raw LLM that's just next token prediction.
Speaker 1:We had to drop tool use on top of that. We had to drop reasoning on top of that. We have to drop memory, databases, internet queries, search engines. Like, we have to we have to use all of these tools together. So attention is not all you need.
Speaker 1:And same thing with scale. Scale probably isn't all you need. You probably also need some algorithms in there, some some like novel design of these things. And so it seems like there there are definitely like breakthroughs that need to be, you know, worked on until we fully get to AGI. But it's fun to to track.
Speaker 1:And and I and I I can see it's it's more definition it's more like a debate about definition than anything else. Like, they can be correct and Tyler Cowen can also be correct, which is why it's fun to debate this stuff.
Speaker 3:Yep.
Speaker 1:And the last, rumor that was going around, Elon Musk actually said this is not true, but, Reuters did report that, that SpaceX, Palantir, and Anderol, are talking to the US government about a Golden Dome project, which I think Trump mentioned a while back.
Speaker 2:He likes the idea of. We know that.
Speaker 1:I mean, it's a great brand. What's interesting I mean, I I wanna dig into this because we so so the the the the claim is that they're they're pitching between 400 and a thousand tracking satellites plus 200 armed satellites. So you put a bunch of satellites up in low Earth orbit. They track missiles, that are potentially coming into The United States. If if somebody's sending a missile to, you know, TBPN HQ to take us out, The one of the armed satellites Don't even think about it.
Speaker 1:Would go into action and blow up that missile before it can blow us up. Right? Yeah. Pretty basic. This is one of those things that comes out of like, wait, you guys aren't already doing this?
Speaker 1:Like, I would really appreciate if this already existed.
Speaker 2:I mean, some forms of it already exist.
Speaker 1:But but so so we can actually go through the whole history of the, like, domes generally, I guess. Because I think it's really interesting if we have some and we have some the first guest is, coming on at 12:30. And so I think we should run through, history of Golden Dome, Iron Dome. What do think? Let's do it.
Speaker 1:Okay. So, the US Department of Defense formally launched the Golden Dome plan in April of twenty twenty five. Do you want to share this with you?
Speaker 3:Yeah. That'd be great.
Speaker 1:Let me let me send this over to you. In 2025 how do I copy this link? There we go. Send to Jordy. Boom.
Speaker 1:There we go. And the and and, basically, the plan is to ring the planet with hundreds of sensor satellites and roughly 200 space based interceptors capable of shooting down ballistic and hypersonic missiles in their boost phase. SpaceX Palantir and Andoril are currently the leading industry team, which is I mean, it's just like a wild combo of companies. Right? Because it's like all FFs.
Speaker 1:Like, which is why I should I I I actually don't know anything about this. And and, you know, I think all of these companies would would decline to comment on speculation, and I have no inside information here. But I'm excited about this, so we're gonna talk about it anyway. So, of course, there are other subcontractors on stuff like this. There's more than a 80 firms ranging from Lockheed Martin, RTX to newer startups vying for pieces of the project that may be may cost well over 300,000,000,000.
Speaker 1:So Golden Dome revives the now, Jordy spent time to make the loudest gong hit in history if he he can't control himself. So the, do do you remember Star Wars? This was Ronald Reagan's nineteen eighty three Strategic Defense Initiative. And he was like made fun of for this because everyone was like, oh, stupid president thought saw Star Wars and wants to build laser weapons in space. But like, it was actually Probably a good idea.
Speaker 1:Like a good idea. Exactly. And so, the this and so so so Golden Dome is kind of like re re revising that plus what the The United States already has, which is called the layered homeland shield, I guess. The the Patriot, the THAAD, the Aegis BMD, ground based mid course defense. And so let's go into the Israel's Iron Dome and how that And then we will contrast that with the American current situation and then where we might go.
Speaker 2:Yeah. So I'll give some backstory After the two thousand and six Lebanon war showered Northern Israel with roughly 4,000 rockets, The Israeli Ministry of Defense rushed development of Iron Dome jointly built by Rafael Advanced Rafael. Rafael Advanced Defense Systems and Israel Aerospace Industries with Raytheon providing US co production. The system entered service in March 2011 and scored its first combat intercept two weeks later. Quick turnaround.
Speaker 2:Since then, Iron Dome has logged over 5,000 successful kills with a claimed 90 success rate. So those kills are missile kills. So this is a missile defense system, to be clear. So US financing has been decisive, divisive.
Speaker 1:Yeah. A lot of people don't like that America's paying for Israel's golden dome. But of course, there's like all the strategic decision making about, well, they're an ally in a very complicated area, complicated region. You put you back them. Also, there's a lot of Israeli citizens that come to America.
Speaker 1:We wanna support them and stuff. So we're we're not gonna go into all the geopolitics of it.
Speaker 2:But Yeah. Congress has spent about 1,600,000,000.0 between 2011 and 2021, plus another 1,000,000,000 emergency tranche in 2022.
Speaker 1:But I think what should be noncontroversial and nonpartisan is that, hey, if we've invested a ton of money in this technology, we should get a claim on some of this IP. Yeah. We should
Speaker 4:be able
Speaker 1:to bring that back, and it should be able to protect
Speaker 3:Yep.
Speaker 1:And and I think that that's probably something that most people would be in favor of.
Speaker 2:So in exchange, the US Army gained two Iron Dome batteries for limited homeland Exactly. Expeditionary use and early experiment in importing allied systems. Exactly.
Speaker 1:So they build it there, they test it there,
Speaker 2:then point
Speaker 1:it back to
Speaker 2:us. Anyway, so the key takeaways for, you know, I think, you know, basically the takeaways that
Speaker 1:Yep.
Speaker 2:That the Golden Dome will will you look to implement a software first design, enables basically like rapid updates to the system. Yep. Networked launchers, radars, and battle management lets operator operators mass interceptors at the most dangerous threats, basically like conserving effectively ammunition and just this constant pressure.
Speaker 1:Oh, this is yeah. This is interesting.
Speaker 2:It's forcing iterative improvement in a way that a US system just never would.
Speaker 1:Because America's famous for the exquisite system. The f 35 took 2,000,000,000,000 in thirty years because, like No. I think it's not like it's not like, oh, f 30 fives are blowing up and getting shot down constantly. So we gotta better.
Speaker 2:But it's also like we don't have Canada and Mexico constantly launching rockets Yeah. Into The US. Yeah. If we did, we'd be able to iterate really quickly.
Speaker 1:We're in the we're in what what the fat on the couch era, and we're going to get back in shape. And so this is this is us getting back in shape. And so giving a little bit of history on how America thinks about this. I mean, obviously, there's a there's a few different layered shield systems that have that have built up over time, but it all goes back to that Reagan strategic defense initiative, aka Star Wars, announced on 03/23/1983. The idea was space based lasers, which sound crazy, but kinetic inter interceptors, which actually makes a lot of sense, and exotic sensor webs to render nuclear missiles obsolete.
Speaker 1:Cult congress ultimately spent roughly $30,000,000,000 in current dollars on prototypes such as brilliant pebbles miniature interceptors and alpha chemical lasers, but the collapse of the Soviet Union and severe technical hurdles led to program curtailment by 1993. So, of course, like, can you imagine how difficult it would be to put how expensive it it is to put, technology, lasers, interceptors, drones, anything like that into space when you don't have SpaceX launching a new rocket every single day? Like, you have to use NASA for that. It's extremely expensive. Yeah.
Speaker 1:You just don't have the cost the cost to LEO so that you can't iterate or anything like that. And then also, a lot of these a lot of these, like, you know, drone based systems were not really developed yet. And so all of it was a little bit too early, but it did seed today's hit to kill technology infrared sensors and the political idea that The US could defend rather than simply deter against nuclear attack. Yeah. And so the Golden Dome has this, like, kind of potent this is all kind of rumor at this point, but you can think about two different layers to the Golden Dome Dome, like, core.
Speaker 1:So two ring satellite constellations, wide field tracking layer, that's 400 to, like, a thousand satellites. CubeSat class, which is like star think like Starlink, in 500 kilometer orbits provide a global persistent infrared coverage, PIR coverage, queuing interceptors within seconds of a hostile launch. So basically, you put up all the different sensors and you're and then you're seeing is are there any missiles that are launching? Then the shooter level is a larger platform to carry kinetic kill vehicles, KKVs.
Speaker 2:And this is a cool part.
Speaker 1:Class solid state lasers. Laser. They're actually doing the laser thing, allegedly. This is all alleged. Yeah.
Speaker 1:But but yeah. Lot can destroy can destroy missiles fifty to a hundred and fifty seconds after boost.
Speaker 2:Yeah. And a lot of what the the real role of deep tech is to turn science fiction into reality. Right? And so this this is sort of crazy conceptually. Yeah.
Speaker 2:But if it's, you know, if if effective, it will be extremely cost efficient way to mitigate the threat of, you know, ICBMs and and
Speaker 1:Also, there's this rumor that it will be offered on a subscription model. Did you see this? So
Speaker 2:so Elon's like, hey. Starlink's actually a pretty good model.
Speaker 1:Yeah. People
Speaker 2:on, they don't really churn.
Speaker 1:But it also makes sense then as opposed to building, like, this exquisite system. Like, it really is it sounds funny, but it is it is a reasonable way to to finance this type of development, and the ongoing upkeep and the and the iterative improvement of it. So the missile defense agency issued its first industry sought, sources sought notice on 04/04/2025. I think that's probably what's driving the news today, calling for concepts that can just that can demonstrate initial boost phase intercept by 2026 and expanded capabilities through 2030. The Space Force will own command and control.
Speaker 1:And so, like, the companies that build this stuff, whoever they are, might be SpaceX, Palantir, Andoril might be completely different companies.
Speaker 3:But Yeah.
Speaker 1:They're not going they have their finger on the trigger. Yeah. Command and control operates with the space yes. Yeah. Because we are a democracy.
Speaker 1:Yeah. And and this was something that was it it became a point of debate with with Star Shield and Starlink. And so there was a moment where Starlink was so dominant and there was no real path for the US government to buy Starlink in a meaningful way, like buy it as a capability, not to buy the company. And so people were saying, well, if Elon turns on Starlink in the Ukraine, that's helping Ukraine. If he chooses to turn it off, that's hurting Ukraine or Israel or Taiwan or any of these countries that are in geopolitical conflict.
Speaker 1:And so all of a sudden, the decision about our geopolitics actually rests with his business decision. And so that is something that should, I think, be decided democratically through America's normal process for how we engage with allies and adversaries. It should not be a purely economic consideration for the company that just wants to maximize shareholder value because you could imagine, you know, if you're just trying to maximize shareholder value, you're like, yeah. Okay. We're gonna turn Starlink on for both sides of this conflict because we just wanna make as much money as possible.
Speaker 1:But so Elon got all this intense, like, criticism. Oh, Elon's just playing like, you know, God and like, you know, he's deciding what's going on with this war. He shouldn't have that much power. But I always said, like, that's not gonna be an issue because the the US government will just be able to buy it as a capability, and they wound up doing that. Yeah.
Speaker 1:That's Star Shield. And then and then it's actually like a more more secure version of it, and it's something that the US government then decides. And this is gonna be the same thing
Speaker 4:where Yeah.
Speaker 1:It's leveraging technology from private citizens that have been developed, but ultimately, the decision of how it's used, the command and control, rests with the with the the government and ultimately the American people, which is great. So the government will pay an annual service fee rather than buying hardware outright, which sounds funny because now it's like SaaS, but it's way better that way because, of course, then you can upgrade and you can iterate and you can improve.
Speaker 2:Yeah. And these annual service fee proposals seen by Reuters so far, which again, Elon denied it.
Speaker 1:He denied it.
Speaker 2:Yeah. Suggests a thirty year life cycle that could reach $600,000,000,000
Speaker 1:Wow.
Speaker 2:Roughly equivalent to three years of the entire US defense budget. So really eye watering numbers.
Speaker 1:Yep.
Speaker 2:But makes sense in the context of, you know, preventing full scale, you know, nuclear
Speaker 1:Totally.
Speaker 2:War and having, you know, hundreds of ICBMs flying through the sky is effectively in the interests of all of humanity.
Speaker 1:I agree. So I agree. Take out all of them. Of course, it gets more complicated because everything that's like the line between like defensive technology and offensive technology is pretty loose, So it's like if you can build this like KKV vehicle or secrecy vehicle that can or lay space laser that can shoot down a missile. It can also shoot down like a seven forty seven with, like, the president on it, or it can shoot down, you know, an an adversary or can conduct an assassination.
Speaker 1:So Yeah. Like, you still have to, like, even if you even if you create the best Golden Dome possible and make make nuclear war a thing of the past, like, you will still have the risk of conflict. Right? Yeah. And so you always need to come back to just, like, how we actually resolve these conflicts.
Speaker 1:Interesting to hear a little bit about who how how all these companies could fit together, hypothetically. Obviously, SpaceX has launched the cheapest mega constellation with Starlink. And they also have the Starlink bus, which is like the platform that Starlink is built on. So they could easily swap out Internet for, I guess, it's infrared. Yep.
Speaker 1:And then just start spamming those up there on the subscription, which is Yeah. Exact actually, how I would describe their their approach to to putting up Starlink satellites. It it is just spamming them up there, but it's great. It works really well. And I'm sure there's a lot of work that goes into positioning them perfectly and whatnot.
Speaker 1:But so they'd be, like, potentially the prime integrator, the Falcon nine, r, and Starship launches would be putting up these satellite buses.
Speaker 2:But there's this is gonna be a huge collective effort. Right? There's so many different primes that are, you know, wanting to participate in this. You have the new primes, the Palantirs, the Andorolls, and then you have Lockheed Martin, Northrop Grumman, RTX, which is Raytheon, Boeing. Boeing has a bunch of heavy satellite experience.
Speaker 2:Raytheon has a bunch of relevant experience. Northrop Grumman is like For sure. You know, very oriented around these Kills vehicle codes designed. Yeah. Has built missile interceptor products in the past and
Speaker 1:And a lot of and a lot of rocket motors too. Yeah. So if you want to deploy some sort of missile from the from like a satellite platform, actually building that rocket motor. Yeah. They have they do have a heritage there.
Speaker 1:There's good things you could say about them. There's things where they're falling behind.
Speaker 2:And Northrop actually had a huge explosion I saw that. On April 16. Druva had a post yesterday. I'll just pull it up on on my computer, but he said a real setback for America. This rocket motor plant was such a pillar of national security capacity that Northrop had agreed to be a supplier to Boeing in a competition to build the LGM 35 a Sentinel, a key part of The US nuclear triad.
Speaker 2:So anyways, unclear if this explosion was just an accident or if there was something else going on. These types of facilities are are super dangerous. But again, this is Northrop and Boeing already being a they they were basically leveraging this facility to to contribute to The US nuclear sort of defense apparatus.
Speaker 1:Yeah. It's it can be dangerous stuff. So more than a 80 firms responded to the April industry day, including laser specialist, General Atomics, L three Harris for space radars. Everyone shows up. Even AWS and make and Azure, Microsoft showed up, said, hey.
Speaker 1:Yeah. We got the data back end covered. And it makes sense. This should be bipartisan. Like protecting us from nuclear war.
Speaker 1:Is amazing. And and I'm very excited to to to learn more about this. And I I it it's always tough because, like, they are probably not gonna tell everyone everything. Right? Because it's gonna be classified and, like Yeah.
Speaker 1:Because as soon as you say, this is exactly how it works, well, it's easy to start shooting them down and taking them out and defend and figuring out what the what the anti missile, the anti anti missile is. Right? Yep. So anyway, know, it'll be interesting. In terms of just the history of missile defense, in the 1960s, we have the Nike, Zeus, and Sentinel.
Speaker 1:These are silo based sites. And, so you'd like, you know, we gotta fire it off from the ground. Yeah. 1983, we see SDI Star Wars. The tech was premature, but they did create the idea of, like, this IR sensor and KKV field, which is kind of the modern strategy, I think.
Speaker 1:I I I think that we're not we're not reinventing the wheel on that. We're just using the latest technology and actually being able to get it to scale. And then, of course, the the Iron Dome is kind of like the gold standard here until the Golden Dome becomes the gold standard, hopefully, because it's been combat validated with 90% greater success. And so I know. Think we should keep following this story.
Speaker 1:It'll be interesting to see where where it lands and how much we learn. I mean, the very least, it will be I think it might be more of a business story than a technology story because I think a lot of the technology will be classified effectively. But we will be start like, as I mean, Palantir is a public company. So if there is a big award, it will show up in their earnings. Yeah.
Speaker 1:And that's cool. And that will drive the market. And that that's interesting to follow.
Speaker 2:Yeah. And it's coming at a very interesting time. Obviously, Reagan's Star Wars program and campaign was was made fun of in many ways partly because of the name. Golden Dome will be made fun of too because it's a kind of a funny name.
Speaker 1:Right? It's
Speaker 2:almost. But at the same time Yeah. It's coming at a time when the commercial space economy is flourishing. Yep. We're putting stuff into orbit every Like
Speaker 1:the technology is so much more mature.
Speaker 2:And so the timing feels right. And over time, this could replace a bunch of systems on the ground that are very, very, very costly and to, you know, create and maintain.
Speaker 1:So Well, if you think the legacy primes are gonna do well, if you think Palantir is gonna do well or vice versa, you can go express your opinion, your your independently formed opinion on public.com investing for those who take it seriously, multi asset investing, industry leading Got everything. By millions.
Speaker 2:You got pretty pretty much every asset on there.
Speaker 1:Pretty much every asset on there. And we gotta do another ad ramp. Time is money, say both. Easy to use corporate cards, bill payments, accounting, and a whole lot more all in one place. Back to back.
Speaker 1:We should get it. But we gotta move on to Johnson and Johnson.
Speaker 2:Card reader here to just swipe.
Speaker 1:We have a card reader. We we ordered one for a shoot that we did. And I and I got some very nice cinematic shots with Ben for the card reader. There we go.
Speaker 2:Well, let's talk about generative Johnson, John.
Speaker 1:Generative Johnson. So Johnson and Johnson is making a shift to focus only on the highest value generative AI use cases and shut down pilots that were redundant or under delivering. And this is big news because a lot of companies have probably sold huge generative AI transformation projects into all sorts of companies, and we'll see how many stick around. Yep. And so they used to previously, Johnson and Johnson was experimenting with generative AI pretty broadly across the healthcare conglomerate, and now they're taking a more focused approach.
Speaker 1:They want everyone to know
Speaker 2:Let's try a bunch talk a journal about it. Let's try a bunch of stuff.
Speaker 1:Makes sense.
Speaker 2:Then See what's what's working well today. Yep.
Speaker 4:What would
Speaker 1:Double down on what's future.
Speaker 2:Then churn.
Speaker 1:Yeah. Churn. We hate to
Speaker 2:see churn. Anyways, so chief information officer Jim Swanson said the move ensures the company allocates resources only to the highest value generative AI use cases while it cuts projects that are redundant or simply not working. That was a pivot we made after about a year of learning, Swanson said. Now, we've moved from a thousand flowers to a really prioritize focus on Gen AI. The thousand What a funny a funny analogy.
Speaker 2:Golden dome. Thousand flowers.
Speaker 1:The thousand flower approach involved a number of use case ideas germinating from across the company, which made their way through a centralized governance board. At one point, employees were pursuing nearly 9,000 individual use cases, many that were redundant or simply didn't work, he said. And as the company tracked the broad value of AI, including generative AI, data science, and intelligent automation, it found that only 10 to 15% of use use cases were driving about 80% of the value, he added. Interesting. And I imagine yeah.
Speaker 1:I mean, I I'd love to know exactly what they're what they're what they're using. But you can imagine, like, you know, when all you have is a hammer, everything looks like a nail.
Speaker 3:Yeah.
Speaker 1:Let's throw a generator at But there's gonna be places that are like, oh, wait. We we still have a division that's just transcribing paper receipts or something. Yeah. Should just get on ramp.
