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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 backstop TV.
Speaker 2:Today is Thursday, 11/06/2025. We are live from the Backstop Ultra Dome.
Speaker 1:The Backstop Arena.
Speaker 2:Yes. The backstop right here.
Speaker 3:Stops.
Speaker 1:Look at this. This is how it works.
Speaker 2:It's the infinite money glitch.
Speaker 1:If you're Just do it.
Speaker 2:If you're
Speaker 1:Just do it. Ask for it.
Speaker 2:If you're if you're skiing like this Don't over your skis
Speaker 1:If you get over your skis
Speaker 2:just use the infinite money glitch to get out of jail free.
Speaker 1:That's right.
Speaker 2:Backstop yourself.
Speaker 1:That's right. Doesn't hurt to ask.
Speaker 2:Now, wild time on the timeline yesterday with comments from OpenAI, OpenAI's finance chief Sarah Fryer. She was at a Wall Street Journal event on Wednesday, and she and the She put the timeline in turmoil. She did put the timeline in turmoil. The headline from the Wall Street Journal, was OpenAI wants very difficult. Wants a federal backstop for new investments.
Speaker 2:It was a crazy thing. She wound up clarifying it. Let's play the actual Sarah Fryer interview at that Wall Street Journal event so we can just set the table and hear what she actually said. Wall Street Journal. Let's go.
Speaker 2:This is a nice event. Looks
Speaker 1:like
Speaker 4:it's OpenAI at our core are the model company that needs always to be the state of the art. That's what we've done time and time again. GPT-five is no exception. But even in areas like open source, we are attempting to put the state of the art model always out into the world. And in order to do that, we always want to be on the frontier chip.
Speaker 4:So the question is how long does a chip remain on the frontier? Is it three years, four years, five years or even longer? Now in a world where we have no compute or compute constrained, we are absolutely using chips that have like a 100 equivalents that have been around like maybe six, seven years at this point in time. If that's the case, financing chips gets a lot easier. If the timeline on the chip stays short, that gets harder.
Speaker 4:And so this is where we're looking for an ecosystem of banks, private equity, maybe even governmental, the ways governments can come to bear. Meaning like a federal subsidy or something? Meaning like just first of all, the backstop, the guarantee that allows the finance
Speaker 2:Heads like a ton of bricks.
Speaker 4:That can really drop the cost of the financing, but also increase the loan to value. The amount of debt that you can take on top of an equity portion for So some federal backstop for chip investment. Exactly. And I think we're seeing that. I think the US government in particular has been incredibly forward leaning.
Speaker 4:Has really understood that AI has is almost a national strategic asset. And, that we really need to be thoughtful when we think about competitive competition with for example China. Are we doing all the right things to grow our AI ecosystem?
Speaker 1:We're in a global erotica race.
Speaker 4:Are you talking to the White House about how to further formalize that kind of backstop? We're we're always being brought in by the White House to give our point of view as an expert on what's happening in the sector for sure. Mhmm. Should we you is know there something announcements? No.
Speaker 4:I will I love you, Sarah, but nothing to announce. Nothing that's going on right now. If you wanted to, we're here to listen.
Speaker 2:Yeah. Wild. She wound up clarifying her comments on LinkedIn.
Speaker 1:Elsewhere, the same interview, she did say the market is not exuberant enough.
Speaker 2:Yeah. In the same interview.
Speaker 1:Yes.
Speaker 2:And she also said that they're not working towards an IPO yet. There are a whole bunch of scoops that came out of, this particular event. This Ben
Speaker 1:just texted TPPN, the backstop programming network.
Speaker 2:The backstop programming network. So on LinkedIn, Sarah Fryer said, she wasn't asking for a backstop for OpenAI's investments. She was just making the point that, American strength in technology will come from building real industrial capacity, which requires the private sector and government playing their part. Before we on, move let me tell you about ramp.com. Time is money, say both.
Speaker 2:Easy to use corporate cars, bill payments, and accounting a whole lot more. So, obviously, OpenAI is so dominant in the zeitgeist that, you know, every comment, every sentence by uttered by an an OpenAI executive, will be analyzed to death. It's one of my favorite things to do. So that's exactly what we're gonna do on this show. We're also gonna be restreaming it.