Speaker 2:Yeah. So here's where it's working. J and J is drilling down into high value gen AI use cases around drug discovery and supply chains. Zach Weinberg might put the drug discovery one in the truth zone. As well as an internal chatbot to answer questions on company policies.
Speaker 2:So hard to hard to know if
Speaker 1:this is It's like, okay, chat with your company handbook, basically, which that's fine, but I don't think people care at all.
Speaker 2:Drag the handbook into ChatGPT? Enterprise enterprise version of ChatGPT in your Azure cloud and ask it questions. Yeah. Not probably something they're paying Yeah. For a standalone product for
Speaker 1:Sure.
Speaker 2:Or maybe will long term. It's hard to say. Sure. I know there's companies like Glean that have, you know, gotten to, you know, multibillion dollar valuations Yeah. Doing something like this.
Speaker 2:Yeah. Anyways, so It's also
Speaker 1:just funny because you know that, like, with a company like J and J, like McKinsey was, like, all over this being, like, with, like, millions of decks of, let's put it in this. Let's slide it in here. Let's do all this. Yeah. And and and then there's also there's just all the forces aligned to do 900 projects.
Speaker 1:Because Yeah. Anyone who's at Huge company. J and J and wants a promotion is like, well, yeah, I'm not just a marketer. I'm a technology enabled marketer. And I Yeah.
Speaker 1:My team is using AI. So we're gonna be more efficient. We're gonna drive more shareholder value. Then then you have the CEO who's like, yeah, oh, I gotta tell Wall Street an AI transformation story. Yeah.
Speaker 1:Oh, yeah. We're firing everyone. It's all AI.
Speaker 2:So very interesting.
Speaker 1:We're not doing it this quarter. We're not firing everyone this quarter. Like, AI is coming and you can you can price this into the stock today.
Speaker 2:It's interesting that they use a centralized governance board to lead the thousand flowers AI transformation.
Speaker 1:It's like the one thing you shouldn't do is just like instead just just diffuse the the research. I mean, I think the way you actually transform an organization is just say like, hey, everyone. Like AI exist. It's the Toby Lookkey approach. It's Shopify.
Speaker 1:It's like AI exists. Like whatever your job is, like, use ChatGPT. If you need to expense ChatGPT, it it it's the same thing as, like, Google exists. If you hired an employee and they didn't use Google, you'd be like, woah woah woah What what's going on with this person? Like, they need to be Googling stuff.
Speaker 2:Yeah. One example that is working is a rep copilot, which helps coach sales representatives on how to engage with healthcare professionals about new treatments.
Speaker 1:We actually use this to coach our sales reps on how to pitch the show to other to people that are listening to other podcasts.
Speaker 2:Yeah. And I think we have, know, our sales team isn't as big Yeah. As J and J, but it's close
Speaker 1:Yeah. Right? Dozens.
Speaker 2:As you, you know
Speaker 1:Yeah.
Speaker 2:Dozens of thousands, I think. But Yeah. Anyways.
Speaker 1:The company is piloting this in its innovative medicine business segment, which develops new treatments for oncology and other areas and is now working to expand that pilot to its med tech segment, which sells robotics and hardware like hip replacement and lenses. So the rep copilot, that sounds like AI SDR, but not going all in on the agentic motion.
Speaker 2:It's more like an AI sales manager.
Speaker 1:Maybe. But I I I I I would imagine that what works well in in sales rep Copilot is, okay, I just got an email from someone we're trying to sell to. They ask these questions instead of needing to go back to the team and say, That's what
Speaker 2:I'm saying. Going back to the sales manager.
Speaker 1:How would you
Speaker 2:answer
Speaker 2:this
Speaker 1:yeah,
Speaker 2:I guess that's right question.
Speaker 1:Exactly. Exactly. And so that's just information retrieval. It's LLMs as a knowledge engine and help with copywriting, right? Which is like what we know these things are so great at.
Speaker 2:Yeah. And then it has a little bit more on the internal chatbot. It says that the internal chatbot ingests information about company policies and benefits to help reduce the sum 10,000,000 interactions employees have every year with the services team. Yep. And so this is just like, hey, am I allowed to take this day off?
Speaker 2:Yep. I already used 14 Yeah.
Speaker 1:Of my vacation days. We should actually develop something like this because I'm getting sick of everyone on our team asking, like, how much creatine should I be taking? Like, is it chest day or is it back day or is it leg day?
Speaker 2:Like Yeah.
Speaker 1:You know, if we could just have a chatbot that they could ask all that stuff, it would really
Speaker 2:suit me. I am I allowed to work on Saturday? Worked, you know, ten weekends in a row and I know it's required that I take one Saturday off every ten weeks. Can I do I have to take it off?
Speaker 1:Do I have take it off? I want I want I want to keep grinding.
Speaker 2:Yeah. This is essentially more interesting. Yeah. In drug discovery, the company is looking at whether Gen AI can help researchers find the optimal moment to add a solvent to turn a liquid molecule into a solid. And they're also doing stuff on the supply chain side specifically around supply chain risk, which is relevant now given some of the shortages and and, you know, trade war stuff that's going on.
Speaker 2:Yeah. So anyways, the good news is if you were working with J and J and you didn't and they didn't churn, probably on the right track at least. Mhmm. And so I think this will be a good signal. We need more companies to like overspend and then scale back Yeah.
Speaker 2:To figure out, like, what what's actually valuable.
Speaker 1:Yeah. It's also unclear to me, like, we we we maybe we should try and find, like, some sort of, like, consultant or someone who has worked inside these Fortune 500 companies and seen what is actually working or not. We might need to have them call in, like, anonymously, honestly. But but I'd I'd love to know, like, of of these like, for a representative organization that's done, like, a thousand AI projects, how many of those are just, hey, we had our team sign up for ChatGPT Pro versus, hey, we had our team buy a trial with a enterprise, like an AI SaaS company versus we built something internally, we had our teams implement something? Because obviously, a company like J and J has a massive IT team.
Speaker 1:They have a CIO who's commenting to The Wall Street Journal. So clearly, have the ability to roll out software and automation across that's entirely custom to their business. And I would be interested to see, what tools are they using, because they probably haven't built their own AI Copilot for coding. But are they using Windsurf? Are they using Cursor?
Speaker 1:Are they using Devon? Like, what's sticking Or Stick it Yeah. Yeah. It's interesting. But
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Speaker 2:We got another headline here. The EU delayed punishing Apple meta just before trade talks started. They postponed an announcement that was initially planned for this week, earlier this week. So the European Union recently delayed penalizing Apple and Meta platforms temp they're just always Penalizing. Coming after our big tech.
Speaker 2:I said it earlier, I will defend big technology.
Speaker 1:I You didn't just say that. What did you say,
Speaker 2:Jordan? Say?
Speaker 1:You didn't say you would defend them. You said you would die for them.
Speaker 2:No. I said I would take a bullet.
Speaker 1:Okay. Take a bullet.
Speaker 2:Yeah. I would probably hold out my arm
Speaker 1:Yeah. Yeah.
Speaker 2:Yeah. And just flex as hard as I could to try to, you know Yeah. Block it, but not Yeah.
Speaker 1:Yeah. I mean I mean, that is the goal of like this the the secret service. Like, if Sundar Pichai was over there and I was wearing a bulletproof vest, I would dive in front of it for sure.
Speaker 3:That's right.
Speaker 2:Absolutely. Diving in front with a bulletproof vest.
Speaker 1:Exactly. That that's the level of dedication. Still a lot of dedication. Totally. But, you know, it's not
Speaker 2:You're gonna get badly bruised by
Speaker 1:Oh, yeah.
Speaker 2:By that. Yeah.
Speaker 1:But you're gonna look like a hero
Speaker 2:Totally.
Speaker 1:For big tech.
Speaker 4:Price case.
Speaker 2:What's new? EU coming after big technology, but they had initially planned to announce cease and desist orders targeting the tech giants on Tuesday and had informed at least one of the companies of that timing. People familiar with the matter said What
Speaker 1:are they?
Speaker 2:They're like, hey, by the way, we're going to send a cease and desist and slap you with some fines. The decision to postpone the announcement was made shortly before EU trade commissioner Maros Sefkovic met with US Officials in Washington on Monday for his first in person talks since President Trump announced a ninety day pause on some tariffs. I think this is a good call by the EU. There's kind of bigger fish to fry Yeah. Right now.
Speaker 2:And it says, in addition this week, Italian Prime Minister, Giorgio Maloney, met with Trump who said he would have very little problem making a trade deal with the EU. Yep.
Speaker 1:Okay. So the the the actual cases here, what's going on, Meta and Apple, they're both under pressure from the EU for alleged breaches of the Digital Markets Act. This is a law that seeks to make it easier for small companies to compete with their big tech rivals. The commission opened investigations in March of twenty twenty four and issued preliminary findings in both cases last summer. The cases carry a potential fine of up to 10% of the company's global annual revenue, though people, familiar with the matter, said that they expect fines would be much lower.
Speaker 1:But can you imagine that? You're you're you're vending, you know, the iPhone you're selling iPhones in Italy or something. And because you're not in compliance with the Digital Markets Act that says, oh, you gotta have, like, open app store competition or you gotta let this API work in this particular way so someone can build on top of Apple in, like, a more competitive way, You violate that, they catch you, and the fine is 10% of your global revenue, which is like hundreds of millions of dollars across these companies. Is it is insane amount of money. But, of course, this would all be negotiated.
Speaker 1:And there's a lot of leverage because Again, regulators consumers like these products.
Speaker 2:Are basically negotiating. Yep. We saw the FTC coming after Meta
Speaker 1:Yep.
Speaker 2:Saying we want 30 b's. 30 b's. 30 b's. We see you spending on AI CapEx.
Speaker 3:We know
Speaker 1:you got
Speaker 2:a piece.
Speaker 1:We know you're good for it, Mark.
Speaker 2:We want
Speaker 1:We saw that cubitus on your wrist. Yeah. We we saw that we saw that F. P. Jorn.
Speaker 1:Yeah. Give us some of that. When flexing goes wrong
Speaker 2:Yeah. Everyone just knows. Yeah. And anyways, they say, European officials say they won't water down their tech regulations in response to US pressure, but some lawmakers in the European Parliament have questioned whether the cases have become political. Wonder if they become political as the EU seeks to negotiate a deal with The US on trade.
Speaker 2:The Meta and Apple cases both relate, and you covered this already. So
Speaker 1:so so with Meta specifically, the EU is upset that Meta has a policy of you either have to buy a subscription and pay for Facebook or Instagram, or you have to allow Meta to use data for targeted advertising. And and the EU is arguing this does not comply with the Digital Markets Act. Meta, they said, hey. Here's an olive branch. Let's introduce an alternative that allows you to see less personalized ads without buying a subscription.
Speaker 1:Third option. But they say, that's still not good enough. We want you to just show random ads all the time, I guess.
Speaker 2:It's so wild because that's so harmful to Businesses. Small businesses. It's incredibly harmful to small businesses. It's it's it's actually okay. Like Apple, Nike
Speaker 1:Yes.
Speaker 2:You know, a a big insurance company, a big bank, they have billions of dollars Yes. To spend on advertising. They can just basically spend money in a completely non targeted way.
Speaker 1:Yep.
Speaker 2:And so policy like this over time will just hurt small businesses that you think you're trying to protect.
Speaker 1:Exactly.
Speaker 2:Even even companies that would go on to compete Yeah. With with these big tech giants
Speaker 1:Yeah.
Speaker 2:Are gonna struggle when they're like, hey, we have a million dollars to spend on advertising this year. And all we can advertise to on Google is just this random audience.
Speaker 1:It's terrible.
Speaker 3:So the
Speaker 2:ads are gonna be Yeah. Terribly inefficient. You know, caught just CAC will will go through the roof. Yep. We saw this with with this sort of iOS tracking Yep.
Speaker 2:Changes. And so anyways, these types of
Speaker 1:App tracking transparency.
Speaker 2:Yeah. All of this is just absolutely insane to me. And
Speaker 1:Well, some people hate small businesses, and they just want to hurt them.
Speaker 2:It's possible that EU regulators like
Speaker 1:small businesses.
Speaker 2:Yep. They want to support
Speaker 1:I mean, that was the most ironic thing about the whole ATT thing was like, it just made Facebook stronger because they were the only company that could actually do machine learning based ads and and nondeterministic ads. So they didn't need to track you anymore because they had enough data that they could infer that this person wants a Ridge Wallet just from what they're watching on the actual Facebook platform. But no one
Speaker 2:else can be Even on consumer side Yeah. I want ads
Speaker 1:I completely agree
Speaker 2:with perfectly targeted
Speaker 1:I completely agree with Like, do not show me ads for dementia medication or like Yeah. You know, I don't know. There's a million things that I'm not in the market for, and I just it's a complete waste of time to show me Yeah. Like, even just products that are sold to women. Like, I don't need to see any of those.
Speaker 1:And and all of that's just like a waste of time. And I actually enjoy and get value out of having ads. If I'm going to see an ad, it should be targeted at something. It should educate me about something that I'm already in the market for or considering buying.
Speaker 2:And every every every once in a while, an American VC will go to Europe and make a joke about cookies.
Speaker 1:Yeah.
Speaker 2:I I in the past, I've made
Speaker 3:jokes about cookies.
Speaker 1:Yes.
Speaker 2:But it's still just, like, funny how their, like, high level tech policy really works. You go over there and you will spend if you're just using the Internet.
Speaker 1:Yeah.
Speaker 2:I hope you enjoy cookies because you will be accepting a lot of them. So anyways
Speaker 1:Well, if you're traveling, you should find
Speaker 2:your happy place. Find your happy place.
Speaker 1:Let's book a wander with inspiring gifts, hotel decor and drinks. Success. Dreaming beds, top tier cleaning, and twenty four seven concierge service. It's a vacation home, but better folks.
Speaker 2:And wander's just been on an absolute tear.
Speaker 1:They have.
Speaker 2:Many people are calling it an overnight success Yes. Both in the speed at which they're crushing it. Yes. But every time you stay at a Wander, it's effectively an overnight success. Right?
Speaker 2:Yes.
Speaker 1:Let's close that. Overnight success. So we have we have new data on Apple in China. They're losing ground in the smartphone market as local rivals gain. The US tech giant dropped to fifth place with a 13.7 market share.
Speaker 1:They lost its top spot in the China smartphone market, dethroned by Xiaomi as Beijing's consumption boosting subsidies helped buoy demand for cheaper products. The US tech giant's share of China China's highly lucrative phone market shrank to 13.7% during the first quarter from 15.6 a year earlier. That is a pretty big drop. Yeah. Apple's been facing increasing competition in China in recent years despite claiming the top spot in the final quarter of twenty twenty four with marginal lead.
Speaker 1:The iPhone maker lost out to local rivals Vivo and Huawei on annual shipments that year. And it is interesting. Have you seen any of these Chinese phones? Some of them I mean, it feels like there's like a Cambrian explosion. Like, I saw iShow Speed was over there and looking at this, it's a trifold phone that basically turns into like an entire tablet.
Speaker 1:But it's almost the same size as an iPhone. Like, they're doing cool stuff over there. Like, the tech is cool. I want
Speaker 2:a phone that's structured like a newspaper, John. I want I want it to, you know, basically fold up like this, and then I wanna be able to unfold it like this and just, you know, you're sitting in the back of a Waymo.
Speaker 1:They're getting close.
Speaker 2:So that's where we're headed. I just I I I would not be surprised to see Apple drop out of the top five
Speaker 1:Yeah. I agree.
Speaker 2:In, you know, even in the next year. It just does not seem like they are welcome there despite having their supply chain oriented around it. And Yeah. The competitors are just iterating quickly. They have a cost advantage.
Speaker 1:Yep. And and and there's also a major cultural shift in China about, like, nationalism. Like, let's buy let's buy Chinese made products from Chinese products. And
Speaker 2:government subsidies. Xiaomi's returned to the top spot after nearly a decade was largely due to government subsidies. So they're just directly subsidizing and that is resonating with just the the Chinese citizens broadly.
Speaker 1:Yeah. Mean, it's it's so it's funny to compare Apple's experience in Europe where where it's basically like an anti subsidy. It's like, get out of here. Pay us 10 of your global revenue.
Speaker 2:Accept our cookies and leave.
Speaker 1:And, oh, by the way, like, what has Nokia done in I mean, it's the only broadly European phone company. And Nokia is completely out of the game. They're not really producing new phones that are competitive whatsoever.
Speaker 2:When you go to nokia.com, by the way, one
Speaker 1:What do you get?
Speaker 2:They they just the name of the site is just Nokia Corporation, which is not super optimized. Apple just says Apple. Yeah. But Nokia Corporation and they there's not a single mobile device on the home page.
Speaker 1:Yeah. Think they're out of the game. So it's it's very odd where where, you know, China has upstart companies that are competing with Apple, and they're subsidizing them and being very aggressive to push and win. And then Europe is taking the opposite approach where they're like, Apple still is a China hasn't banned iPhones in China. Like, you can still sell them.
Speaker 1:They are subsidizing their national champions, but at least the end result of that will be more technology, better homegrown competitors. Right?
Speaker 2:Yep.
Speaker 1:Versus Europe is just give us 10% of your global revenue and, yeah, we're not gonna even try and compete. We're just going to try and tax you. Yeah. It's like yeah. It's a very, very weird strategy.
Speaker 2:Maybe so. Hopefully Harry Stebbings.
Speaker 1:Yeah. Maybe maybe someone in maybe someone in Europe will try and build a phone and and take some market share, it doesn't seem like it's happening. Yeah. And so very, very interesting.
Speaker 2:But subsidies are basically oriented towards 75% of the country's entire smartphone user base. No matter what kind of product Apple releases to try to hit that lower end of the market, they're going to have trouble competing.
Speaker 1:So basically, if you buy a phone in China that's under 6,000 yuan, the equivalent of $821.92 dollars, 8 hundred and 20 1 dollars 90 2 cents, Consumers like, the subsidy applies. So consumers can't use the benefit to buy products with bigger price tags like high end iPhones. And so the whole the whole push will push Chinese consumers to replace their phones with products that cost less than 3,000 yuan, a segment that makes up 75% of the country's smartphone user base. This is also a great industrial policy or or economic policy because if you can get your entire your entire country on phones, on smartphones, you're going to increase, finding jobs, doing remote work, like communication, economic activity, paying each other, like, every like, the the smartphone is the backbone of the economy. And so getting everyone in in the entire even at the lower end of the lower and middle class on smartphones is just good economic policy domestically.
Speaker 1:It's I mean, it's kind like what we talked about in The US where there's this push to get high speed internet into rural communities. Was an absolute disaster. Instead, the focus should have just been, hey. Let's try and subsidize potentially, like, smartphones that connect to Starlink satellites. Something like that would have been a much, much more, like, free market approach.
Speaker 1:We're getting out out capitalism ed in China recently. We gotta step it up. And They're good. Yeah. And and Europe needs to Europe needs to step it up too.
Speaker 1:Anyway
Speaker 2:Apple is under threat in China. If they don't wanna just give up on the market entirely, what should they do,
Speaker 1:I'm I'm thinking what you're thinking. They should buy some billboards. They should get on adquick.com.
Speaker 2:Buy every billboard.
Speaker 1:They should buy every billboard in China. Out of home advertising made easy and measurable. Say goodbye to the headaches of out of home advertising. Only ad quick combines technology, out of home expertise, and data to enable efficient seamless ad buying across the globe.
Speaker 2:Thank you, Adquik.
Speaker 1:Well, we're staying with big tech. Big tech is under attack left and right. We've big Google Meta and Apple are under attack in Europe. Apple's under attack in China. And then Meta and Google are under attack in The US for antitrust.
Speaker 1:And we talked about this yesterday
Speaker 3:With Adam.