Speaker 2:One livestream, 30 plus destinations, multistream. Reach your audience wherever they are. So the big question here is, should a federal backstop exist for large scale industrial projects? Like, when there's a lot of money floating around in the economy, should a should the government be ready to step in if things don't line up, if things don't pencil pencil out? And I would argue that one already exists, and that's what Sarah was referring to.
Speaker 2:And so Sam Altman actually touched on a similar concept in his conversation with Tyler Cowen that was recorded, I think, a few days ago, but also went live yesterday, which is just sort of crazy timing. But, basically, Tyler is talking about nuclear energy projects and how the government interfaces with them. And then Sam gives an answer that I think is a little bit more illuminating in this whole backstop of the AI build out. So I'd love to play the clip of
Speaker 5:Not this
Speaker 2:Sam Altman Not this year. Talking to Tyler Cowen.
Speaker 6:Here's a very difficult question. As you know, both you and I were fans of nuclear power, but we also know the insurance for nuclear power plants is provided by the government. The plants might be quite safe, but people worry. They're nervous Nellies. There's a lot of parties involved, so the federal government does the insurance.
Speaker 6:Do you worry that the future holds the same for AI companies, or the feds or your insurer, and how do you plan for that? Again, even if AI is pretty safe, as with nuclear power, people are nervous Nellies.
Speaker 2:This is fascinating because it's How will you insure everything? It's not necessarily a question about the financing, but it winds up being about it.
Speaker 5:Like, at some level, when something gets sufficiently huge, whether or not they are on paper, the federal government is kind of the insurer of last resort as we've seen in various financial crises and insurance companies screwing things up. So I guess given the magnitude of what I expect AI economic impact to look like, sort of, I do think the government ends up as, like, the insurer of last resort, but don't I think I mean that in a different way than you mean that, and I don't expect them to actually be, like, writing the policies in the way that maybe they do for nuclear.
Speaker 6:And there's a big difference between the government being the insurer of last resort and the insurer of first resort. Last resort's inevitable, but I'm worried they'll become the insurer of first resort, and that I don't want.
Speaker 5:I don't want that either. I it's not I don't I don't think that's what will happen.
Speaker 6:What we're seeing lithium rare earths is the government is becoming an equity holder. Again, not of last resort, as of second or third resort. And I I don't mean this as a comment about the Trump administration. I think this is something we might be seeing in any case or see in the future after Trump is gone. But how do you plan for open AI knowing that's now a thing on
Speaker 5:the table in the American economy? I put almost no probability on mass onto the world where no one has any meaning in the post AGI world because the AI is doing everything. Like, I think we're really great at finding new things to do, new games to play, new ways to be useful to each other, to compete, to get fulfilled, whatever. But I do put a significant probability that the social contract has to change significantly. I don't know what that will look like.
Speaker 2:Yeah. And so we kind of moved past the the original backstop question. We can we can move on from this. But
Speaker 1:I also think I let me give some more context here because a lot of the dialogue on the timeline started to center around this quote that we just played Yep. On the backstop. Earlier, in that that same day, that same interview, OpenAI CFO Sarah Fryer suggested the market is overly focused about on anxiety about a possible bubble in artificial intelligence and should muster more exuberance about the technology's potential. Quote, I don't think there's enough exuberance about AI when I think about the actual practical implications and what it can do for individuals. We should keep running at it.
Speaker 1:And so she also said, we're all just building out full infrastructure today that allows for more compute to come into the world. I don't view it as circular at all. A huge body of work in the last year has been to diversify that supply chain.
Speaker 2:That's for sure true.
Speaker 1:So, yeah, that that that part is true. But again, going Supply chain is potentially too diverse if
Speaker 2:you're in the supply chain because you're like, I have a ton of competitors.
Speaker 1:Yeah. And and part of this is like you have to put this in the context of last week. You know, Friday, everyone saw the interview with with Sam
Speaker 2:Mhmm. And
Speaker 1:Brad. Brad asked a very simple question that's on everyone's minds. Mhmm. Sam, basically doesn't answer the question. You know?
Speaker 2:It just kinda says, like, we're gonna pay with it with revenue. We're gonna hit our revenue miles.