Speaker 1:With Adam, which was great. Great segment. Yeah. You should go listen to it if you haven't already. But they are the two titans of digital advertising are facing unprecedented legal threats over tactics they use to reach dominance.
Speaker 1:And it's
Speaker 2:and it's wild because I'm sure this will get into it, basically the FTC and the justice department were basically like, let's just divide everything up and you attack and we'll attack and Yep. You know, they'll be facing an attack from, you know, both sides. So the key points, Google and Meta are facing antitrust pressure, focused on tactics they used to grow into tech giants. Google lost its second antitrust case in eight months. Mhmm.
Speaker 2:Moment of silence affecting its core ad business. Meta faces a trial with the FTC, which is seeking to force the company to part ways with Instagram and WhatsApp. So two things here. One, the the case yesterday that Google lost or was it Wednesday? Losing track of time.
Speaker 2:Is not really its core ad business. Right? This is like the sort of display network business that was impacted. And then Meta, very clearly feels like they have a super strong case here because, they are fighting over something that happened roughly thirteen years ago.
Speaker 1:Yeah. And it all comes down to market definition. And they're trying to define the market as what? It's like meta versus Snapchat and, like, WeMe or something. Yeah.
Speaker 1:Was the Meowee. Meowee? We gotta
Speaker 2:have the Meowee founder on.
Speaker 1:We really do. Meewee. Meewee.
Speaker 2:Any if if you've used Meewee
Speaker 1:Should we be on Meewee? Should we be distributing the show on Meewee?
Speaker 2:Well, it's called the Next Gen Social Network.
Speaker 1:Oh, we got to get on there then. We got to be socially
Speaker 2:They've got 20,000,000 people.
Speaker 1:That's pretty good.
Speaker 2:Yeah. Congrats. Yeah. But
Speaker 1:yeah, I mean, the FTC is is is trying to force Meta to sell Instagram and WhatsApp. And I mean, already those are I
Speaker 2:feel like Zach had a pretty good faith offer, half a billion dollars to say, like, hey, let's just make this let's make this all go away. Right? And they denied it and they're pushing the FTC is pushing forward. And again, they're trying to ignore TikTok entirely. Yeah.
Speaker 2:And, you know, TikTok is not necessarily an example of completely organic adoption. Right? They spent billions of dollars on user acquisition. Yep. And who knows if if you could start a completely independent TikTok Yeah.
Speaker 2:And compete. But
Speaker 1:How do you think that would play out if if the FTC forces Meta to part ways with Instagram and WhatsApp? Like, does Adam Messeri become the CEO of Instagram? Do they try and bring back Kevin Systrom? Are they just like bringing in some McKinsey guy or some HBS search funder?
Speaker 3:No. I mean, the
Speaker 2:thing here that's interesting is is Zuck made a very concerted effort years ago. Yeah. Remember the Meta rebrand? Remember when they started rolling out messaging? Yep.
Speaker 2:Like, you know, sort of universal messaging across different products? And all of that was in anticipation of this type of, you know, kind of conflict. And so smart move to, like, get ahead of it and show that, like, yeah, these products are deeply interconnected. They have a lot of overlapping users.
Speaker 1:Yeah. And I would just be very bearish if they spun out Instagram and it went to some manager mode person. Yeah. Some manager mode Yeah. Like maybe it could win if they bring back a founder, but I would be very, very skeptical of it running well as a business independently without Zuck at the helm.
Speaker 1:Like, that's the bull case for Veta is that he keeps taking all these risks and building all these different tools and integrating them all in very aggressive ways. It'd be very, very odd. Maybe just sell it to private equity and just like try and squeeze as much cash out of it while they wind it down, do it for like an asset fire sale, like fire everyone. Like that would be the outcome. Like a lot of digital The agency would really want.
Speaker 2:Seems like there's a common thread
Speaker 1:of
Speaker 2:of social network type platforms Yeah. Just Internet platforms in general, getting a manager mode operator and just being run into the ground.
Speaker 1:Yeah. I don't know.
Speaker 2:AOL, Yahoo, etcetera.
Speaker 1:There's there's actually interesting. So, Zuck inferred that Snapchat, which he tried to buy twice the second time for 6,000,000,000, isn't as successful as it could have been if Meta had bought the disappearing photos app. And there's a, Rajvir dropped a little history lesson on the Snapchat Facebook tragedy of 2013 that kind of backs this idea up. So Yeah. Evan Spiegel turned down a $4,000,000,000 acquisition offer.
Speaker 1:Zuck asks for a counter. Evan doesn't respond and moves to close a fundraiser, a $3,000,000,000 valuation. Zuck loses hope but makes one last ditch call. Evan hints at wanting $1,000,000,000 liquid post tax. Marc Andreessen
Speaker 2:Just pause for a second because it's it's makes total sense.
Speaker 1:Why
Speaker 2:not? And it's also very funny.
Speaker 1:It's great.
Speaker 2:It's like, yeah. Could be interested, but, like, would need to be a liquid billionaire to even consider.
Speaker 1:Yeah. I mean, we'll go through the numbers, but achievable achievable with what he built. Like, he he deserved it, in my opinion. Mark Andreessen tells Zuck to buy it at any price. Zuck tells his suits to come up with the cash and presents final offer of 6,000,000,000.
Speaker 1:So Zuck starts at 4,000,000,000, raises it to 6,000,000,000. Evan says offer is good, but later turns it down, wants to stay independent. Zuck is upset. Facebook since then, up 900%. Snapchat since then, up a 23%.
Speaker 1:Both sides would have been richer if the deal happens. But at this point, if if if they owned Instagram, Snapchat, and WhatsApp, and Facebook, like, the FTC would be even more upset for sure. But, here's here's the actual email that that eventually leaked in a in a a legal proceeding. From Mark Zuckerberg, subject, re, Sasquatch update. Privileged and confidential.
Speaker 1:Well, not anymore. It's been leaked onto the Internet because of the lawsuit. I delivered the offer to Evan, and he seemed to take it well. He told me that he could get it done and that he'd call me back quickly. Five hours later, he called me and told me he was turning down the offer.
Speaker 1:He says the offer is the offer is what he wants, but he just wants to build the company on his own. I'm disappointed and frustrated by this. I don't know what else to say to him. At this point, we should probably prepare for it to leak that we offered 6,000,000,000 for them and all the negative that will come from that. Interesting.
Speaker 2:Cool to see the actual email. Yeah. And
Speaker 1:Yeah. I mean, the big question is like, where would Snapchat have gone if if if if Zuck had been behind it? I think the the easy answer is just Meta has been the one company that's really, really been dominant in the post ATT era in terms of driving higher revenue from advertising based on the AI driven ad ad matching, essentially. Yeah. And so even if first off, Snapchat probably would have grown into its own thing and not been as competitive with Instagram over time.
Speaker 1:Yeah. Like, if he buys Snapchat, does he clone Stories into Instagram, or does he let Stories live in Snapchat as its own thing? Like, that might be a that might have been some of the some of the strategy. Eventually, stories got cloned into everything. Like, even LinkedIn, I think, got stories for a while.
Speaker 1:Remember remember Twitter had stories for a little bit?
Speaker 3:Yeah.
Speaker 1:What were they called? Fleets? Fleets. Fleets. Yeah.
Speaker 1:Fleets.
Speaker 2:Really didn't take off.
Speaker 1:There was like a there was like a three month period where like every social app needed like stories. And people were joking like, now Excel has stories.
Speaker 2:And it's interesting to put these numbers into context. So Mark was telling Zach to buy it at any price.
Speaker 3:Mhmm.
Speaker 2:And, you know, with with $6,000,000,000 eventually being turned down, Clubhouse got a basically 4,000,000,000 Yeah. I believe they got a $4,000,000,000 acquisition offer despite not having anywhere near the traction or scale that Snapchat had at that point, which they turned down from Yeah. From Twitter as everyone knows at this point. And, you know, ultimately got cloned and I don't know the the latest over there.
Speaker 1:What is what is Snapchat's market cap right now?
Speaker 2:Are still a $13,000,000,000 company.
Speaker 1:So, I mean, arguably, we should have taken Marc Andreessen's advice and gone back and said, seven. Eight. I'm I'm Evan, come on. I know you want to be independent, but you must have a buy it now price.
Speaker 2:Yeah. And they've just really, really struggled. Year to date down 30%.
Speaker 1:They did have a crazy spike. Right? At some point when it went ripped.
Speaker 2:Lot of people were longing it Yeah. Hard in 2021.
Speaker 1:Yeah.
Speaker 2:Were at $74 a share at their $83 a share at their peak. They're down at $77
Speaker 1:a share now.
Speaker 2:$7.88 now, so.
Speaker 1:I mean, still think Evan Spiegel's like a fantastic entrepreneur and has a really fascinating And to even compete in that, it's a network effects driven business. Like it's so monopolistic at its core. It's the classic example of, like, a compounding monopoly advantage. Yeah. And as soon as that snowball gets rolling, it's really, really hard to play in that space at all.
Speaker 2:Well, it's also a company that doesn't get nearly the use that many of these other platforms do among our networks. Right? That's true. I mean five years.
Speaker 1:Yes. But that was because of Zuck. Like, if Zuck had not had not gone after Snapchat so aggressively Sure. Snapchat would have kept growing and had been the app, like, most most millennials, most personally,
Speaker 2:was aging out of Snapchat before
Speaker 1:You think so? It was Before it was cloned? Think that a lot of it was like you were aging out because Instagram was effectively on the defensive and and it was working. It was like Yeah. Yeah.
Speaker 1:Like like you have a stronger network over at Instagram and they have all the same features, so why would you open that other app? But I agree. I went through the exact same experience where I was on Snapchat for a little bit, and then eventually Instagram was good enough for everything. And so I went And then I never really opened Snapchat again. But, well, I don't know.
Speaker 1:We'll figure it out. It is fascinating that you know, Snapchat was was able to hold on to the users that they did. It wasn't it wasn't declining in user base. It was just kind of flatlining. And that's the same thing that happened with TikTok once, Zuck really moved aggressively on Reels.
Speaker 1:But they are stuck in this interesting place, which, again, it's a $13,000,000,000 company. Yes. So at this point, you have to ask the question of, do they get bought by a foundation model company? Interesting. You need more distribution.
Speaker 1:If you're not like, llama is aligned with Meta and Instagram. X AI is aligned with x.
Speaker 2:Anthrop and
Speaker 1:Google has YouTube and Google Search for distribution. Yeah. Maybe you take Anthropic and put it together with Snapchat. That'd be interesting. Dario just, no.
Speaker 1:I just wanted to work on safety. Now I have to work on viral TikToks or viral Snapchats. Yeah. I don't know. It it does seem it does seem like it's interesting.
Speaker 1:It's like floating out there as this, like, pretty solid platform and distribution, and they have a lot of tech and a lot of interesting ways to push content out.
Speaker 2:With Snapchat from an acquisition standpoint is even if you're a foundation model, let's say you're a massively loss making foundation model, Snapchat is also losing. They lost $700,000,000 in 2024 Wow. Despite being how how many years into the business. Yeah. So hard for a CEO that even wants, you know, massive distribution among a, you know, younger sort
Speaker 1:of Yeah.
Speaker 2:Yeah. Cohort. Still, it's hard to say, you know, is it is it gonna be worth it to to have that be my problem now, you know?
Speaker 1:I mean, if if AI allows for better monetization and it turns Snapchat into a stronger engine, like, part of the reason Snapchat is not monetizing that well is because of things like ATT, app tracking transparency, harder targeting. But maybe you start, you know, inserting chatbots into the conversation and driving more personalization, better targeting, better monetization through that. I don't know.
Speaker 2:I think the question just comes down to where is the consumer value for the Anthropix, the OpenAI's, the Grox, etcetera, really gonna come from? And I think there's a good argument to say it will come from the sort of personal assistant capacity. Mhmm. If Snapchat is big on college campuses and with high school, you know, students and things like that, is Snapchat, you know, suddenly like, you know, trying to force an LLM, forcing kids to say like, hey, I know you're in here to talk with your friends, but like, why don't you use us for your homework? Yeah.
Speaker 2:Like, maybe that works or maybe they're just like, yeah, when I'm on my computer, I use ChatGPT GBT and when I want to talk to my friends, I Yeah. It just like
Speaker 1:I still think like the x x AI integration is actually a pretty good case study for AI in a social context where you see someone post something and you want to fact check it essentially or get more context around it. And so you just click a button. And so I could imagine you're watching content on Snapchat, and then you click a button and you're dropped into an interface where you're discussing that with the LLM, and that could be somewhat valuable. So you see a viral video for, you know, a handbag, click on the chatbot, get more context on the handbag industry, what the different options are. Maybe there's a there's an agent that helps you buy that Yeah.
Speaker 1:And you check out all in Snapchat, and it's becoming Yeah. More of an e commerce engine. Yeah. Not sure. Maybe
Speaker 2:Snap's one of those companies that always and Evan, I I would love to get an up like a
Speaker 1:profit. It seems like he just loves running the company still. It seems like even though, yeah, maybe financially it wasn't the best decision not to sell, like he probably could have gotten a bunch of Meta stock and then 10 x that.
Speaker 4:10 x that.
Speaker 2:10 x that. 10 x it again. If he just got the 6,000,000,000
Speaker 1:If he got a billion
Speaker 2:10 x
Speaker 4:it again.
Speaker 1:Could have gotten a billion in in Meta stock.
Speaker 2:10 it again.
Speaker 1:He could have gotten a billion in Meta stock. Like, for sure, at the 6,000,000,000 price based on what he owns, like, could have gotten a billion in Meta stock. And then he and then the stock price would have actually 10 x'd, and he would have had 10,000,000,000. It's crazy. And then he just has 10 that 10 x that three more times, and he's trillionaire.
Speaker 1:Yeah. So Honestly, just do that.
Speaker 2:The math is, like, pretty simple.
Speaker 1:Yeah. The math is pretty simple. More people should be doing this.
Speaker 2:No. Snap's just one of those companies. I mean, it it we gotta get the full update from Evan sometime. Yeah.
Speaker 1:Yeah. I reached out to his team to try and get him on the show.
Speaker 2:I I really think that it's a company that has consistently shown so much potential.
Speaker 1:Yeah.
Speaker 2:Spectacles Yep. VR Yep. Shopping Yep. You know, early AI avatar Yep. You know, and never has, like, quite they just haven't hit a home run on any of those.
Speaker 1:Yeah. It is interesting. They they have, like, enough resources because it is a 10 plus billion dollar company. There's a lot of cash sloshing around, so they can go and do a VR project. But Zuck has a hundred times full resources.
Speaker 1:Right? Because he's a trillion dollar company. And so it's literally a hundred to one fight on everything. You wanna train a model? Well, Zuck has a hundred times more resources.
Speaker 1:And so Evan for a long time was I mean, I think still I think still on his LinkedIn, he puts like, I'm like the I'm like the VP of ideas at Meta, because his whole idea is like, he comes up with the ideas and then Meta clones them. It's like,
Speaker 2:but when you have a x,
Speaker 1:the money to spend, you can actually win in those markets sometimes. Anyway, you wanna read this post from Ryan Peterson?
Speaker 2:Yes. Ryan says, bull market are n for the number of business people admitting to customs fraud on LinkedIn.
Speaker 1:A lot of people are saying, oh, I I figured out how to get around the tariffs, basically. Yeah. It's like, no. That's not how it works.
Speaker 2:That's not how it works.
Speaker 1:You can't just figure out a a workaround. Yeah. You have to pay the customs.
Speaker 2:I talked to somebody that works in apparel manufacturing and they they're they're like, everybody's just working a way to figure out loopholes Yep. A way to effectively show that their COGS are maybe lower Yep. Than they actually are. Yep. So the tariff is not as substantial.
Speaker 2:So, folks, if you are importing products to The United States, why don't you go and just talk to the Flexport team before you think you've you cracked the code. Yep. They will help you out.
Speaker 1:Don't skimp on your customs bill. Don't skimp on your sales tax. Go to Numeral HQ. Put your sales tax on autopilot.
Speaker 2:You would be crazy not to use
Speaker 1:Spend less than five minutes per month on sales tax compliance, go to Numeral HQ.
Speaker 2:Benchmark series a. That's my favorite my favorite line to just sprinkle in there.
Speaker 1:I love it. Well, let's move from benchmark over to Sequoia. Andrew Reed says founder to their therapist. Hey, look. I want this to be more of a conversation than a presentation.
Speaker 1:Please jump in with questions anytime.
Speaker 2:Classic Love it. Board meeting.
Speaker 1:Clearly takes a lot of pitches. Yeah. When you're pitching, there I don't think you have to say that to make it a conversation. You should just actually have a conversation.
Speaker 3:Yeah.
Speaker 1:But it is a little bit of
Speaker 2:an art. Yeah. I mean, the right approach generally is explain very clearly what you're doing in about three to five minutes Yep. And then talk about it.
Speaker 1:Yeah. I told you about that founder I got on the phone with and he spent I was eating lunch and I just put myself on mute and he just talked for twenty minutes straight. And at the end, I was like, hey, like, I'm not an I'm
Speaker 2:not on the investing team.
Speaker 1:Yeah. Found it. Founders fund. He just did not understand that. And I was like, I should have jumped in fifteen minutes ago.
Speaker 1:But I was just eating, so I was like, okay, just keep talking.
Speaker 2:Steak doesn't eat itself.
Speaker 1:It was wild. It was very funny. So, don't make that mistake. May actually make it a conversation more than a presentation. People like conversations.
Speaker 1:People hate presentations. Stick to the stick to the conversations.
Speaker 2:Long conversations.
Speaker 1:Short Aaron Harris gives a shout out to Sequoia with some best practices for VCs. I think everyone should probably follow this. The truth is this isn't complicated. One, make the calls you say you will. Two, schedule the meetings you say you will on time.
Speaker 1:Three, if you ask for a data room, actually look at the data room. If you ask for customer references, do them quickly and promptly. If you want to pass, you have to tell the founder. You can't just whisper it into your pillow. If you want the deal, chase the founder.
Speaker 1:If you want the deal, don't disappear for a few days. Be extremely responsive. Yeah. If you if you can't do that, you're not gonna be competing. This isn't just a Sequoia thing.
Speaker 1:I think all the best VCs follow the same playbook. And that and that, like I mean, it is crazy how how bad some VCs are at passing. They just cannot bring themselves to do it. And it's like it's like a pretty easy part of the job.
Speaker 2:Unfortunately, we're gonna
Speaker 1:The hard part is picking the good companies. Like like, the hard part should not be just saying like, yes, I have enough conviction to say like, I'm passing on this round. Like, go find someone else. There's a million VCs. Like, no one's gonna be like, I think it forever.
Speaker 2:Every now and then you'll see, like, some exchange where a VC passes and then the founders, like, basically, like, start swearing Yes. F you, all this stuff. But those founders don't tend to
Speaker 1:Yes. To go
Speaker 2:anywhere at all. And usually, founders are gonna really respect just like kind of really direct prompt pass.
Speaker 1:Yeah. Of course.
Speaker 2:Most most of the big funds now are very much multi stage and
Speaker 1:Yep.
Speaker 2:And there's not a lot of value in making enemies. Yeah. So Exactly.
Speaker 1:Anyway, you
Speaker 2:don't want We have a post here from Architectural Digest.
Speaker 1:Oh, you want to do this one? Okay. Yeah. Let's do
Speaker 2:it. Yeah. Let's pull it up. I just thought this was a fantastic house.
Speaker 1:I wanted to look at this house because I was I was looking for specifically for the bed. I wanted to see if the bed had an Eight Sleep on it. Is I don't know if the photos just doxed the bed that Dan Romero, the founder of Farcaster, sleeps on. But he does have a fantastic looking house, that's been profiled in Architectural Digest. I I did a lot better last night, eight hours and eleven minutes, hundred percent sleep quality.
Speaker 1:The routine's still off because I'm all over the place, but 91. How'd you do?
Speaker 2:Let's see.
Speaker 1:And, you know, you were talking trash to me. You beat me? Of course. You got a 100? Oh, let's go.
Speaker 1:Yeah. You you're talking to her, oh, just beat me twice. Just beat me twice. I I I you beat me once and then I beat you twice. You beat me once and then I beat you twice.
Speaker 1:Well, I have twice as many children. Right? Or young children. So it makes sense. Okay.
Speaker 2:Okay. You're trying to you're trying to change your rules now.
Speaker 1:I just think like like You have three
Speaker 2:kids? I have two.
Speaker 1:Yes. Yes. But but the but the young ones are the dangerous ones. Yeah. The young ones are the ones that kill the sleep score.
Speaker 1:Those are the wildcards. So when you have two young young ones, that's two extra bad nights of sleep. So I think the ratio of good sleep here in this in the in between me and you, it's actually completely I
Speaker 2:I need a button here that just says, Giga excuse.
Speaker 1:Giga excuse.
Speaker 2:Anyway. Anyways, Architectural Digest did a fantastic
Speaker 1:This was a really cool story. They bought four house they bought four houses and merged them all together into
Speaker 2:some mega compound and It's pretty cool.
Speaker 1:Realize Sparkaster was in I
Speaker 2:used to live on the street. Same street. And this house just looks absolutely phenomenal. They did an amazing job with Dan and his wife who I haven't met, but she's Julia DeWall. Julia.
Speaker 1:Founder of Antares Nuclear, very cool nuclear company.
Speaker 2:Very cool. I think she was at SpaceX for a long time. And they just did an incredible job with this and it's very cool.
Speaker 1:Let's hear it for a beautiful house. We love to hear a beautiful house. Overnight success. Anyway, go to 8sleep.com. 5 year warranty, thirty night risk free trial, free returns, free shipping.
Speaker 1:They got the pod four ultra. Check it out.
Speaker 2:Loved how you turned an a d home feature into an Eight Sleep ad. That was just phenomenal. That's all that matters. Well, have a post here from Sean Frank. Yes.
Speaker 2:I believe Sean Frank is in the YouTube chat right now just hanging out. Really? He says, second order effects. Talked about this on a call with Ryan Peterson today, but ocean freight out of China is capital D E A D dead. Prices should collapse.
Speaker 2:Right? Well, it is so dead ships aren't sailing. They're just canceling the voyage instead of losing money on the cargo. So ships are waiting around for weeks, waiting to fill up, driving up the cost to get an actual to get on an actual departure. Ironically, costs out of China are peaking.
Speaker 2:So Interesting. Weird second order effects. And this, again, is just
Speaker 1:Little word play there, peaking. This just Peaking China.
Speaker 2:Yeah. This just makes it even harder if you're, you know, manufacturing products in China and needing to get them to The US. Not only are your actual effectively, your COGS going up due to the tariffs, your your, you know, transportation costs are going up as well.
Speaker 1:Back to three kids in a trench coat walking through TSA security with all your goods. That's the way you get stuff out of China these days. Fly there. Yeah. I don't have 75 iPhones on me.
Speaker 1:Don't worry about it. Yeah. I'm on a good
Speaker 2:trench coat with with a bunch of iPhones.
Speaker 1:Yeah. I don't know. It seems rough. I have not tried to get anything out of China. Hopefully, we can manufacture all our merch in America.
Speaker 1:We did get this giant gong, which we have not revealed yet. I think it came from China.
Speaker 2:May The gong would have been hit hard except it was a gift.
Speaker 1:Yeah. We'll we'll reveal it soon. We'll reveal it soon. There's a time and a place for that. It's so loud.
Speaker 2:It's way too loud. I was dying laughing. Anyways, we got a from Yassine. He says, girl science is real. Manifestation is real.
Speaker 2:It works. What else are girls write about? I'm gonna start looking into astrology. Maybe I should listen more.
Speaker 1:Yeah. I've been I've been long on astrology for a long time and but my thesis was like, you can actually get to the same conclusion via something that feels more like boy science, I guess, which is that so what is astrology? It's like if you're born in this month, you have a certain personality. Right? And that seems like weird, random, like why would it be that case?
Speaker 1:Like, is it really like the moon and the stars and the certain alignment like makes who you who you are? It doesn't really doesn't really track if you're like a science guy. But I always thought about it like, well, if you're born during like tax season and your parents are stressed out about tax season and that's your main memory of like your birthday, well, could that make you more neurotic about money? Like, probably. What about if you're born during Christmas and every Christmas season, you're
Speaker 2:You're trying
Speaker 1:be like, drinking mead. Yeah. Yeah. Or or or or, like, there's all these difference. Even just being born in the winter and spending more of your life in win harsh winter conditions and and having more rain, more gloomy days be imprinted on you, could that make you a gloomier person?
Speaker 1:Like, that's certainly possible. Right?
Speaker 2:You might have cracked the code. Yeah.
Speaker 1:And so and so I always thought that, the the astrology thing, like, it's it it maybe isn't straight up like this moon and this sun and this star at the same time, but just the idea of, like, when you're born, that affects you. Even you look at the NHL, the hockey hockey guys. Many, many of the hockey stars are born right before hockey season starts or something like that so that they're older, so they're bigger on their young teams, and then they outperform again and again and again, and then they and then they get reinforcement on that. And so, like, there's a there's a probably like like there's there's more I remember on my high school football team, the best guy was born in July and was really old for the class, and the worst guy was born in September and was really young for the class or something like that. Know?
Speaker 1:It it wasn't worse, but, like, you know
Speaker 2:Well, there's
Speaker 1:a whole being a year bigger, a year older is if
Speaker 2:you really care about your children's athletic pursuits,
Speaker 1:just Yeah. Hold them back. Right? Hold them back. And there's all those things about, oh, yeah.
Speaker 1:There's a foot I remember there's a football player in in LA. This guy, I think he went to go play at Notre Dame, but he was driving himself to Pee Wee football games because he'd been held back so much. So he was 16 in eighth grade. He was a 16 year old eighth grader. He should have been a junior.
Speaker 1:But he was amazing because he was older. And then there was all those like all those debates about the baseball players who came from other countries and they'd like fake their baseball their birth certificates. So like it's very clear that like when you're born affects like how you accelerate in different My parents
Speaker 2:are doing that with YC. They say, don't don't do YC until you're, you know, 60. Yeah. Okay? Like, wait till you've accumulated incredible, immense knowledge in a network.
Speaker 2:Yeah. Come into YC, get the check, raise $200,000,000
Speaker 1:Yes. Yes. In the first
Speaker 2:week and just steamroll Yeah. The class.
Speaker 1:Same same thing about the, like, Thiel Fellows. Like, people are always trying to, you know, kind of reinvent themselves at age like 38 and be like, oh, yeah. I dropped out of college. Like, let me go through a Thiel fellowship. Right?
Speaker 1:And and it's all just a ruse, but it's effectively like holding yourself back. If you hold yourself back and you're like, yeah. Well, I I had I had a career, ten years on Wall Street, then I went back to college undergrad, and then I dropped out of undergrad for a Thiel fellowship at age 36. Like, all of a sudden, everyone's like, wonder kid. He's amazing.
Speaker 1:And this guy is incredible. Like, he knows he has encyclopedic knowledge of business because he's it feels like he's been on Wall Street for a decade. But he's a Teal fellow. He's super young. How old is he?
Speaker 1:Oh oh, yeah. 24. You know? People lie about their ages all the time. You know.
Speaker 1:And this is kind of this is all this is all related to
Speaker 2:It's all hearsay.
Speaker 1:To astrology. Anyway, I Way to round it out. I think it's I I I think I think Yaxine is on to something anyway.
Speaker 2:Well, I'll be right back.
Speaker 1:And we have our first guest actually, two guests coming in to the temple of technology. We got Daniel from Checker and Ryan from True Work coming into the studio to discuss a very cool merger that's happening, an acquisition. So Checkr, c h e k c h e k r, c k r, Checkr, employee background screening for companies, streamline your hiring with the fastest, most accurate background checks. So you've probably run into these background checks, not just when you're hiring on, for a job, but also this was a huge thing during the, those marketplace boom of you want, to put your product on or your your your house on Wander, for example, well, they're gonna wanna see your ID. They're gonna wanna know who you are.
Speaker 1:Same thing with your car on Turo. They're gonna wanna make sure that you have you know, they know who you are. Even Coinbase is a customer of Checkr here. And so when you go through the KYC flow of Coinbase, Checkr is the company that helps Coinbase understand the the ID verification, all the document verification. Coinbase didn't have to build that in house.
Speaker 1:Instead, Checker built it and sold that into DoorDash, Fenwick, FIFA, Harris, Hot Topic, Instacart. Wow. They're really in everything. Domino's uses Checker. That's cool.
Speaker 1:Anyway, and the deal that was announced
Speaker 2:It was announced yesterday morning.
Speaker 1:Yeah. Let's break that down. Checkr True Work deal. Let's see. Checkr requires True Work in, it was an employment verification, roll up.
Speaker 1:I'm getting a paywall on Axios. Let's see if there's something else we can do. Big news, Ryan Sandler. He writes, TrueWork is being acquired by Checkr. Together, Checkr and True Work will achieve the vision of a truly one stop consumer verification product.
Speaker 1:When Ethan Victor and, and Ryan here started True Work in a back alley office in the Mission in 2017. It was a dream to get to where we are today. Over the past eight years, they've grown as an incredible team to over a hundred employees, pretty big company, raised five funding rounds, called six different offices home, operated in three cities, had two name changes, and most importantly, millions of consumers get approved for homes and apartments. True Work now services thousands of customers from the smallest family owned businesses to eight of the 10 larger largest mortgage mortgage lenders in the country, including Rate, PennyMac, and Fairway. We've gotten to the scale only because we are obsessed with giving our customers the highest completion rate and accuracy in the in the industry.
Speaker 1:Today marks a major milestone, but the journey is just beginning. I'm excited to see True Work and Checkr continue pushing boundaries of what's possible. Together, we can unlock endless opportunities from powering Checkr's background checks with True Work employment data to expanding Checkr into new verticals like mortgage and property management. It's gonna be an incredible journey ahead.
Speaker 2:So Well, looks like we got both of them
Speaker 1:Fantastic. Let's bring them in. Let's bring them in, and, I'd like you to kick it off with a little bit of an intro, get the background from them, and I will be right back.
Speaker 2:Sounds great.
Speaker 5:Yes.
Speaker 3:Okay. All good. Sorry. There was a Google Meet link in the same invite. I clicked on the Google Meet, not the Zoom.
Speaker 2:That's on me. Sorry. I messed it up. How are you guys? Exciting week.
Speaker 2:Great to meet and, great to see you, Ryan.
Speaker 3:Good to see you.
Speaker 2:It's been a long journey. Why don't why don't you guys give, your own kinda quick intros and, and then, John will get back and we can go from there.
Speaker 3:Great. Great, Ryan.
Speaker 5:Cool. Yeah. Ryan Ryan here, founder and CEO of Chewark. And, Jordy, it's it's great to see you. You know, we started Chewark eight years ago, grew it to quite a large company, and excited to see the vision really continue and accelerate under Checkr.
Speaker 5:So I'll I'll let Dan ensure himself.
Speaker 2:Awesome.
Speaker 3:Yeah. Hey, guys. Yeah. Daniel here, founder and CEO of Checkr. We started eleven years ago.
Speaker 3:We invented the API for background checks and verifications. And so we've been pretty big in the employment space and verifications for employment, access to marketplaces. And I've known Ryan and the Twerk team for for many years as well. I was an investor in their B round and been following the And we're excited to announce that our teams are going to join forces and we can continue to build the product and platform together.
Speaker 2:Amazing. When did the did you know when you were investing in the bead, did you have any idea that your guys' journeys would really intersect at some point? I'm curious when that conversation, you know, or that idea even popped into your head.
Speaker 3:I mean, we love, I love this space because I love, you know, APIs and data products and verifications. I wasn't sure it will if it will ever intersect at some point. You know, I thought that the the the challenge that they're taking was great. And then I think it's only in the last, I would say, maybe in less than last year that we we started thinking that could align with our long term data platform vision.
Speaker 2:Awesome. Talk about, I guess, last your guys' opinion in the last few years. You know, I know Checkers, you know, more on the HR category, True Work, you know, more more of a, like, you know, fintech darling. But, Ryan, how how was it the last few years navigating, you know, all the ups and downs to get to this point?
Speaker 5:Yeah. I mean, we we saw immense growth during during COVID with with home buying sprees. And and once the interest rate went up, you know, we dead definitely had to navigate a higher rate environment that meant lower volumes for mortgage lenders. We expanded into other verticals like property management. That was a little less cyclical, but we were able to keep up, you know, really strong growth despite the market that we're really proud of.
Speaker 5:And now this is way for us to expand it to even more verticals like BackboneCheck.
Speaker 1:Can you talk a little bit about the different tiers of verification and kind of like the the different pools of TAM that you're going after together? Like, I I run a, I I started a nicotine product company, and, we need to age verify. So we do background checks loosely. We do ID verification, but it's sometimes like a $30 checkout. So, you know, we need to be under a dollar per verification versus if you're hiring some engineer and you need to verify them, that could be hundreds of thousands of dollars in, you know, value essentially, totally worth paying, you know, I don't know, $1,000 per verification.
Speaker 1:What are the different pools? And what's most exciting? What's the biggest TAM? And how do you kind of divide up the market?
Speaker 3:Yeah, yeah. So we're going after over a $50,000,000,000 TAM on different types of verifications and identity products, which, like, started in the 14 plus billion employment market. Ryan and team, they've been going after financial underwriting, property management, which is also $12,000,000,000 plus TAM. We also are going after the risk and fraud market in TAM, which we also size at at about $10,000,000,000, you know, specifically competing with companies like LexisNexis in financial fraud and financial risk. And then we also have a nascent consumer offering and product that's growing quite well, and that's also a multibillion dollar TAM.
Speaker 3:So, yeah, we're quite busy. And once we start to build a consumer driven profile with verified credentials, identities, employment, work information, that can be used to sort of lots of use cases in different industries.
Speaker 1:Can you talk about the the the the war between artificial intelligence here?
Speaker 2:Yep.
Speaker 1:I saw a, a post recently saying, oh, the new ChatGPT images. You can generate a fake receipt. You can generate a fake ID and use that and upload that. At the same time, I'm sure you can use AI to weed some of that out. What technologies are the most interesting to you today?
Speaker 3:Yeah. So, I mean, Ryan's product and ours, we've been more on the data sides Mhmm. Which is a little bit harder to fake by AI. I mean, AI can fake anything. It's just a question of cost of, you know, the bad actors, how much money are they gonna spend to to try to do frauds.
Speaker 3:So we're we're not focusing on taking pictures of driver licensees. I think that's gonna become very challenging over
Speaker 1:time. Okay.
Speaker 3:We're focusing more on verified data sources, you know, from from government signals like the DMV Yeah. From payroll companies and payroll records, from employee records. So we stitch together different verified data sources, also consumer generated data. We triangulate it. We score it.
Speaker 3:We verify it. And so that's a lot of our approaches that are a little bit more resilient, I would say, to AI fraud. We also both in our products have document based verification and processes in case you know, there's there's no data available on on different systems. And we also use AI to to combat AI fraud on documents. So it's it's definitely multi pronged strategy.
Speaker 3:And Yeah. AI, I think, is both an opportunity because it's going to create a lot more fraud and problems for customers. So it gives us a lot more work to do. And at the same time, it's an opportunity because we're going to use AI tools and technology to combat AI fraud.
Speaker 1:What is it like working with the DMV as a data source? When you hit the API, do they make you take a ticket and wait for the response, or is it a little bit faster on your end?
Speaker 2:Yeah. And I'm curious about the evolution. Imagine, you know, when when Ryan started True Work and
Speaker 1:Yeah.
Speaker 2:And, Daniel, when when you started Checkr even, farther back, I imagine there was things that you had to do with humans that you maybe anticipated that you could do with AI at some point, but Yeah. Yeah. Weren't immediately possible just given, you know, now we have products like computer use that could
Speaker 1:Yeah.
Speaker 2:Sort of like, you know, navigate systems that don't necessarily have APIs.
Speaker 5:Yeah. I mean, for us, like, we you know, as as Dana mentioned, similar to Checker, we try to get our data from as automated of sources as possible, like, directly from the payroll system, directly Mhmm. From your bank account, etcetera. But in some cases where, you know, you work at a mom and pop store and there's there's just no other way to access information, we have to get in touch with the HR department. We have to we have to get verified data back from them.
Speaker 5:And it's a mix of automation and manual work, but there are some HR departments that that just only use a fax machine, for example. They will only respond to fax machine. It's crazy. And so we've had to kind of build a lot of automated flows on top of these manual processes. AI LMs are definitely making that easier.
Speaker 5:You can automatically, you know, send a fax, email communication, even make a phone call to these teams in an automated way. So it's it's changing, but there are still a lot of these businesses that are really stuck in the legacy past.
Speaker 2:It's really funny to be using, like, the future of technology to, like, work backwards with, like, like, but company. Right? Like Yeah.
Speaker 1:Like, they all build on top of these, like, archaic systems. What's your take on eyeball scanning? World coin. This is this is future was
Speaker 2:gonna ask.
Speaker 1:You're gonna ask that?
Speaker 2:I I imagine every time you guys see somebody walking around with a, you know, an orb
Speaker 1:An orb.
Speaker 2:Scanning eyeballs, you're like, that's cool, but you can also sort of triangulate personhood. But they're less focused on The US market. But I'm curious how you guys think
Speaker 1:Yeah, what do you think about the far future of verification?
Speaker 3:No, I think on identity, I think we're laughing about it, but I think in person is going to become important when you want to have the best assurance because online will be able to be faked so much easier and cheaper. So I think there's going be actually more it depends. It depends on the use case. But if you have some very, very important transaction, like getting a passport or, you know, like, very important points, you still are going to need the biometrics in person. It's to be it's going be hard to fake that.
Speaker 3:So I think we'll see more in person use cases and probably in the identity stack more solutions. The the other thing that I'm bullish on is electronic driver licenses and wallets. You know, like Apple and Google are starting to have your driver license in your wallet, Apple Pay. And I think, you know and the government, especially in Europe and other countries, they're moving to mobile driver licenses that connect to the government. And if Apple and Google are are opening their SDKs and continuing to build them right, I think that's going to be a more elegant solution than scanning your, you know, picture of your driver license, for example.
Speaker 1:Yeah. How do you think about, like, I don't know, the the the the the cost curve on this technology? A lot of people are complaining about, like, the dead Internet theory. All social networks will just be filled with spam and bots. Is there is there a world where you can get this to a scale where it's so cheap and effective that we can reliably put an end to the bot problem on the Internet?
Speaker 1:Or is that just intractable because it's like a capital fight?
Speaker 3:No, I think the cost is definitely going down. I mean, just to give you an example, you know, the verifications Ryan and I were doing, they used to cost tens of dollars because a lot of human labor. Yeah. With AI and automation, we can now automate its end to ends and bring it to pennies in terms of cost, many of them. For example, through the criminal checks, we can do it at very high scale, very low cost.
Speaker 3:And that allows us to open new use cases, like not just hiring an engineer background check, but we you know, provide safety on online dating marketplaces, car rental marketplaces, home sharing marketplaces for a fraction of the cost, and it's an instant product. So as you with technology, you can lower the costs, you can make it instant, you can open new use cases. So I think we'll be able to do similar things also on risk and fraud over time.
Speaker 1:Yeah. We see this with like like, Ramp often looks at, like, the the b to b trend report of where companies are spending more money than ever before. Do you have data like that as well? Because I see on your website, like, like, you know, you're in gig and marketplace, staffing, hospitality, retail, manufacturing, health care technology. Do you have an idea of what industries are doing an, like, exponential growth in verification?