Speaker 1:Sure. I'm sure.
Speaker 2:Sure. A whole bunch of different projects that are But you put
Speaker 1:that, but but
Speaker 2:nobody pencil out.
Speaker 1:Nobody nobody heard his response and thought, okay. I'm confident now.
Speaker 2:Totally.
Speaker 1:Totally. It it did not inspire confidence. Yep. And so to go into that and then say in this interview, the market is not exuberant enough. Yep.
Speaker 1:And also, you know, she she can go on LinkedIn and and her response, I wanna clarify my comments earlier today. Opening eyes, not seeking government backstop Yeah. Or infrastructure commitments. I used the word backstop and it muddied the point. As a full clip of my answer shows, blah blah blah blah.
Speaker 1:So she can go out and say that she takes it back or that she didn't mean it to come across in the way that it did. Yep. But she, like, very clearly, like, the moment, agreed with the interviewer's point.
Speaker 2:Yeah. It's it's interesting because I feel like it is true that there is a government backstop. Whenever there's a trillion dollars of spend going on, there is a de facto backstop. Like, this happened in 2008. There was a global financial crisis.
Speaker 2:Banks were leveraged on housing. The government came in and acted as the lender of last resort. Like, tons of people hated this, and it created Occupy Wall Street. Like, people argued that it should not have happened, but economists would say that the alternative was worse because the economy would just continue to spiral. You'd see more and more bank failures.
Speaker 2:Yeah. And so in that moment, it was the rational thing to do. Now the now the problem is is that if you are identifying the backstop before you get into trouble, it creates this moral hazard. And that's why people were so upset with Wall Street because if you go into it being
Speaker 1:like The main
Speaker 2:thing is
Speaker 1:going out and announcing
Speaker 2:We're too big to fail.
Speaker 1:Right? Announcing a trillion dollars plus of of spending. Mhmm. Obviously, on balance sheets, some off balance sheet Yep. Yep.
Speaker 1:And then going out and and not being able to answer the question convincingly on how you pull it off. Yep. And then a few days later saying the market's not exuberant enough. We we think it would make sense for the government to get involved in some capacity. When you're building functionally, elsewhere in the interview, she talked about monetizing commerce, monetizing discovering products, monetizing the transaction.
Speaker 2:Mhmm.
Speaker 1:And so to be going out and suggesting something like that when you're building, like, OpenAI today, yes, it's a national lab. Yes, it's strategic to The United States that OpenAI is being built here. But, ultimately, you're building a company that's just gonna compete with Google and Amazon and a variety of other companies. Right?
Speaker 2:Yeah. And I would include those in the backstop. Like, if Google, overinvests or if Google, you know, is is doing a training run on a variety of neo clouds and they get overleveraged and there's you know, like, the buck might not stop with one like, the like, there's a world where there's an overbuild, and the people that get caught is some sort of, like, real estate investment trust or some sort of, you know, aggregator of, private credit or some sort of, you know, senior debtor at on some data center project. And that, yeah, it doesn't it doesn't really affect, the big the big clouds. But I don't see I actually don't see a problem with the government, behaving like it always has.
Speaker 2:I don't I don't have a problem with that. I'm I'm fine with a backstop, and I wouldn't change anything about the way the government works. And I'm serious about that. I'm not joking.
Speaker 1:Say say
Speaker 2:Because I think that I think that the alternative is actually worse. I think the alternative, if you go back to 2008 and you say, okay. Let's not bail out the banks. I think that you just extend the recession.
Speaker 1:Yeah. Yeah. Yeah. But but if in 2005
Speaker 3:Yeah.
Speaker 1:The banks were saying and and various players were saying, we're gonna do a bunch of super risky lending that we're not sure is gonna pencil out. And we just wanna know that if if things get really bad, you'll be there to bail us out, but we're gonna make a ton of money in the process.
Speaker 2:Yes. There is How would you feel about that? There is the problem of it so my conclusion to my post today was America has a playbook for backstops. I don't think Sarah Fryer or anyone at OpenAI is asking to rewrite the playbook, but there's something that feels very moral hazard y about the CFO of the most important company at the center of a massive economic wave sort of telling everyone how the magic trick works. Like like, why people are latching on to this, I think, is not so much the idea that that if there's an economic boom and bust cycle and the government steps in at some point, like, that's not that big of a problem, but it is a problem if you if you say, I'm openly acknowledging the way the system works, and I'm gonna push it to the limit.