Speaker 5:I guess, like, ours quickly and Elliot, I I you had, Dana.
Speaker 3:Like, when we we have
Speaker 5:a pretty good view of the mortgage market, like, you know, share mortgage mortgage lenders, thousands of lenders on platforms.
Speaker 1:So Yep.
Speaker 5:We we will see pretty early if if volumes are going up or or down.
Speaker 1:Sure.
Speaker 4:I think what's interesting in
Speaker 5:these other verticals, like property management, like, we we are seeing a huge uptick in using technology here. I mean, 90% plus of property managers were using very manual processes. Hey. Give me your pay stubs. Give me your tax return.
Speaker 5:And you're seeing real momentum in that space of of folks bringing on AI and automation.
Speaker 1:Mhmm. There there was this tweet a while back that we talked about something like, you'll meet your acquirer, like, four years before the deal gets done, something like that. How'd you guys originally meet?
Speaker 3:That that that's been true for us. Right, Ryan?
Speaker 5:Yeah. Exactly. You know, Daniel and I got connected, I believe, by a a mutual investor, and and, you know, Daniel's been incredibly helpful. He's just obviously really close to the space, invested in our series b about four or five years ago. So that that line
Speaker 3:Yeah. And we're we're both part of Y Combinator, so, you know, we are well connected with Y's founders. And so
Speaker 1:Gary Tan wins no matter what. I I again, another another million dollars for Gary. Love to see it. That's great.
Speaker 6:Great. It's awesome.
Speaker 3:And it's been great to just work with other founders, know. Think there's there's lots of small YC companies who you know, some of them are gonna break through. Some of them, it makes sense to join forces and build products together. Yeah. So YC founders, working with YC founders has been one of the most most fun thing for me to do over
Speaker 1:the last I think a lot of people don't often get, like, the inside story of, like, how an MNA event comes together. Can you give us some color on, like, how long the deal took? What who who were the parties in the room? Was it just, handshakes over dinner and steaks and Dom Perignon, or was this in a boardroom with all the lawyers and you're screaming at each other? What what what happened?
Speaker 1:And then I also wanna go through the post merger merger integration stuff, but let's let's talk about the anatomy of the deal first.
Speaker 3:Yeah. We we can share some story, Ryan. When when did we go on that walk, Ryan?
Speaker 5:Maybe till July of last year.
Speaker 2:So it's
Speaker 5:been quite the long process, about ten months. Yeah.
Speaker 2:Overnight success.
Speaker 1:That's great. And and, yeah, I mean, like like, what how do you build vision? What are the, what are the hurdles that you guys have to kinda get a deal done? I think a lot of founders, are open to acquisitions, but, what what what are the parameters that you guys were thinking about that and the discussion points that led you to think that this would make a lot of sense?
Speaker 5:Yeah. I think I mean, I one thing I was really impressed by how Daniel and the team approached it is I I think it really started a lot with the product. And and is this is this a product that is that works really well? Is this something that we we wanna buy? And, you know, there was testing of the product and our completion rate and and how it could potentially look like a part of the the checker environment.
Speaker 5:I really appreciated that as, like, one of the first steps.
Speaker 1:So are you both based in San Francisco? Yeah. Okay. So you just went on a walk. Where was the walk specifically?
Speaker 3:Around my office right here in Okay. One Montgomery. Yeah.
Speaker 1:Very cool. So the deal comes together. What what does post merger integration look like? I imagine that there's, you know, teams can work together. You guys can merge offices.
Speaker 1:You can go into a new office together. What what what are you thinking? What are the, what are the hurdles that you both wanna overcome?
Speaker 3:Yeah. Yeah. So it's still very fresh. Right? I mean, we literally signed.
Speaker 3:It was it was a bit of drama getting all the signatures on Wednesday evening, like, less than two days ago. Yeah. Like, at 2AM with so sleepy. I'm surprised. The last few days were a lot of lawyer calls, like, more than my entire life.
Speaker 3:Like, I have enough lawyer calls that I wanna do more. Like, but on, like, small details that are not very important, like, we're both sides. We're like, let's let's get it done, guys. You know? Yeah.
Speaker 3:Yeah. It's fine. It's just, like, legalese. Yeah. So it just got signed, and then we just announced it yesterday externally and to our employees and everything.
Speaker 3:So it's still very early. Yeah. We've done six different acquisitions, bigger and smaller, over the years. So kind of trying to learn how to get better at it. And a lot of acquirers mess up the acquisition, as you know.
Speaker 3:Right? Like, lot of company, it's a failure because mostly because of the acquirer just not not doing the best to welcome the team and to continue the growth and the business. So our top priorities, like, to continue what's working at TrueAcc. A lot of things are working. We wanna accelerate their growth and give them more support.
Speaker 3:We don't wanna suffocate them in a in a bigger company. So I think that's been early alignment with Ryan and and Ethan and Victor and the team. And so also, the the rationale for the acquisition is both we tested their product and their employment verifications are 10x better than than what we have. So it's gonna their product is gonna make our product much better for all of the customers. And we're excited to expand into the financial underwriting space.
Speaker 3:Sure. So double rationale. On that, they have
Speaker 2:Yeah, it's cool to think about, you know, I can imagine you guys are in a much better place to do this extensive diligence because you have such as, you know, similar and and potentially overlapping businesses over time than even somebody that'd be writing, like, a 9 figure check, right, on the, you know, VC side just because, yeah, who's gonna be able to get into the weeds more and and really understand the product. So it's a huge vote of confidence in the in the platform.
Speaker 1:Yeah. Yeah. Remember hearing a story from a lawyer about, like, getting a signature from a VC who was literally this is not a joke, literally on the ski slopes and they had to they had to fly someone out with the paperwork to get them to sign at the top of the hill because they were on vacation. Were like, this you have to sign this day. This is super important.
Speaker 1:So I'm sure I'm sure there's a lot of drama, and I'm sure there's gonna be a massive legal bill for you, but but good luck. I think it's gonna work out. Obviously, it's a lot easier when the companies are growing. Right? Because, this doesn't become about like, oh, let's chop it up and, like, really cut costs.
Speaker 1:It's like, hey. We're all growing together. This just will accelerate things. What is you're both private companies. Is there, like, an FTC approval process for a deal like this, or is that just something that doesn't even come into play at this level?
Speaker 1:Is Lina Khan punching the air watching two companies merge even though both of you guys seem pretty happy about this?
Speaker 3:Yeah. No. I think it's I think this one was below the threshold. Okay. We've had it for previous bigger acquisitions.
Speaker 3:Sure. Yeah.
Speaker 1:Is there any like regulatory process? How do you even how do you even think about that as as a start up? I mean, we've we've all heard the story about like, you know, the big ones, like the Figma, Adobe, back and forth. They're still litigating Instagram and Meta right now. What advice would you give to founders as they're growing to think about acquisition and merger and acquisition strategies broadly in the regime as it's evolved over the last few years?
Speaker 3:Yeah. Yeah. I mean, I think M and A, and I was talking to the M and A bankers, you know, last year and this year and the trends, M and A with the big, big, big four tech companies like Amazon, Google, everything, has been very difficult Yeah. Especially in the last regime. Lots of deals canceled and and everything.
Speaker 3:I don't know if we're right or for wrong. You know? I think it is important. We we are startup guys. Like, we root for new startups to succeed.
Speaker 3:Right? I think we that's what we like to do. But I think in in the opportunities are for small and medium sized startups to to join forces and do M and A. And I think it's a good M and A market right now. The roads to IPO is longer than ever.
Speaker 3:The bar is higher than ever. I mean, the IPO window just got shut again. Yeah. And even before that, you know, experts and and friends and and people are saying, like, hey. Even $500,000,000 in revenue, it's not it's not strong enough these days.
Speaker 3:Totally. You you want a billion plus in revenue.
Speaker 1:Yep.
Speaker 3:Super strong growth, super strong profitability, super diversified business, very high bar. There's very few companies to get to that level. And so even for us, you know, I think the opportunity is like we have a big vision. We work in the data and identity space. What other startups can kind of join that venture?
Speaker 3:And we all work together to be a bigger, stronger company and qualify over time.
Speaker 1:Awesome. Yeah. Ev Randall was talking about how he pulled up a screen of SaaS companies with over $500,000,000 in revenue that are public, and there's hundreds of them now. And so just as a public markets investor, like, you can kind of satiate your demand for SaaS companies in, like, almost any vertical, and so the bar's never been higher. I mean, you mentioned that, like, the M and A markets are heating up.
Speaker 1:Is that are you looking backwards towards a year ago when this start process started? Or is this what you're feeling even this week? Because, obviously, there's been some market turmoil. Do you think that, the mood in Silicon Valley, the mood in San Francisco has shifted at all around M and A. Because obviously, Wall Street reacts much faster with like the the IPO window is closed, like, as of a week ago.
Speaker 2:Well, it might be open again.
Speaker 1:It might be open again. Who knows? It may you know, it changes so fast. But I feel like in Silicon Valley, the M and A market moves much more slowly as VC funds scale up and scale down. Obviously, there's still growth funds that are getting bigger than ever.
Speaker 1:What are you seeing in terms of M and A over the last year? And do you think there's going to be a shift this year?
Speaker 3:Yeah. I mean, I think it's from the seller side, there's going to continue to be a lot of appetite because the again, the valuations were so high in 2021.
Speaker 1:Sure.
Speaker 3:It's really hard to catch up, especially when you are, like, raising at a hundred times revenue multiple or things like that.
Speaker 1:Yep.
Speaker 3:If the if the scale is not there, profitability is not there, companies might really struggle to fundraise more. So I think we're gonna continue to see companies interested in joining forces and and demand on the seller side. That started over a year ago, and it's continuing today. I think on the buyer side, I have seen some anxiety in the last few weeks from investors. You know, should we really do M and A or not?
Speaker 3:It's, you know, it's it's scary out there. There's anxiety. And so, you know, it's always a big investment. So, you know, people don't want to invest or take risk when when things are scary out there. But from our perspective, I'm fortunate we have a strong financial position, strong long term investors.
Speaker 3:And, you know, we continue to win for it. We did that M and A because it's the right thing to do in the long term. So we're really playing the long term game here.
Speaker 2:Yeah, love it. Last question I have, Ryan, is there one investor maybe besides Daniel that comes to mind as the most helpful, somebody that stands out on the on the eight year journey that that you would, you know, highlight?
Speaker 5:Yeah. I mean, it's it's it's hard to single out just one. We we're lucky to have many really, really great helpful investors. I mean, all three investors on our board, Alfred Lin from Sequoia, Keith Erboy from Cosla, and
Speaker 1:Really stacked.
Speaker 5:Yeah. Stackboard. And so
Speaker 2:is the last one?
Speaker 5:And Steve Saracino from Activent.
Speaker 1:Yeah.
Speaker 2:Cool. Awesome.
Speaker 5:Yeah. So their stat is stacked incredibly helpful, incredibly supportive from the beginning till now. I I really couldn't have asked for a better board. We got really lucky.
Speaker 1:But gun to your head, Keith or Alfred. Just kidding. No. I I I I do wanna know, like, maybe last question for Daniel. There's been this back and forth meme about chat GPT rappers, GPT rappers.
Speaker 1:Just, we're we're the AI Salesforce. Maybe we're the AI checker. You know? There's a lot of those companies. Some of them, they felt like they were overvalued, and then some of them ramped up revenue really nicely.
Speaker 1:But they still feel like, I wouldn't wanna be building one of those companies when there's a active venture backed company in founder mode building in the same category because I think that they're gonna figure out how to wrap if they need to wrap. But what are you thinking about in the early, early stage of, like, AI empowered disruption? How important is it is it to do a greenfield project, build something? We're seeing that Windsurf is getting acquired. And I think a lot of people were saying, oh, that's just a ChatGPT wrapper.
Speaker 1:OpenAI is just gonna build that. Well, maybe they will buy it. And so what are you thinking about the latest crop of kind of AI driven startups?
Speaker 3:Yeah. I mean, I think we are the AI checker in Founding Mode, so good luck if you want to come in our space.
Speaker 1:Yeah.
Speaker 3:No, but I think AI is just the latest software, right? Like, it just you used to say we're, like, the SaaS company to do CRM. We're the AIcom we are a cloud company to do CRM. Now we're AI company to do CRM. Yeah.
Speaker 3:So I think in b to b and we're in b to b, it's like, b to b problem are you tackling? Are you tackling sales? Are you tackling underwriting? Are you tackling HR? And AI is just the way to build modern products.
Speaker 3:If you think about it this way, it applies to every category, every business. And it's not enough to just be the AI rapper. You have to come in and say, why is AI going to be a differentiator to replace all of the other players? And if you have a strong story on that and the other players are not doing and leveraging what you're doing, I think there's a chance it's highly disruptive. Building AI products is not the same as building the products we've been building as product and edge people in the last twenty years.
Speaker 3:The paradigm, the UI, the experience is different. The stack is different. So either there's going to be opportunity because bigger companies are not going to change fast enough. But I'm racing in my company to transform everyone to be like, hey, guys, we've got to relearn everything from sign up flow to monetization to, you know, buttons and dashboards. It's we have to rebuild products.
Speaker 3:AI first, it's different.
Speaker 2:Yeah. Is Have you thought at all we always say last question and then there ends up being more but we have one minute left. Have you thought about a world, you know, maybe you've done this already, but integrating with something like a ChatGPT where if somebody's using ChatGPT at work and they can say like, hey, I have a new hire coming on board. Would there ever be a world in the future where you would actually like integrate into the, you know, agent layer if you're looking at something like a ChatGPT as an agent? Or is that not even the right kind of workflow?
Speaker 3:No, that's futuristic, but it could be. It could be. You know, I think if you look at, who is it? Like, Klarna, who's not even using Workday and Salesforce anymore and just, like, directly agents who
Speaker 1:Yeah.
Speaker 3:Do the workflow. Yeah. You could skip some of the traditional recruiting and hiring process and go straight into the agents. Yeah. Could happen.
Speaker 1:Awesome. Interesting. Well, thanks so much for Congratulations,
Speaker 2:Very exciting.
Speaker 1:Excited follow along.
Speaker 2:You guys dominate together. It seems like it was fate. And, yeah, congrats to the whole True Work team on on the on the eight year run too Yeah. And the continued success. Thanks, Ryan.
Speaker 1:Really rubbing it in Lina Khan's face. She hates a merger, doesn't she?
Speaker 2:She hates a merger.
Speaker 1:No. I'm sure she's fine with this one. Little tech little tech building up resources.
Speaker 2:Future big tech.
Speaker 1:Future big tech, but little tech right now. Gary Tan at the helm.
Speaker 2:Yep.
Speaker 1:One hand washing the other on this
Speaker 2:one. Yep. Well, we are gonna be talking about
Speaker 1:David Senra. He's coming on the Big Big Dell. We're the history of Michael Dell, the history of Dell.
Speaker 2:Technologies. He asked One of the most pull up a post. Yes. So, I used
Speaker 1:to work runs for a founder. Dell are you looking at the revenue over time?
Speaker 3:Yeah.
Speaker 1:Is that the one? Oh, man.
Speaker 2:$19.84, $6,000,000. This is the first sixty dollars. Nineteen eighty five, thirty three million dollars. Nineteen eighty six, sixty seven million dollars. Nineteen eighty seven, a hundred and fifty nine.
Speaker 2:Nineteen eighty eight, two hundred and fifty eight. Nineteen eighty nine, three hundred and eighty eight goes all the way up to 25,000,000,000 by 1999. And let's bring Sunrun What a run.
Speaker 1:How you
Speaker 4:doing, What's up, brothers?
Speaker 1:What's up? You're looking great today. I like the suit.
Speaker 4:Well, I I text you last time. I came on with a hoodie and it was completely unacceptable. So Yeah. It would never happen again.
Speaker 1:Much better in a suit. You look fantastic.
Speaker 4:Everybody does. Be before we jump into Dell, which is a crazy story, can we talk about the fact that Larry Ellison has now started following TPPN? Say
Speaker 1:hello, Larry. Hi. How you doing? Good to have you
Speaker 4:on list And what you guys called him? Do you remember the nickname you gave him?
Speaker 1:The big technology father? Was that me? He's not he's not a tech bro. He's a tech father.
Speaker 4:Yeah. Yeah. But the I I think I texted you guys, and then it what I love is how fast, like, you are with it. You're like the original technology father.
Speaker 2:Like, Basically created
Speaker 1:The database. The database, basically, the mainframe. Yeah. I mean, what a fantastic
Speaker 2:The Fantastic. A what a incredible book that which you covered. What is it? The Difference Between God and Larry Ellison? Is that
Speaker 4:So so there's actually it's funny because he I think he's gonna be I I just did Michael Dell. I'm working on the founder of Sony, Akio Morita.
Speaker 2:Sure.
Speaker 4:And I think I'm doing Larry Ellison again. I've done three on Ellison, but it's been like four or five years. So there's three books about him. The best one is probably Soft War
Speaker 1:Yep.
Speaker 4:Because He got the right footnotes.
Speaker 1:Yeah. This is such a funny story. Tell this, please.
Speaker 4:So to get to to agree to cooperate with the author, he's like, you can write whatever you want, but I must be able to answer on the same page and, like, have my, like, counter argument. And so at the bottom, it's like l e writes is is initials.
Speaker 1:Yep.
Speaker 4:And you I could almost do an entire episode. Like, maybe you might wanna just read the whole book and just read l e Wrights. Just his It's just it's hilarious. But More bullshit.
Speaker 1:That should exist. Somebody should go do that for, you know, all the major tech people today with that style. Because on the one hand, it's like, it's not what journalism's about. Like, you're it's not it's not it's not gonna drive the same narrative. It's not objective because he's, like, putting his footnotes everywhere, but it's just an awesome format.
Speaker 1:I think more people should do that.
Speaker 4:Yeah. We go back and forth. Like, actually, no. I disagree with it. I was there.
Speaker 4:It this is what I think happens. And then there's even better so I think I'm gonna do sophomore. Mhmm. You know, because I think the the founding story of oracles told best in that book. Shockingly only three books on him.
Speaker 4:But then he did a book called There's a book written about him called The Billionaire and the Mechanic. And I think when I did that episode, was like, yeah, it's technically about Larry Ellison, but it's about extreme winners. And I think that's when I realized, like, oh, Larry Ellison has probably more in common in terms of his competitive drive with Michael Jordan than he does with most other founders. And I said something like, if Michael Jordan sold enterprise software, he'd be Larry Ellison. They're just ruthlessly competitive.
Speaker 4:And the there's a fantastic scene in the billionaire and the mechanic because Larry Ellison was best friends with Steve Jobs and he'd go on long walks. And so I'm pretty sure the book opens or maybe open the episode with it, with them debating who the greatest person in history was. And and Jobs went more more like Gandhi, like peaceful, and I'm pretty sure if I remember correctly, Ellison went like conqueror, like Napoleon or or something like that. It's like, alright, here's your two personalities, you know, basically explained in this conversation you you guys are having. So yeah, it's I
Speaker 2:hope you can uncover what what Allison's longevity regimen is at some I know I know it won't be the focus Crazy. Live such an intense high stress, you know, lifestyle. Yeah.
Speaker 1:You think it would take a it would take a toll on him, but it seemed like it hasn't at all.
Speaker 4:So this is actually interesting because Yeah. I feel like every time we come on there, we talk about founder mode. Sure. And one thing that was, like, striking that missing from that essay Yeah. Is the fact, like, you know, like, it was like, well, there's a manager runs a company in one way and a founder runs a company in one way.
Speaker 4:He's like, no. I think the founder runs it based on the personality of who they are. And so I I was having private conversations about this, and it was like, well, take take two competitors, Larry Ellison and Bill Gates. It's like Bill Gates was a grinder. Larry Ellison, by his own admission, is a sprinter.
Speaker 4:He'll work excessively hard for, like, three weeks, and then he'll disappear on his boat with some Italian model for a few weeks, and he comes back. He literally says
Speaker 1:that during COVID. During COVID, he sent an email like everyone in Oracle just saying like, I'm on
Speaker 4:the island. I'm on Yeah. We're all gonna work remotely. It's like, yeah, but you're working from an island that you own?
Speaker 1:Island that you own. He only owns 96 percent of But
Speaker 4:but the point the important part was like, he was like that,
Speaker 2:you know? Really his island.
Speaker 4:Yeah. Decades ago. He was like that decades ago. It wasn't just now as like an 80 year old man. So like, you know, he there's there's a lot of different personality types where Bill Gates was just like ripping his you know, there's this great story that Michael Moritz tells when he before he was a VC, he was a phenomenal writer.
Speaker 4:Still is a phenomenal writer. Yep. I just finished reading his down his hidden book on down Valentine, which is remarkable. But Moritz tells a story, think at Stanford, you can see this on YouTube, where he's like, oh, you wanna know what focus is? Like, I'll tell you a story about focus.
Speaker 4:Like, I'm riding with Bill Gates probably in the early eighties, and he's like, oh, somebody broke into your car and stole your radio. And Bill Gates said, what are you talking about? He's like, no. I I took that out. He said, why'd you have it taken out?
Speaker 4:He's like, well, it takes me eight minutes to drive from my house to Microsoft, and it takes me eleven minutes to drive from Microsoft to the airport. And he does the math. He's like, so, you know, if I had a radio, that means I would wouldn't be thinking about Microsoft for that those eight minutes or for those eleven minutes, and then I go to work every day, so that's like forty minutes, whatever the time frame is. It's like, it's insane focus, insane level grinding. That was not Allison by his own ambition, was not him.
Speaker 2:Well, there was a lot, but Founders Podcast didn't exist back then. So No. Yeah. Kept the radio in there and just been hearing you over the airwaves.
Speaker 4:So I talked about this. We we we were talking in our group chat that I'm probably gonna do an episode on Jengus Khan. And I said on there's a fantastic book on Bill Gates, which everybody should read. It's really hard to find. It's on it's a biography of the first thirty five years of his life.
Speaker 4:It's called Hard Drive, Bill Gates and the Making of the Microsoft Empire. I've done two episodes on it. And in that episode, I said a line that now, like, years later or so, gets spit back to me, like, every week. And they're like, you realize the similarities between, like, Jengus Khan and Bill Gates? I was like, oh, Bill Gates is like Jengus Khan in a Mister Rogers costume.
Speaker 4:Like Yep. He's like dressed like mister Rogers, but he's unbelievably, like, ruthlessly competitive with yell like, when he lost a contract, when young Bill Gates lost a contract, let's say, you know, you lost us a $50,000 contract. He's like, he didn't lose this $50,000 contract. It was a hundred thousand dollar contract because we lost to 50,000 and our competitor got to 50,000. There's this great I can't remember which one of his competitors was, but there's a great story that one of his competitors tells that Bill Gates wipes the floor with and and knocks the guy out of business where he sees Bill Gates sitting in the corner at a conference one day.
Speaker 4:And he's sitting in, like, a a foldable chair, and he's looking at something in his hand. He's, like, just really focused, kind of shut out the world, shut everything around him out except what he's looking at. And so he walked the competitor walks over to Bill to, like, say hi to him and talk to him. And what he realizes is that Bill is looking at a picture of his face. It's like if I come to the TV band studio and like I walk in and there's pictures of other podcasters face that you guys are
Speaker 1:looking at. We actually have a picture of you up as well as the godfather podcasting.
Speaker 2:Yeah. We're still putting framed photo around here.
Speaker 4:Yeah. That's that's a that's a positive thing. I know I know some other people
Speaker 3:Yeah,
Speaker 4:yeah, yeah. That you would have like fucking bull's eyes on.
Speaker 1:For sure.
Speaker 4:Yeah, just super competitive.
Speaker 1:What what do you think about the the post economic adventuring of the greatest founders? What I'm talking about is like, you know, there's a very I mean, a lot of the there's like a lot of commonalities between what the founders do when they build their companies and how methodical they are about that. But once they're super rich and they're thinking about their legacy, some of them start hospitals, some of them, get involved in politics. Larry Ellison is really into sailing, I guess. Nathan Merveld at Microsoft, He owns more T Rexes than anyone in the world.
Speaker 1:He owns the T Rex skeletons, and he's My son would
Speaker 4:love that.
Speaker 1:Massive Same. Yeah. Yeah. Yeah. So he he actually put all of his money to go and find new T Rex skeletons.
Speaker 1:I saw I a deck
Speaker 2:for a dinosaur fund.
Speaker 1:Yeah. Yeah. And and and, you know, William Randolph Hearst obviously built this like unmanageable castle that became a museum. I I'm I'm kinda beating this drum about, like, we need our elites to go and do even crazier things, just like build the world's tallest building, build the world's biggest house, build a castle, build a library, build a museum, and I'm not seeing it enough. But what do you think about that?
Speaker 1:What interesting kind of like side projects have you seen from the greatest founders in history?
Speaker 4:I I It's interesting. Like, what would be the most interesting, one that's done? Honestly, I I prefer them to do like what Steve Jobs did. I you know, if Steve was alive today, he'd be, what, 70? So still young.
Speaker 4:Sure. The the idea that he wouldn't be still working all the time at Apple to me is just unfathomable. Like, I
Speaker 1:think Yep.
Speaker 4:Totally. Like, he I'm all for charity and all that other kind of stuff, but, like, you know, every biography is kind of written like that where it's, like, you know, focuses on the early life and then the rise, and then gets really boring once they're like super rich and like name it, like, that's not relatable to other people. It's like, I donated a wing to, you know, the hospital named after my mother or something like that.
Speaker 1:Yeah.
Speaker 4:I prefer them to not have side quests. Prefer them to work on what they're working on until they're dead.
Speaker 1:So you you want Bezos to go back into Amazon now that Lena Khan's out and the heat's off. Yeah. Cool it with the Blue Origin, cool it with
Speaker 4:no. That's actually a great example. If you're gonna have a side quest, like the Blue Origin, like, then build, another company.
Speaker 1:Make it a company.
Speaker 4:Yeah. But Bezos also
Speaker 1:goes that clock, the Long Now Foundation. Have you heard about the clock?
Speaker 4:Yeah. Of course. Of course.
Speaker 2:But like even Ellison did this. He he took his island and and turned it into a sensei
Speaker 1:Four seasons.
Speaker 2:Which is
Speaker 1:Oh, yeah.
Speaker 2:Like, you know, this amazing, like, hotel. It's not Yeah. It's not a David might say it's not a month, but Larry, when you hear this, I love Sensei. I think your properties are phenomenal. Yeah, they're fantastic.
Speaker 4:I'm sure they're excellent. I would expect nothing else.
Speaker 2:Interesting lore, he he so Larry has six homes on PCH. Mhmm. He's invested heavily
Speaker 1:in Malibu.
Speaker 4:More more
Speaker 2:than that. Well, He's got like dozens of properties in Malibu Okay.
Speaker 4:That are
Speaker 2:and I think there's six that are just in a row on PCH and I think the fires got to two of them. And at some point, the firemen decided to make, like, a last stand and were basically like, the fire's not going past this point. And so a couple of them went down, I heard, in the in the January fires, but Mhmm. Four still standing, and I'm sure he's doing a ton to to kind of help with the recovery effort broadly in Malibu.
Speaker 4:No. I think this is a perfect, like, segue into what I actually wanna talk to you guys about, which is Michael Dell. It's like, he's 18 he starts Dell when he's 18, 19 years old. He's 60 now, right? Mhmm.
Speaker 4:I talked you had Zach Dell, his son, his co founder on last week
Speaker 1:We did.
Speaker 2:For for Bass.
Speaker 1:Bass Power.
Speaker 4:I talked to I talked to or, yeah, I talked to Zach for a while before I did the episode, and you know, he's like, the idea that my dad is ever gonna stop is just never gonna happen. Just like, he had so many opportunities, like, didn't When when he took the company private, when he came back public, he didn't have to be the CEO, it's like, he was He's just obsessed with it. Like, you go to his house, like, he will he's working on his computer. He wants to talk to you about the the company. Like, he's completely in love with what he's doing, and that's probably the the highest and best use of his time as opposed to, like, another side quest.
Speaker 4:Yeah. So I I do, like, I I the response for this episode has been really, really nutty in in terms of, like, everybody knows they've heard Dell, right? They know who he
Speaker 1:is Yeah.
Speaker 4:They've heard of this company, but the feedback I'm getting is, like, they didn't understand his life story and just how I think I just tweeted out, like, I study uncommon people uncommon life stories for a living, and Michael Dell is uncommon amongst uncommon people. Mhmm. I'm almost 400 episodes in, I can't think of another single comparable founder story to his. In the sense that like, this guy was a money making machine since he was like 13. You guys, I just heard if I don't know if you guys put it up on the screen.
Speaker 4:Heard you We did. Talking about it. That that tweet that he has where he starts with, you know, $6,000,000 the first year.
Speaker 2:Down doing how did he manage I haven't I've been so focused on TBPN this week. I haven't been able to listen to the episode yet. I'm gonna get to it this weekend. But how do you go from zero to netting 6,000,000 or or grossing 6,000,000 in the first year? Like, what does that even look like?
Speaker 4:It's even crazier than that, where, he started the company with a thousand dollars, no co founder, no VCs. Okay? So, like, this is what I mean. Like, I I I I've been getting a bunch of text messages, and one of them was, like, I don't think there's another, like, fucking startup story like this ever. I forgot what the text said.
Speaker 4:There's definitely an f word in there. And I posted it too. Because I I just can't think of another, like, that successful that fast with so limited means. And he's his head to head competitor was Compact, which was he's in Austin. He he launches Dell in his in his dorm room.
Speaker 4:Austin's or Dell Compact is in Houston. They raised, I think, 25,000,000 initially. So I think 25,000,000 at the beginning, and then in the first early years of Dell, they'd already raised like a hundred million in capital, and he smokes them. They wind up getting bought, then, you know, Dell still is thriving and and Compact no longer exists. But one of the things that is obvious in in the story is just like, he a lot of these outside successes, obviously, like, you you have to be the right person with the right set of skills at the right time.
Speaker 4:And, you know, in '84, the personal computer, his the the first time the first very popular personal computer, computer appliance is what Steve Jobs called it, was the Apple two. That's the first computer that I think Dell was 14 years old when he buys. And there's a crazy stories about how big of a hustler he is and the businesses he was making. He was making more in high school than his teacher was. Like, just a money making machine from day one.
Speaker 4:And he buys an Apple II with his own money. Right? You'll love him, Kugen, because he buys a Porsche. He buys a BMW and then a Porsche. He gets arrested when he's like 19 for going like 92 and like a 55 and a red nine eleven.
Speaker 2:You're getting under the bus like that. I think both of us like You'll love him because he was No,
Speaker 1:but he's I've defended Marquez Brownlee for speeding.
Speaker 2:Yeah, yeah.
Speaker 3:I he's fine.
Speaker 4:So he's he's obsessed with with, you know, beautiful cars and and going very very fast. But to answer your question, it's like, a lot of this is because the market was pulling out. So I I I, a long time ago, I think it's episode 50. Have you guys ever read Marc Andreessen's blog archive?
Speaker 1:Most of it, I think.
Speaker 4:Yeah. Do you remember like this is a long time ago, a lot of young founders don't even know this. He was like a prolific blogger Oh, before he started a sixteen z.
Speaker 1:P Marko, that's like the blog name.
Speaker 4:Exactly. And I think you go to a sixteen's website now and you can pull the archive and it's absolutely incredible. And one of the most important things that Mark says in that was very fascinating because he's like, well, you know, lot people debate. What is the biggest predictor of startup success? Is it, like, the product?
Speaker 4:Is it the the the the actual people, the founders, the team, or is it market? And he's like, if I had to pick one, my thing would be on the market. And he's like, in a great market with a lot of real customers, the market has to be satisfied. The market will pull product out of the market will pull product out of the company and the market will be satisfied by the first viable competitor that comes along. And so Dell, of before he goes all in on it, he travels to England.
Speaker 4:He's making a ton of money, essentially just buying IBM PCs, souping them up, and then selling them to rich architects, dentists, doctors, and stuff like that. Right? That's how it
Speaker 1:story of Yeah.
Speaker 2:Yeah. Yeah. The Bravess
Speaker 1:of PC market, of IBM PCs.
Speaker 2:The AMG.
Speaker 1:Yeah. Yeah.
Speaker 4:That's great. So, and so then he goes to England, and he's like, wait a minute. I thought like all this, like, there was just like computer fever in Texas. Mhmm. He goes to England, and he's like, I'm in these stores.
Speaker 4:The product sucks, the salespeople don't know anything, and yet they can't keep the inventory in stock. And that's when he realizes like, oh, need to go all in on this. He winds up dropping out at 19, telling his parents, hey, you know, if this doesn't work out, I'll go back to school. He never goes back to school, and you
Speaker 2:see technical at this time, or was he just a hustler? Or was
Speaker 4:No. He was No. No. He was like a computer nerd, but I think he was much more like in in the sense of like a hardware. He liked His favorite thing to do is to take apart computers.
Speaker 4:So let me give you an example. Another crazy stat that people don't understand. He starts a company in '84. '80 '8, they go public. Mhmm.
Speaker 4:Okay? Yeah. By the time he's 26, he's in the fortune 500. 20 six years old. Like what I'm telling you right now, when you listen to this episode, you're gonna be like holy shit, there's not another story like this.
Speaker 4:So his favorite thing to do, he recruits this older guy because we can talk about the fact that they they He made a lot of money because you know, people give him money, they were paying him credit cards back then. So the customer pays today, and then I go buy the parts. Right? And then eventually, starts selling to governments and and businesses and and schools and everything else, so he needs to get credit. And so this is where he's like, my bank will give me credit.
Speaker 4:I need to extend credit to governments and everything else because I'm paying my credit cards. So he he went to a partner with this guy named Lee Walker, who is, like, a 45 year old, very successful venture capitalist entrepreneur in in Austin. And he was played a really important role in the first, like, four years of Dell. But one of the most fascinating things is that what Dell then does they how would I like, let me back back up real quick. Lee Walker is the one that has the relationships with the bank to get the credit that Dell needs to start selling to all of these, like to to to issue the credit.
Speaker 4:Like, they're selling to, like, US government and Monsanto and and all these different companies. He's also the one that helps Dell go go public. So Goldman Sachs does recommends they they choose Goldman Sachs to do to to to take Dell public. They say, hey. Let's do a private placement first.
Speaker 4:Okay? The this is gonna answer your question, Jordy. So the private placement right? There's, a couple hundred private placements that are that are in the works on Black Friday, which is the stock market crash in nineteen eighty k, which we talked about last time I was on here with Sam Walton. Lee Walker goes in and is telling a young Michael Dell, we're screwed.
Speaker 4:Like, they're they're gonna cancel our private placement. They the stock market drops in '23 I think it's 23% in a single day. Mhmm. And he goes in to to Dell's office and he finds Dell to tell him this bad news and what's Dell doing? Dell's like, I was taking apart the the computers of my competitors to see how we can improve.
Speaker 4:So I don't know if he was technical from a software perspective or from a hardware perspective. He was he understood how they worked. He liked putting them together. He liked taking them apart, putting them together, making them go faster and perform better.
Speaker 2:Yeah. The concept of a computer nerd almost like died off. Right? In some ways. He could Not not died off, but it it was just way more of a thing, and then it became like, well, if I'm really into computers, then I'm just gonna make software.
Speaker 4:He talks about now they're way too complicated. You used to be able take away the first Apple two, the IBM fifty one fifty, which I think is the first one he gets. You could take it apart and actually understand what every single component was doing. Now you it's impossible to do that.
Speaker 1:Yeah. Can you can you compare Dell to Jobs? Similar revenue ramp at Apple actually, although a little bit slower in the first year. I think Apple made, under a million dollars the first year, but that was 1997. By 1984, Apple was doing over $1,000,000,000 in revenue.
Speaker 1:So Dell comes in with $6,000,000 The market's a little bit more established. And then if you look at what Dell's done today, they're selling servers for businesses. That's about $40,000,000,000 revenue. And then, laptops for often computers, personal computers, for business workers, another $40,000,000,000 or something in revenue. He seems much less focused on product design, brand, all the different things that Steve Jobs was known for.
Speaker 1:Is he more of a private equity financial mastermind? That what makes him special?
Speaker 4:This is the weird thing too where, again, not really comparable to any other people. He was upset. He was a computer nerd. Like, he'd get in trouble in high school because he'd just sit in the back of class and read, like, Byte magazine and, like, was just a separate it was computers. But his parents were successful in business, and so every single conversation they'd have when he was a kid like, this dude was reading Fortune and Forbes magazine at 12 years old.
Speaker 4:Mhmm. And then we didn't even get to the point where, like, he does he takes Dell by the time they they they go off on this crazy run. By the time they start hitting a lot of headwinds, like, 2,005, by the time it gets 02/2012, '2 thousand '13, they're in real big trouble. And so he takes this huge risk of doing the the biggest technology leverage buyout in history with Silver Lake Partners. So they take Dell private in 02/2013.
Speaker 4:Okay? The story gets even crazier. So he understands. He he was actually preparing for the age of AI like ten years ago. So Jensen I talked about this in the in the episode where I I found an interview with Jensen Huang and Michael Dell, and Jensen's like, well, there's only one company in the world that can actually build these data centers at scale and give do every single thing from the storage to compute and everything else, and that's Dell, and that's why they're such an important partner to us.
Speaker 4:And Dell was, like, moving into storage and servers and stuff a long time ago, way before AI Mhmm. Like the proliferation of AI, I should say. And the I get the the the most interesting thing is like, so he take he does the largest technology that they buy out Dell, all they take a private 24,400,000,000, if I remember correctly. Okay? Two years later, while he's still a private company, he does the largest technology acquisition ever.
Speaker 1:The MC. I
Speaker 4:I I was at dinner tonight and we were with our wives and I had to apologize, you know. I was like, listen, I don't mean to be vulgar, but I have no other way to say this. It's like, Dell's got balls the size of watermelons. Like, the guy is a private company. He buys EMC VMware, right?
Speaker 4:Billion dollars with like 4,000,000,000 of equity.
Speaker 3:Yeah.
Speaker 4:So it's like, there was like a special dividend or something like that, but they wind up borrowing like $50,000,000,000. He's like, hey, I'm gonna take this risk. I'm gonna go $50,000,000,000 into debt to buy this company. There's a great story I talk about on podcast, it's also in the book, where EMC is I think a Boston company. The board of directors are a little older, a little different, and so Dell's coming there saying he's pitching this as a, you know, merger, not an acquisition, but, you know, it's more of an acquisition, would say.
Speaker 4:But merger acquisition, whatever you wanna call it. And he brings Jamie Dimon with him. Right? And there's a great story in the book where the boards, he's talking about what his vision for EMC, what he wants to do and everything else. And then they're like, okay.
Speaker 4:And they lean forward. This old guy on the board is like, but Michael, we're talking about a lot of money here. Do you have the money? And Michael is about to answer and Del goes or and Jamie Dimon goes, they have the money. It's like This is like the guy running the most valuable bank in the world is telling him he has the money.
Speaker 4:We got the money. We will get you the money. Yeah. So, yeah. And then what happens, he buys that for 67,000,000,000.
Speaker 4:They spin out VMware. This will go back to your question. It's like, he had technology. He's obviously a technology expert. He's also really gifted at business.
Speaker 4:He understands finance and everything else. So he buys EMC VMware for 67,000,000,000. I think in 02/2022, they spin out and they sell VMware by itself for 61,000,000,000. That's insane. Wow.