Speaker 2:That's a little bit rough. What do you think, Tyler?
Speaker 7:Yeah. I was just gonna say, like, the the AB test of, like, 2008, you can kind of say is, like, Great Depression
Speaker 2:Yeah.
Speaker 7:Where there's this big critique where, you know, people were basically mad that there wasn't stimulus earlier.
Speaker 2:Totally.
Speaker 7:And then, basically, by not doing stimulus, you drag out the depression like way longer than it should
Speaker 2:have. Totally. Yep. I mean, was the foundation of the Keynesian economic model. Like, this idea that, like, it is actually advantageous to spend.
Speaker 2:I mean, like Yeah.
Speaker 1:And I'm guessing guessing I'm actually against government backed infrastructure spending.
Speaker 2:That's not what that is. That's not what this is. That that that's a separate
Speaker 1:I know. It's a separate thing.
Speaker 2:Yeah. Yeah.
Speaker 1:I'm just saying if the government was saying we're gonna we're effectively gonna guarantee Yeah. That a bunch of infrastructure can be built, roads
Speaker 2:So bridges. I actually like I actually like the the hey. We're a backstop. I like the backstop more than we're going to, try and pick a winner and do a specific project. The specific project, that's how we got Solyndra.
Speaker 2:So, like, Solyndra was backstopped. It was this, it was this solar project. It was energy infrastructure. We wanted to build out clean energy in America. And the I would think of the Obama administration wrote like, they basically gave, loans to this company, and the tech just didn't work out.
Speaker 2:And so the taxpayer just got a write off and or not not a write off, but, like, you know, the the the debt didn't work and didn't get didn't get paid back. And so there was just, a loss. That technology never worked. The company went bankrupt, and it was a big, like, egg on the face moment. Obviously, it's not gonna bankrupt America because it's just one company.
Speaker 2:It's just one small project. But it was still like, why do we spend, I think, hundreds of millions of dollars or whatever it was on this, like, moonshot technology? Like, shouldn't the private markets be the ones allocating capital around that? That's very different than if there's a systemic problem in the economy stepping into just lower the interest rates. Like, look at what what was the backstop in .com?
Speaker 2:Do you know what they did as a result of .com? No. Like, they didn't go in and say, oh, you're in pets.com. We're making you whole. Yeah.
Speaker 2:What they did was they said, there's a recession right now. We need to lower interest rates. We need to cut taxes a little bit. We need to just stimulate the economy just a little bit to get back on our feet and just start up the economic engine.
Speaker 1:Yeah.
Speaker 2:So they did tax cuts and it lower interest rates. And that is a backstop, and I'm fine with that. I think that's fine. Like, if if the if the AI bubble pops and the end result is that we get lower interest rates and and some tax cuts and, like, just, hey, let's Yeah.
Speaker 1:But again, I think that's very different. Very different than than various players wanting to develop data centers Mhmm. And lenders feeling uncomfortable about not having clarity on, are these chips gonna be worth anything in six years? Are they gonna be worth anything in five years? Are they gonna be useless after a few years?
Speaker 1:Right? It's like,
Speaker 2:if Yeah. But that's on the lender. Like, the lender can do the analysis.
Speaker 1:No. And and when I when I hear Yeah. When I hear these comments from Sarah Fryer
Speaker 2:Yeah.
Speaker 1:I'm I'm what I'm hearing is we have a bunch of lenders that would that would happily finance this if there's a government guarantee that they won't lose money. And that's very different.
Speaker 2:Yeah. That is odd. I don't know.
Speaker 1:Like, the like, so so if you get if you get if you get some type of setup where the government does come in and say, not just for OpenAI, but for a variety of these players, like, yeah, we we will provide a backstop.
Speaker 2:Yeah.
Speaker 1:The the lenders start to feel comfortable. They start to lend. What's the lender's incentive? If a lender makes money when they lend money and they have type some type of structure where they can't lose money
Speaker 5:Yep.
Speaker 1:What are they gonna do? That's They're gonna lend as much money Totally. As they possibly can.
Speaker 2:Of course.
Speaker 1:Of course. And OpenAI will take as much money. They will take as every everybody involved, the lenders will lend as much money. Yep. OpenAI will take as much money as they possibly can, or or benefit as much as they can from it.
Speaker 1:And, ultimately, I just think it's it's, I'm I'm not again you know, look looking back through, you know, 'seven, 'eight and and and the example you gave around, you know, post.com crash. Yeah. I'm not against government intervention during a crisis.
Speaker 2:Totally.
Speaker 1:But using the government to create what will ultimately just be an even greater crisis and ultimately just socializing the losses from all of this. And, you know, I think
Speaker 2:It doesn't always plan out that way, though. Yeah. Tesla, government backstop. Right? Gave loans.
Speaker 2:Paid back the loans. Tesla paid back the loans with interest. The taxpayer made money on that. And anyone who says, oh, Elon only, you know, he said just the government pays for everything. That's it's like they're wrong.
Speaker 2:Like, the the the government made investment in Tesla, and they got back money with interest. And so the government participating in private markets, it it doesn't always end poorly. It's a little weird. And I think that if you go to the Tyler Cowen clip, like, Sam is not asking for the government to take a position. He's like, I don't wanna be Intel.
Speaker 2:I don't want them on my cap table. I don't want any of that. It's like Sure. So honestly, I don't know I don't know what they're asking for because it is a crazy, crazy piece of comms to say to to even talk about it in the current zeitgeist because it's it makes it feel like, oh, well, why are we talking about, like, how to deal with the crisis? Like, do you think there's a crisis coming?
Speaker 2:Like, that's stressful.
Speaker 1:Yeah.
Speaker 2:Right?
Speaker 1:And, you know, the the general public already hates AI enough.
Speaker 2:Figuring out
Speaker 1:a structure that allows allows, you know, potentially socializing Yeah. The downside is is gonna you know, I don't know. Yeah. I I I would expect that something like this does happen.
Speaker 2:Yeah. I mean, that's why David Sachs came out and said, like, there will be no federal bailout for AI. The US has at least five major frontier model companies. If one fails, others will take its place. It's also that's a crazy quote too because it's like no one was talking about a failure of a big foundation model lab.
Speaker 1:Yeah. And this this is so so if OpenEye OpenAI Yeah. If we were in a if we if the AI race looked more clearly like AI China designing AI weapons Yeah. Yeah. And OpenAI is purely a defense tech player that is also developing AI weapons Sure.
Speaker 1:And in order to be competitive, in order to not have the CCP, you know, take full control over the world with their sort of dark super intelligence, we needed a national champion, national lab. Yep. We needed to give them as much infrastructure, as much energy, all these things. That scenario, I'd be looking at this a lot differently. Yep.
Speaker 1:OpenAI is I mean, my view, I've been saying this for at least a month now. I just view them as a large tech company. Right? They wanna make money from subscriptions. They wanna make from ads.
Speaker 1:They wanna make money from commerce. They have a social media app. They they have an erotica product. I don't have a
Speaker 2:product yet. I have not launched that.
Speaker 1:Okay. Well, I'm sure, you know, they they've they've planned they've announced the launch of
Speaker 2:it. Yes.
Speaker 1:Right? People have used it in that way in the past. Yes. And so, I don't I don't understand the, you know, we need a trillion dollars or or
Speaker 2:I I or I think literally, me, you, Sarah Fryer, David Sachs, we're all in agreement here that no one's saying OpenAI gets a bailout if the company doesn't do well.
Speaker 1:But but No one's saying that. But a bailout is different than a a bailout is different. I I'm I I think it's important to, like
Speaker 8:Yeah.
Speaker 1:Break these out. A bailout is like, in my view, is like OpenAI is gonna default Yeah. And they need a capital injection Yeah. In order to stay solvent. Yeah.
Speaker 1:No one's
Speaker 2:talking about
Speaker 1:that. No one's talking about that. Yeah. And David Saxe was clear Yeah. We're not gonna have a bailout, but Yeah.
Speaker 1:But a backstop of loans that labs Yep. And player like, that seems to I I would expect that to happen.