Speaker 4:Like, that's insane. And then EMC, I forgot the dividends, it's in the book, they were making like 6 or 7,000,000,000 a year in cash flow anyways, every single year. So it was like the the it's one of the most successful acquisitions of all time as well, and the foundation for all the building all the AI and everything they're doing now. I again, I just I've never I'm almost eight year nine years into this project, 400 biographies written. I just cannot think of another comparable to Dell.
Speaker 4:Now, if you want me to contrast him with Jobs, yeah. Jobs was much more interested in, you know, the the There's a great there's a great clip that just went viral on Twitter the other day where it's like Steve Jobs back in '97 sitting there with Tim
Speaker 1:I think you were on mute.
Speaker 4:Could share. Yeah. And his whole thing was like, no, no. Like, I'm not worried about market share. I'm worried about building products that I could be proud of.
Speaker 4:So yeah, completely different
Speaker 1:And much less acquisitive. I mean, Apple's never really done that opportunistic acquisition thing generally. It seems like it's still DNA of the company now. They buy some IP, they buy some foundational technologies, but if but they're not just gonna go buy a VR headset. They're gonna build their own.
Speaker 4:And then if you look, I've been told by people that know way more about finance than I do that Dell's family office is the most financially successful family office in history. He actually built it into a firm and like some of the things they've done around that. So like every single thing this guy does, he's just an extreme winner. Yeah. And then he just owned I think when they went public, he owned like 73% of Dell the first time.
Speaker 4:When they went private and went public again, he wind up owning like something like 45 percent personally, so huge ownership. And then I think he personally profited from a friend of ours that I can't mention who, knows a lot about finance told me this, where it's like you have to also look that when he sold VMware to Broadcom, he took a a shit ton in stock. And if you look at the acquisition date and Broadcom stock, it's up like three x. So Broadcom buys VMware for 61,000,000,000, and then the stock is up like three x from that since then. And a lot of that was his own personal money from what I understand.
Speaker 4:So it's just like, when it just the guy the guy just can't help but win. It's it's crazy.
Speaker 2:What what's the backstory on his broadcasting company? Did you did you follow that at all? He started OTA broadcasting in 2011, which seems like maybe kind of a No.
Speaker 4:The so the the the book has actually a weird structure. So I read he he'd I read his first kinda autobiography. It's called Direct from Dell. It's published in 1999. Then he publishes, during COVID, Play
Speaker 4:Nice Win. So Play Nice Win is is the one I wanted to focus on because I think it's actually, like, any he, like, reads the audiobook. It has a very interesting structure because the the first chapter is him fighting with Carl Icahn, he's trying to steal steal his company from him, it's about to take private at Dell. Then every chapter alternates, right, between the fight to take his company private to the the startup of Dell. It's a very interesting structure for an autobiography. And then the next chapter will go back to the fight and then it'll and then the next chapter after that will go, okay, now we're in '90 you know, we're in '84, we're now in '87.
Speaker 4:It weirdly stops in like '90 I think maybe '99 or 02/2001. He talks about the troubles they were having in 02/2005, '2 thousand '7, '2 thousand '11, the the first chapter of the book, but no. I don't even think that's in the book, if I if I remember correctly.
Speaker 2:Yep. That makes sense. It's crazy to see where Dell imagining, if he was still running the the company today, it it trades at two thirds of their like, the the value today, the market cap is like two thirds of their revenue last year. Wow. So which is just $60,000,000,000 company.
Speaker 4:And yeah. What was it like billion Yeah. What was it last year though?
Speaker 2:Well, did like $95,000,000,000 of revenue last year. Yeah.
Speaker 4:Yeah, But it was over Yeah. Was over a hundred A hundred billion, right? What was it? Or two years Yeah,
Speaker 1:yeah, yeah. It was, stock was at a hundred and 18, stock's at 84 today, down 30% over the last year. So yeah, they were around $100,000,000,000 last year. And it's pretty fascinating comping them to Apple. They, Dell was significantly bigger than Apple for, like, a decade.
Speaker 1:Like, 1999, Dell's doing $25,000,000,000 in revenue. Apple's doing 7,000,000,000 In 1998, Dell's doing $55,000,000,000 in revenue. Apple's doing $6,000,000,000 in revenue. Apple had a like, also had went through, like, this really rough period of transition in the late nineties, early '2 thousands before having the breakout success that they've had now. And now they're up in, that 300,000,000,000 revenue and of course Wow.
Speaker 1:Trade at a
Speaker 4:much They also the most successful consumer product of all time.
Speaker 1:And and then also built the services about and then they also built a very, very high margin services business around that, and that's something Dell has never been able to do, build like this high margin locked in monopoly on top of the technology in the software. I remember in
Speaker 4:the early days of making the podcast, just how disorienting, like, the success the outside success of the iPhone was. Because I think in one of the first episodes I did on Steve Jobs, and I've done, like, 10 or 15 or something. And they made the point that, like, Apple makes more from the iPhone if they just had the iPhone and nothing else than, like, Disney does from every single thing they've ever like, they they everything. All their theme parks, all their movies, everything else. Just like that one Yeah.
Speaker 4:Single product.
Speaker 1:A %. I mean, Larry Ellison is 80. Dell is 60. He's got another twenty years in him. It's not No.
Speaker 1:It is. He's He's stepping down or anything. So, I mean, Larry Ellison is in the conversation to buy TikTok now. You think Dell's got, like, a second, third, fourth, fifth act coming up? Are you seeing him Yes.
Speaker 4:I got a great text message. Somebody Yeah. They said, dude, when you said he's only 60, I had to Google it real quick because he's so young. There's gonna be another edition of the book for sure. He has another era of domination coming.
Speaker 4:For sure. Yeah. I think there's going to be for sure. Like, I he okay. So we've talked about this last time I was on here where it's like, oh, people say if you love what you do, like, you'll do it for free.
Speaker 4:And I was like, There's actually no such to that. It's like, if you love what you do You'll be people couldn't pay you to no. People couldn't pay
Speaker 3:you to stop. Yeah. Yeah.
Speaker 4:He Dell takes it another level in the book where during 02/2012, when he's fighting to take the company private, they're like, why are you doing this? Like, it was very painful. He could have lost control of the company with his name on it. They're like, you've already made so much money, like, just go retire to Hawaii, or why don't you start a new company? And he goes, I don't want to retire.
Speaker 4:I don't want to start a new company. I want this one with my name on it, and then he takes it to another level. He goes, I will care about this company after I'm dead.
Speaker 1:Founder Moe.
Speaker 4:And then, hold on. I I I do have to say one even And and again, a lot of the people I cover on the podcast are kinda cautionary tales. They're like obsessed to the point where they destroy everything around them.
Speaker 1:No, Del seems great. Think it Seems like you have a great life.
Speaker 4:I I I think it's really important first of all, it's a much longer episode than I normally do. It's really important to get to the last few minutes of the podcast, Because, like, I save what I think is the most important lesson for the very end. I'm not trying to, like, hide it. In fact, that, like, when I talked to Zach, and the way he talked about the way his kids think about him, and how they look at their father, you know, they they're he's a hero to them. He was talking about like, you know, Dell's running one of the most complicated, largest companies in the world, and yet, anytime his son calls him or any his kids call him, it's like, he'll drop everything for them.
Speaker 4:He's a legitimately great dad, still married to the same wife, like This is what mean, he's just uncommon amongst uncommon people. I cannot think of another single, like, comparable to him.
Speaker 1:That's fantastic.
Speaker 2:Absolute legend.
Speaker 1:Think you kinda compare to him actually. I I often think of you as like the Michael Dell of podcasting.
Speaker 4:No. One thing I will say, he's got excellent excellent taste in podcasts. He sent Michael Dell a few years, like a year and a half ago sent me the best DM I've ever got. He says, your podcasts are A plus in the little trophy emoji. I was very proud of that.
Speaker 4:And then today, he wound up tweeting. He's like, you're very good at what you do. I was like
Speaker 1:That's amazing.
Speaker 4:Fucking crazy that you're saying that.
Speaker 1:So I
Speaker 2:Real recognize real.
Speaker 1:Real recognize real.
Speaker 4:It's wild.
Speaker 1:It's been great. Thanks for yeah. Thanks for coming on, hanging out. This is always fun. Jordan's got something queued up on the soundboard.
Speaker 6:Let's hear it.
Speaker 1:That it's brother behavior. Brother behavior.
Speaker 4:Thanks for the invite. I love you guys.
Speaker 1:Love you. Talk to you soon.
Speaker 2:A good rest of your Friday.
Speaker 1:And Nicole Wiskoff's got some news. Right? Wishoff?
Speaker 2:I mean, she put out a post. She's You wanna
Speaker 1:bring it down. Let's bring her in. Nicole Welcome to the show.
Speaker 2:She said yesterday, spent two full days with institutional LPs. Can safely say that 98% of them are fed up with venture funds are too big, especially for new fund spinouts. No one does math anymore. No liquidity. Godspeed to whoever is out raising
Speaker 1:our to do math. We have AI now. Oh.
Speaker 2:Intelligence is too cheap to meter. Yes.
Speaker 6:Yeah. That's true. We have to take AI to meetings and let them speak, Yeah. And then more funds will get raised, I think.
Speaker 1:Yeah. Break it down for us. Name names. Who's who's the dumbest watcher LP in the valley? No.
Speaker 1:No.
Speaker 2:I'm kidding.
Speaker 6:Oh, I wasn't even in SF, but
Speaker 4:I don't wanna throw it in under
Speaker 1:the bridge.
Speaker 6:So I was in a big money hub, if you will, less probably tech companies, but a lot of capital. Sure. And I did so I tried to every six to nine months just to to, like, set the stage here, I try to just go to the LP tour. Existing LPs, as you guys probably know, you wanna get to know institutional folks years before they invest, or that's the expectation that they know you for a super long time. So I do my, you know, grand old tour across The US, you know, twice a year, and this was one of those.
Speaker 6:So I took six, like, hour long meetings in person over the last two days with, like, endowments, pension funds, you name it, all of which are largely pretty active in venture or have become increasingly so. And so, yeah, just just setting the stage there, but happy to either you guys yeah. Let me know what's most interesting.
Speaker 2:I can see
Speaker 1:you
Speaker 4:in my level. Yeah.
Speaker 2:Yeah. Break down the post. There was kind of a lot in there, but the idea that, you know, venture's clearly an important asset class or or at least we would always like to believe even though it's a small percentage of actual dollars allocated. I'm curious, the quote, no one does math anymore. To me that stood out as potentially, you know, you have a $200,000,000 seed fund, you start running the math and you're like, wait, we need to back six unicorns at seed to deliver a 2x fund.
Speaker 2:And then is that what you're kind of getting at there? Or it's just like
Speaker 6:I don't wanna butcher some quotes here from from meetings, but I think it was along the lines of fund managers come to raise funds. I think. And what I what I should caveat is it seemed like a lot of the house cleaning was done on the existing kind of blue chip relationships with a lot of these institutions, like, a couple over the last few years. So I think that the negative sentiment was actually towards maybe newer funds or, like, the funds that are on fund three and fund four, but going out and still trying to raise these, like, aggressively large, like, over $300,000,000 funds. It seemed less I I think they did some housecleaning already when they were frustrated with the big funds that they've had in the portfolio for over a decade, and did some house cleaning there.
Speaker 6:And so I think that feels like it's sort of settled. They've picked the folks they wanna concentrate with. And then but I think the new relationships are getting a little bit blurry. And so from that perspective, it was a lot of how are we supposed to invest in, like, the next generation of the blue chip funds and, like, be in in their fund two and fund three when we have these folks coming to us who don't have a portfolio construction model trying to raise over a hundred million dollars, which may seem small to folks, but it's a lot of money. And then they're saying things like, I I I forget exactly what what the CIO said to me, but something along the lines of, like, yeah.
Speaker 6:So I'm asking, like, what returns the fund. I'm like, oh, we expect, you know, over, like, 25 to 30 positions that, like, five will be decacorns and, like, five will be unicorns and that, like, it's just how do we get it from there? And so it's like, wait. I'm sorry. Can you please back me to the math?
Speaker 6:And so they were saying that, like, you know, 80% of the meetings they take, and these are folks on fund two and fund three, like, clearly have never, like, opened up a spreadsheet and, like, walked through portfolio construction, but I think they've been able to get away with that for their past few funds. Mhmm.
Speaker 2:And so part of it part of it is that math is not commonly used in venture because you're kind of trying predict outcomes ten years down the road, but then that CIO is getting pitched by some traditional private equity fund that's basically saying, we are going to invest in, you know, six companies of fund, and they need to do we're gonna exit within four years. And all we're really aiming for is to just consistently get sort of an 8% k. Return on
Speaker 1:Well, there's two different types of math a VC can do. They can do math about the market size and and, you know, DCF on the value of the company they're investing in, but then they can also do math on the portfolio construction side. And it feels
Speaker 2:like Yeah.
Speaker 1:The other Like, vibe investing might be okay. Just find the insane founder, invest in, oh, it's one on 10 or it's two on 20, whatever, that might not matter. But if you're not thinking about the portfolio construction at all
Speaker 3:Yeah.
Speaker 1:You might turn away some LPs.
Speaker 2:And then simultaneously, the the other thing that I think is interesting is is venture and private equity were always under the same in the same category, yet they're starting to, like, overlap more in different ways.
Speaker 6:Yeah. I mean, I felt like one CIO that manages, like like, I think they're around 15,000,000,000, was saying to me that, like she's like, I would just rather I'd rather just do private equity all day. She's like, the IRR is better. She's like, I have a window into, like, liquidity that is not that long, and so they're obviously safer investments. I think where people are I I would say that the net takeaway is that folks are just sitting on their hands, and I think frustrated that they're still sitting on their hands.
Speaker 6:As in there's no liquidity, so there's no no one would say this, but there's a lot of fun that's going on right now. Like, no one's super excited about, like, these massive exits where they've got to think that the problem that they're thinking about is where do we deploy this cash. Right? Like, most folks go into every year, and they have a five year plan, and they know we're gonna deploy a billion into venture this year. Mhmm.
Speaker 6:But I think that's just been the other takeaway was from really large folks that are active in venture, I don't know how everyone else is still investing in these funds when no one has any cash. Like, she like, they're like, I just don't understand. There's been no liquidity for any of us. We don't have a lot of money to deploy right now. Like, I don't know where this, like, cash is coming from.
Speaker 6:And so it just seemed like some of the bigger, I think, more legitimate folks that have been around in venture for a long time don't understand maybe the newer entrants.
Speaker 1:Hasn't always been driven just by shifts away from other asset classes? Like Yeah. You know, large LPs rotating out of real estate or treasuries or the public markets. Like like, anytime there's a boom in venture, it's always dwarfed by the other asset classes. So we're just looking at, like, if they take, you know, two percent of their equity or their public equity strategy and roll it into venture, that will, like, double the size of venture.
Speaker 1:Right?
Speaker 6:Yes. Yeah. Yeah. I know. And it's they're tapped out.
Speaker 6:Yeah. But it's it's hard. I mean, right, this is all this is just all cyclical. Right? Like, we're gonna be
Speaker 1:in a world
Speaker 6:I bet in twenty four months, I hope that I'm on the show and we're talking about this, and everyone's gonna be like, wow. We, like, tripled our exposure in venture, and everything's going fantastic and, like, poo poo on private equity and, like you know? So I I do foreshadow. Like, I foresee that happening. I think that just for right now, it's just been, like, three plus years of crap.
Speaker 6:And I think everyone feels like they're staking this beating, so no one's optimistic.
Speaker 2:Well, is the three plus years of crap coinciding with a boom in AI? You know, 58% of venture funding in q one went to AI startups. Is part of it or or do you feel like LPs are like, yeah, well, we had to stretch ourselves a little bit thin effectively so that we could get as much exposure here as we wanted? Or, like, yeah, how how do you think they're like, yeah, I I'm curious. Like Yeah.
Speaker 2:In many ways, you could you would imagine that I think over time, it will become clear, like, yeah, deploying into, you know, AI startups from 2022 to 2025 was, you know, yeah, there were some overvalued companies, but, like, some generational winners, I would hope.
Speaker 6:Mhmm. Yeah. What what does seem to be true is that, especially with AI and there's so many unknowns, right, like, much capital these companies actually need. We're seeing record breaking seed rounds, for example, and insane prices like Mira's company, 2 on 10,000,000,000. Like, goodness.
Speaker 6:You know? So I think a lot of it right now is it is actually making more sense to me that I think the data last year was that, like, what was it? Like, 5% of VC funds or maybe north of that went to, like, 10 funds or, sorry, capital raise for venture funds went to, like, the biggest ones, the GCs, the Andreessens. I imagine a lot of it is that, one, they're clearly master storytellers, so they're able to say, like, here's what we estimate will happen in the market and how much we need to deploy now. Then maybe those vintages will be fantastic.
Speaker 6:I think what is really confusing and some of the conversations I was having, and I actually got this data. I saw DST did this presentation for some of my portfolio companies a month ago, and it was they wouldn't give me the slides, but I have, like, burned in my brain, which was, like, at growth, what's super hard is that for growth funds is that they've traditionally underwritten companies to say, great. If you're a DST, you've got 30,000,000,000 plus in AUM. You're typically a growth investor. You're looking at a company, and your timer starts for their year over year growth once they hit 2,000,000 in ARR.
Speaker 6:And so, like, from 2,000,000 in ARR, is that if you grow and it's kinda nuts. And I I might be butchering some of this, but we can, like, verify it. But it was like, if you're growing, only 200% year over year from 2,000,000 in ARR, then it will take you, like I think it was, like, twenty nine and a half years to be a $10,000,000,000 company. They're not gonna invest. That's, like, forever.
Speaker 6:Mhmm. If you're growing 300% year over year, then I think that number was around, like, 14 and a half. And if you're growing 500% year over year from that 2,000,000, I think it was, like, seven and a half.
Speaker 1:Oh, for sure.
Speaker 6:But what happens when that window from, like, one, like, like, that that 2,000,000 right now, companies are going from, like, zero to what was, 70,000,000 I just saw in, like, a year or, like, two years. So the entire underwriting model of, like, a great business for growth funds is broken. So everyone now, I'm sure from an LP perspective, is like, are you YOLO ing cash? Like, you know, like, what is the new model that you guys are underwriting to? Like, what does a great exit look like, and what is the the big question you get in venture is, like, how do you identify a great business?
Speaker 6:Like, what are the metrics that make sense for you to deploy 50,000,000 into a business? And and, like, I I shouldn't speak for DST, but they were like, they talked to all the other growth funds and all the guys that run them, and they're all sitting around a dinner table wondering, like, well, how do we underwrite these businesses? So I imagine as an LP, you're thinking, shoot. I'm gonna trust the guys that have made us a bunch of money over the years versus these net new, let's say, AI funds where no one knows. Right?
Speaker 6:And they haven't proven that they've done anything in the past.
Speaker 1:On the AI stuff, maybe on the venture side, do you think with a Windsurf rumored acquisition by OpenAI changes the conversation? There was a big meme. Don't build a don't build a chat GPT rapper. GPT five is gonna steamroll you. Well, it looks like, Sam might be opening up the piggy bank and shelling out for some companies that could be described somewhat as rappers.
Speaker 1:And if that trend continues and all the foundation model companies are buying a ton of consumer products that are built on top of them, well, those could be some really great exits. Well,
Speaker 2:one thing is we don't the conversation. We don't necessarily know we don't have details on that acquisition. It might not be a liquidity event. Right? It might just be like, you know, our windsurf investors getting rolled in.
Speaker 2:You know, I'm sure there's
Speaker 1:You're getting votes in
Speaker 2:the nonprofit. Yeah. Yeah. Nonprofit.
Speaker 3:Yeah. The seed of
Speaker 6:the nonprofit. Too many questions there that I have answers. Right? Like, I actually don't even know who most of Windsurf's investors are and how It's
Speaker 1:a Green Oaks deal, actually. Green Oaks did the seed and the series
Speaker 6:of course.
Speaker 1:Monster Monster
Speaker 6:are amazing. No. That's amazing. Look. I I hope I hope that the people make it look we are all incentivized to seize cash.
Speaker 6:Right? Like, to seize some liquidity. I think I would summarize all the sentiment to being just, like, obviously, as you guys know, lack of and so people are looking for new reasons to get angry. Like, I was hearing even things like, hate the two and twenty model. It's such BS.
Speaker 6:And then big funds ask for more than, like, 20, you know, if they hit, like, over a three x net, you know, then it becomes 30. And, like, I I feel like a few CIOs were like, f this market. You know? But that sentiment's gonna change as soon as they see liquidity, and then it's gonna be like, oh my god. It's amazing.
Speaker 6:Our exposure's, like, tripled. Yeah. And so I just can't wait for that to happen. I just think people are grouchy.
Speaker 2:Grouchy.
Speaker 1:Are you telling an AI story to LPs that mirrors cloud or mobile or fire or electricity around AI? You kind of pick your metaphor and and depending on how bullish you are, you pick a more extreme metaphor.
Speaker 6:Look. I think, me cofounding a business, to build next gen AI data centers shows where my head's at. It's in the infra like, the physical infrastructure and the power. And so, like and that's obviously non Wishoff Ventures related, though I've told you guys, like, I've gifted my shares into the funds. Yep.
Speaker 6:But I think that, like, that that's but that's, like, a non kind of LP pitch from that perspective. I think the from a Wishoff Ventures perspective, I am very bullish on the vertical AI applications. I think I can't I don't know who can, I can't really predict where everything goes at all on the AI front, whether it's horizontal, it's foundational? Like, I I don't know. What I will say is the more specialized you are in your vertical and the more you can enable a home services business, for example, to, you know, hire less people and and bring in more business, I think the more, like, you know, insulated you are, it's harder to rip you out.
Speaker 6:And so I'm really, really all in on, like, these vertical applications where folks are specialized, and they can kind of walk their users to this type of automation. I think people, like, really, really, like, don't think deeply about how hard it is to get people to adopt this. I know the idea is to, like, decrease headcount, but, like, no one understands this stuff. No one knows how to implement. No one knows how to think about it.
Speaker 6:And so I I just think it's, like, down to the folks that know how to, like, tangibly articulate the value of an offering. And being an SF, it's kind of why I'm grateful not to live there, though I love it not knocking it, but, like, you just kinda get sucked into this, like, oh my god. Of course. It's, like, so obvious. Like, everyone's going to adopt and pay a million dollars for this, and enterprise value is, like, gonna balloon.
Speaker 6:And, like, we're forgetting that there's a whole world out there that's, like, never even heard of, like, GBT. Yeah. And so yeah.
Speaker 2:Mediavine. Are you staying away from consumer AI? I talked to a founder yesterday that pitched me, like, a what was, like, a great idea and application of the tech, but I just, like, immediately he was, like, tell me why I shouldn't do this. And I was, like, I believe that this is like not something that OpenAI has like explicitly said is on their roadmap, but is like an obvious thing that agentic, you know, like an agentic would just do automatically.
Speaker 1:Yeah.
Speaker 2:And so how are you thinking? Are are you feeling like, you know, a lot more confident in these, like, sort of b to b verticalized applications versus, like, a lot of consumer right now if if it's not
Speaker 1:network Anime filter was not on the OpenAI roadmap, but they crushed it just by working on images long enough. Right?
Speaker 6:It's like NFTs. They come in and they're so cool for, like, five minutes, and then it's like, wow. We spent a lot of money there. I mean, that's probably not fair. And if watch NFTs come back in, like, twelve months.
Speaker 6:Like, I think that the, honestly, I don't know. I mean, I toy around with a lot of this stuff. Like, the great thing about consumers that I can just mess with it and, like, try and figure it all out. I don't know that I I found anything even personally sticky enough that I'm, like, every day, like, you know, like, messing around with it. And I oh, I guess it's not fair.
Speaker 6:Like, obviously, like, OpenAI, like, Claude, and Perplexity. But I think, like, on the everyday, I haven't really I I always have an open mind. Some of the YC companies I've seen have been super interesting, but I haven't really found longevity for my myself using them as, a you know, personally. But maybe my mind's not open enough. I just try to think I realize this is a pretty irrational business than some you know, like, I I try to take more of a rational lens around, like, could could this make it ten plus years as a durable business?
Speaker 1:You're hiring in San Francisco, looking for two to three folks that are operators. Why did you settle on, that language, operators? We've talked to VCs who have been top of their class at Goldman. Come in and just work the spreadsheets for a decade No. Put up historical runs.
Speaker 1:Look. Also founders, you know, but operators specifically. Why do you think that's the key to success in venture?
Speaker 6:Look. I think from my style of what we do and, like, where we try to, like, add value to companies is absolutely saying, like, oh, been there, seen that. Like, here's what worked for us. Here's what didn't. And, like, just being fast to that response because things have to get done.
Speaker 6:I have hired so I have, Neil on my team as a senior associate and who he comes from venture, doesn't have operating experience. And so this July, when it's quiet in DC, Neil is full time at one of my portfolio companies in LA as on the biz ops team operating. Like, that's important to me. Like, I'll cultivate it. Like, that's the thing I want in our DNA.
Speaker 6:If you don't have the operating experience, I don't wanna lose you to it, but you're gonna go get it. And so I want to keep that DNA. I think it matters. In SF, we need exposure there. Over half the deals done last year, you know, were in California.
Speaker 6:We do a ton of deals in SF. We see a lot, but I want folks folks that are boots on the ground. I it's sort of kind of like to start. I wanna hire someone there full time, but for now, sort of like scouting people that are excited about venture but still really, operating that are writing small checks. But I wanna pull them in.
Speaker 6:So unlike scouting now where you just source and then ideally get some carry, I want them to see a whole deal through. They source a deal that we do it. They're joining every call. They'll learn how to we underwrite the deals, how we do the work, and then eventually, they can put that on their resume if they want to, but we'll see. And, ideally, I can hire one that's fantastic.
Speaker 6:But just an approach I wanna take. I don't know how these venture firms do their thing and do their scouting stuff. I don't care. But it's something that I just wanna test out and see how it works.
Speaker 1:Very cool. Jordy, anything else?
Speaker 2:No. This is great. I wanted to just get a get a gut check for I mean, we have a lot of managers that listen to the show that maybe aren't fundraising right now. Hopefully, they're having you know, doing little mini checkups.
Speaker 1:Doing some math.
Speaker 2:Doing some math.
Speaker 3:You got 2 plus
Speaker 1:2¢.
Speaker 2:Open up that calculator app.
Speaker 6:To answer the question, how do you return 50,000,000, whatever your fund size is? You know, like like, literally and then walk through tangible examples, and apparently, no one does that or can do that on the fly.
Speaker 2:It's just interesting
Speaker 1:to trillion dollar company in the portfolio. Exactly. Just get out of the unicorn, decacorn thing. Just buy 10% of the next Facebook
Speaker 6:Seriously.
Speaker 1:For a hundred k.
Speaker 5:Yeah. It's easy.
Speaker 6:No. On the other thing that was interesting is a lot of I was actually I didn't mention this, but I was asking about spinouts. There's a lot of great people, I think, right, you know, spinning out of of of notable funds and and raising funds. I think what's confusing for them is they were like, look. A lot of these guys took the strategy even though they even the blue chips do this, and this is why they're so active in seed.
Speaker 6:And this is coming from the LPs. They're so active in seed because the individual investors are like, well, hey. If we take 30,000,000 and divide that out by a ton of $23,000,000 checks, if we lose a few, it's not such a blow to the reputation of that of that, you know, partner at the firm Mhmm. Versus taking a $30,000,000 check and putting it into one company and saying, like, hey. Like, I'm a pretty good picker if that works out.
Speaker 6:And so I think it's made it really, really hard to underwrite these guys because they've just done whatever they wanted and candidly haven't taken a lot of risk or maybe have been able to. Mhmm. So it's gonna be interesting to see specifically. I think right now, we're seeing the most probably good quality spinouts. It sounds like over the last six months raising funds.
Speaker 6:But I think it's also I thought that, like, shit. It's just hard for me because I've never been in venture before, and I'm trying to, like, do something substantial. But it turns out that, like, even the folks that spin out are still getting kicked in the teeth. So I think to what you're saying, go meet LPs really early and be able to answer these, like, tangible financial question. I mean, it seems obvious it's not, but, like, it really that matters.
Speaker 2:Yeah. It's funny to look at if you just ignore, like, you know, looking at a spreadsheet of portfolio construction and you just look at somebody and you look and you say, if if this person has a hundred million dollars to deploy in the next three years, do I think they're gonna be able to give back hundreds of millions of dollars? And when you really just, like, look
Speaker 1:at somebody That's a question.
Speaker 2:And just like ask yourself that question. Sometimes I sometimes I look at a manager, you know, I'm an LP in a in a fund here in LA
Speaker 1:running by the math. It sounds like that a vibe LP investment.
Speaker 2:It was a vibe LP investment, but I look at, you know, I'm I'm talking about a buddy of mine Yeah. Jack Dreyfus and like, he's got a $30,000,000 fund. I look at him and I'm like, yes. I believe he's gonna get back around a hundred million dollars
Speaker 1:Yep.
Speaker 2:To his LPs. And like, it's not like it's purely vibe space, but the guy knows how to, you know, knows how to do deals. Yeah. And so
Speaker 6:Well, the other yeah. And I'll leave you guys this. I know we're over is like so I was talking to, like, a managing director at a pension fund that's got, like, over 55,000,000,000, and they're super active in venture. And he was actually saying he's like, go after the pensions because he's like, endowments will actually leave you. Like, they will churn.
Speaker 6:But he's like, pensions don't. So if you get in, it's, like, pretty sticky, but they do have a high bar for, like, emerging folks. But he was like, I almost he's like, I could make a killing if I left here and just advise managers that are trying to basically institutionalize because he was like, the hard stuff are things like when to exit. He's like, you could be you could have great access. You could actually pick the right deals, and you could just never exit at the right time.
Speaker 6:And he's like, that is just, like, a lot of what we see. So there's just an art to how do you institutionalize your firm that is, like, a lot of folks miss. So if emerging managers are listening, that's, like, the big chasm that is really hard to cross. Like, have you hired appropriately? Even if you're a solo GP, like, you have
Speaker 2:But when you talk about when to exit, are you talking about, let's say, a breakout company in the portfolios raising around at $5,000,000,000 and there's a lot enough demand for the round, and you're saying, like, when to exit those positions? Or or what did you mean by that?
Speaker 6:I would say that largely most folks, especially emerging managers, at least as far as I know, are tell LPs, and this is what I do as well. I'm not a public markets investor. When my companies go public, as soon as we're out of lockup, like, that that's ideally around the time that we sell, and then it's your responsibility to do what you want to do with the shares. Yeah. So I think a lot of it is on the way there, especially I mean and then this is probably a lot of what we're seeing because of 2021.
Speaker 6:A lot of folks should have probably sold secondary on the way up because people got priced at, like, sky high valuations, and there were secondary happening all over the place at an insane premium. And I think they're referring to VCs never selling secondary. And then though the those rounds go from being a $5,000,000,000 series d where they could have sold secondary in '21 to, like, a billion dollar company right now, and they're sitting on these. And it's, like, just still on the books. And so I think it's a lot more of that that never happened, but that's hard.
Speaker 2:Well, that's another reason to keep your fund small because if you have a $50,000,000 fund and you get an opportunity to sell a port you know, a secondary, like, that could return the fund potentially. But if you're, you know, a $500,000,000 fund, it's hard to ever figure out
Speaker 1:Yeah.
Speaker 2:An opportunity to sell secondary that's gonna, like, meaningfully, you know you know, return the fund or or or anything along those
Speaker 6:And that stuff can haunt you too because I'll hear stories of people selling Facebook when it was, like, you know, $20. I think I heard the craziest story from Tiger once, which, like, don't actually, mind. I was like, I don't even know if that's on the record. Yeah. Yeah.
Speaker 1:I They love doing PR, actually. Tiger loves just, like, their open book
Speaker 6:was That is not my story to tell.
Speaker 1:There's definitely not a book about them where all the names are changed floating around.
Speaker 6:Actually, no. It's gotta be public knowledge. They sold they oh my god. They sold so early at Facebook. That's all I'll say.
Speaker 6:It is it hurts because they do
Speaker 1:Many people sold. I mean, they they, like, they just I mean, Sequoia sold Google, and we we we've talked about this. Like, they they, you know, IPO, and then they just distribute.
Speaker 6:Yeah. Awesome, guys.
Speaker 1:Anyway, this is great. We'll talk to you soon.
Speaker 2:Thanks for squeezing this in, and have a great weekend.
Speaker 6:Y'all too. See you soon. Alright.
Speaker 1:Thank you. Talk to you soon. Bye. Let's go to Zach Kukhoff. He says, know your audience, chief of staff edition in DC.
Speaker 1:They're either 24 or 45. They're the second most powerful person in the room. They run the show. In San Francisco, it's a new grad, a glorified associate best case or EA base case they run the Slack. Slack.
Speaker 2:It's funny. Very real. SF stole the word, the title chief
Speaker 1:is Co op did that language, yeah.
Speaker 2:And made it extreme in the opposite direction.
Speaker 1:They did. Yeah. Gotta bring it back. Sheel says, thoughts and prayers for our glasspreneurs. The business is down 75%.
Speaker 2:Yeah. This is crazy. SF Auto cherry tan is cooked so hard.
Speaker 1:It's incredible.
Speaker 2:Glass is not getting broken.
Speaker 1:San Francisco auto glass shops are now suffering as car break ins plunge. It really does seem like San Francisco's cleaning things up. There's a new mayor. There's a lot of new investment and obviously the AI boom, but I think just a general vibe shift, not even around
Speaker 2:the It's happening.
Speaker 1:The federal election, but just around enough is enough. And so Yeah. They're they're mixing things up there and seems like good progress. Also I think think you bad happens somebody tags Gary Tan. He's Batman.
Speaker 2:Kept telling friends who live in the Bay, I'm like, you realize that like like 2023 was the time to be buying an SF Yes. Because the buy ship was happening. Yes. Homes were when I when I compared home prices in prime Central SF to, like, suburbs outside of LA
Speaker 1:Yep.
Speaker 2:I was like, how does this make any sense? The only reason it makes sense is people had gotten so depressed. There was not a lot
Speaker 1:of Cisco management.
Speaker 2:You know, people saying, you know, certainly less people going, I'm gonna move from Austin to SF.
Speaker 1:Yeah. And so But people did get dramatic with the moves out of SF. It's like, you could have gone to Marin. You could have gone to Atherton. But instead, they were like, I need to go to Mogadishu, Somalia.
Speaker 1:I have to leave the the hemisphere. I have to be so far away from San Francisco because it's so bad. I have to go to North Korea. Would rather be in Pyongyang than than than Incline Village in Tahoe. Like Yeah.
Speaker 1:There's so many good options even when even if San Francisco, the city is rough. Like Yeah. Sunnyvale is fine. Like, there's so many places in the bay that are great. You can go to Sand Hill Road.
Speaker 1:You can go to Menlo. You can go to Palo Alto. None of those places were ever bad. Yeah. But it got really, really dramatic for a while.
Speaker 1:Anyway, here's a rumor from TechCrunch. Expense management startup ramp is being considered for a charge card pilot program by the US government's general services administration.
Speaker 2:Well, we're gonna take a little credit for this one.
Speaker 1:Did did they plant this in our head and then we joked about it, or did we joke about it and plant that in their head? I don't remember.
Speaker 2:No. Were just joking about it.
Speaker 1:We were joking about But
Speaker 2:we were joking about it in a serious way.
Speaker 1:Yeah. And then and then we got a a deep dive on it. Eric put out a longer post, started taking it more seriously, and it sounds like it's actually being considered, which is crazy. But you'll love to see it and it would be very cool. I mean, we always have a question of like, where does the money go in the government?
Speaker 1:Why not have some insight in that? Why not have the receipts actually categorized? That makes a ton of sense. Makes a lot of sense. Some debate over whether
Speaker 2:or not every card to a dollar like what they've been doing
Speaker 1:Yeah. Yeah. Yeah. Very, very bizarre functions and I mean, can just imagine that if there's no oversight, there's gonna be more like just looser spending and and that hurts the taxpayer. Very excited about this.
Speaker 1:I hope it happens. Anyway Anyways. Let's move on. We talked about the Golden Dome. Anything else in here we should talk about?
Speaker 1:Should we close out with Will Menidas? Talking about Don Valentine? Don't do Don Valentine.
Speaker 2:Don Valentine.
Speaker 1:He says on pricing in 25 year old entrepreneurs, Valentine says, maybe maybe we should go back and forth here. I'll be Valentine, I guess. Can I make an observation before we switch? Sure. Absolutely.
Speaker 1:Because John, I we're John and I were talking about this in the car, and one of the great things about that venture business is that you're in an opportunity to learn constantly. One of the large number of things that were brilliantly recognized and executed was the pricing of the product. We have, in general, at Sequoia, lots of trouble and difficulty in persuading twenty five twenty five year old entrepreneurs that you've got to prod price the product higher. And our agenda for that conviction was the fact that 25 year old that a 25 year old cannot run a company Activate gold golden retriever mode. On 35 or 40% gross margin.
Speaker 1:They need 60%. Sixty five % gross margin in order to compensate for the mistakes that we know they're gonna make. Not specifically, no, but in general, we know they're gonna waste a great deal of investment capital. That's a great insight. Like like, they're gonna overhire.
Speaker 1:They're gonna get get over their skis on CapEx. They're gonna be excited and say, oh, yeah. Let's just pay up for this talent.
Speaker 2:You are making a lot of money Yep. You can afford to make some mistakes.
Speaker 1:Yeah. It's fine. And Cisco was early on, no and no influence from me or other investors, able to recognize the need of, first of all, pricing the product very high, sustaining a very high price, and continuing to make enhancements to the product that provided them with the opportunity to continue at high at a high gross margin level or increase the high gross margin level. So one of the miracles of the launch of Cisco was the creation of an enviable cash flow that was early on very positive when most companies are negative. And I remember conversations not seriously had, but not often had either about what we were going to do with all this cash we are accumulating.
Speaker 1:Now, startups do not have accumulation problems. They have the opposite problem. So they need to persuade the founders Yeah.
Speaker 2:And I love where I love where Will pulled this from Cisco oral history panel part two.
Speaker 1:I love it.
Speaker 2:He's got the PDF. Esoteric value. He's got the PDF. Big PDF guy. But I think that's a good where where place to end the show.
Speaker 1:Yeah. This was fantastic.
Speaker 2:Hope everyone has a fantastic weekend ahead.
Speaker 1:Thank you to Polymarket. If you're trying to monitor the news in real time over this weekend, head over to Polymarket. They got a bunch of markets to check out what's going on.
Speaker 2:Yeah. The Polymarket news platform never stops. I shared earlier this chart the largest company April Mhmm. And Apple and Microsoft were neck and neck. And then Tim Cooked, and Apple is now sitting at, you know, 92% with almost a couple weeks left in the month.
Speaker 2:So who would have thought that Apple would be still on top in a trade war with China, their primary supplier.
Speaker 1:They're doing great. Tim
Speaker 2:is goaded when it comes to supply chain management. So anyways We were
Speaker 1:in one of those interviews. I just looked over at that stupid giant gong and we started laughing.
Speaker 2:We when we roll out this gong, it's gonna be insane. We keep going to the wide angle and the gong is not even it's too big
Speaker 4:to fit in the shot.
Speaker 1:It's such a tease. Anyway, have a great weekend, everyone. Happy Friday. We will see you soon. Goodbye.
Speaker 1:Looking
Speaker 2:forward to Monday. Cheers.