Speaker 2:What do you mean?
Speaker 1:I expect some type of backstop scenario to to like, despite me being it play out.
Speaker 2:Really? You think that there's gonna be, like, major defaults across
Speaker 1:the No. No. No. I'm saying I I the backstop I'm not saying the major default piece. I'm saying I expect a program that they
Speaker 2:Special program.
Speaker 1:Some type of program like
Speaker 2:Those usually only gets set up if there's a crisis. Like, the true like like like TARP, like the trouble asset relief program in
Speaker 1:2000. But there's other per I mean, there's the the there's other programs like housing
Speaker 2:up the price until until there's a crisis.
Speaker 1:Okay. But look at look at housing. There's there's programs to help people buy homes that are are government guaranteed Yeah. For that bank. The the look at the the SBA loan program.
Speaker 1:Right?
Speaker 2:Everyone needs a slice of the top tranche of data center debt.
Speaker 1:Yeah. So why do banks lend to small businesses through the SBA program?
Speaker 2:Yeah. Yeah. Of course. It's government the economy.
Speaker 1:Yeah. And it's it's it's it's backed it's backed by the US government.
Speaker 2:Yeah. And and just like it's what taxpayers want. Like, you want to be able to deduct your mortgage. The American dream, the social contract is that you can buy a house. And so if we can incentivize or make it easier for people to buy houses, that's a good thing.
Speaker 2:That's what everyone wants, and so everyone kind of socializes the risk of mortgage losses by creating these government backed loans. The question is I I guess the bigger question is, like, should America vote for for, you know, actually socializing the losses of the AI build out? Like, if you don't like AI, then you're like, no. There's no point. But if you think it's like the railroad or you think it's like the Internet infrastructure build out or you think it's like the computing revolution, then you should be all in on that.
Speaker 2:You should be thumbs up on, like, yes. Put the economic put put the weight of the US government behind this project.
Speaker 1:Yeah. And I I I just think there's no public appetite for this. Look at the state look at the state of the average American.
Speaker 2:I think you're right.
Speaker 1:They can't afford a home. They can't even afford McDonald's.
Speaker 2:Yeah.
Speaker 1:And they're scared of losing
Speaker 2:But are
Speaker 3:they right?
Speaker 1:They're scared of getting They're already worried, I might get a job, and then I might lose it to AI. Yep. And you have people working in AI that are already talking about job displacement. We had a we had a Yep. A VC on our show very recently.
Speaker 1:He was saying, you know, talking about what a large opportunity investing in AI is because it because this is labor displacement.
Speaker 2:We've been breaking news. Sama has tweeted addressing the backstop. First, before we read that, let me tell you about Privy wallet infrastructure wallet infrastructure for every bank. Privy makes it easy to build on crypto rails, securely spin up white label wallets, sign transactions, integrate on chain infrastructure all through one simple API. Let's go to Sam Altman.
Speaker 2:His post, I would like to clarify a few things. Been been a lot of clarifying lately. I feel like I've read this post before.
Speaker 1:There's I appreciate the post the Veronica thing. Gavin Baker posted earlier. We need a moratorium on OpenAI public appearances and press releases and No. To stabilize the market.
Speaker 2:No. What are you doing, Gavin? Okay. Gavin has to come on the show if if OpenAI people won't come on the show anymore. Okay.
Speaker 2:Let let's read through the same Alvin Post. I would like to clarify a few things. First, the obvious one, we do not do not have or want government guarantees for OpenAI data centers. We believe that governments should not pick winners or losers and that taxpayers should not bail out companies that make bad business decisions or otherwise lose in the market. If one company fails, other companies will do good work.
Speaker 2:What we do think might make sense is government building and owning their own AI infrastructure.
Speaker 1:Go code.
Speaker 2:Then the upside of that should be should flow to the government as well. We can imagine a world where governments decide to take, to off take a lot of computing power and get to and get to decide how to use it, and it may make sense to provide lower cost of capital to do so. Building a strategic national reserve of computing power makes a lot of sense. This is if you if you believe in the lore of AI 2027, this is trust the plan. Tyler, can you get me up to speed on what what AI 2027 predicted on the nationalization?
Speaker 7:I think this is actually more situational awareness than Okay. The GI 2027.
Speaker 3:Yeah. Yeah.
Speaker 7:Yeah. But, yeah, basically, Leopold says we're gonna have the project.
Speaker 2:The project?
Speaker 7:The project is basically nationalization of the big labs. Yeah. All the big build outs are basically on the government's, like, cap table or essentially. Yeah. And it's basically because we see China's basically doing the same thing.
Speaker 2:Yeah.
Speaker 7:They start doing it, and then we need to reach out to you.
Speaker 2:Wanna do it. Yeah. Jensen Huang was in the Financial Times talking about the the China will win AI race with America, says NVIDIA chief. We can go through that in a minute, but let's keep reading.
Speaker 1:He's like he's like, China's gonna win the AI race. We need to sell them as many chips as we possibly can right now, please. They're gonna win if we don't give them even more chips.
Speaker 2:Remarkable money.
Speaker 1:Obviously, position is that we wanna get China dependent Yep. On Yeah. On American AI infrastructures that we can pull it back at any time. But saying they're about to win the AI race when he's also advocating for selling them as many as many chips as as they can produce, doesn't really sit sit that. I'm honestly The other thing is more like how how it know, let's talk about we need to we need to better define what the AI AI race is.
Speaker 1:Yeah. Like, Gurley earlier this year, I think made some good points. Like, is the AI race? What is it? How do how does one win?
Speaker 1:What does that look like? Yeah. What does it look like in the near term?
Speaker 2:If your HCI Pillar is the race to a superintelligence, a system that can do any economic work. So you can tell it, go fight this lawsuit. It'll do that. You can say, go buy this company. It'll just buy that company.
Speaker 2:Create a roll up in the pharmaceutical industry.
Speaker 1:It'll just go that people don't take that narrative super seriously right now
Speaker 5:Yeah.
Speaker 1:Is that companies like OpenAI make short form social media apps.
Speaker 2:Yep. People aren't feeling accelerators. They're not feeling the acceleration. They're not feeling the acceleration.
Speaker 1:And That's correct. You're out there saying, yeah. We want to basically be Google search. We have our own YouTube.
Speaker 2:And then you have multiple multiple experts kind of talking about how they're not feeling the the acceleration. You have Andre Karpathy, and a number of other, folks coming on and saying, like, yeah. I think it might be more like a decade. I don't I don't really know if it's, it's gonna be this, like, fast takeoff. Well, then the question is, if we're not getting 10 x the results, do we need be spending 10 x as much next year?
Speaker 2:Maybe maybe those some of those exponential curves should be sigmoids. We will we will
Speaker 1:find out. So keep keep reading.
Speaker 2:Okay. So what we do think might make sense is the government building their own AI infrastructure. The project is gonna happen. Building a strategic national reserve computing power makes a lot of sense, but this should be for the government's benefit, not the benefit of private companies. The one area where we have discussed loan guarantees is as part of supporting the build out of semiconductor fabs in The United States.
Speaker 2:So, like, I I completely agree with this. I I maybe it's a crazy hot take. Brandon was saying I'm gonna get canceled for being pro pro bay I'm pro pro build out, pro backstop, pro bailout. I'm pro all of it when it comes to building semiconductor fabs in The United States.
Speaker 1:I'll say and I'll say, well, I've been a bit more negative. I'm pro build out. I think the power side is an area that that could make a lot more sense. Yeah. That could benefit the average American a lot more.
Speaker 1:Yeah. Which is like, hey, the government is gonna help finance bringing a lot more power online.
Speaker 3:Mhmm.
Speaker 1:And and we're gonna be stay be able to stay at the at the leading edge in AI, lead in AI, and your power bill. We're actually gonna make your power bill cheaper over time.
Speaker 5:Mhmm.
Speaker 1:That's something that people could could get behind. But, federal backstop so you can get more videos of your cat dressed up like a doctor, I don't think people are gonna be on board with that.
Speaker 2:Yeah. It's tough.
Speaker 1:Let's keep let's keep reading this and then and then give a
Speaker 2:proper reaction. Yeah.
Speaker 1:Yeah. So I guess Before we
Speaker 2:move on, let me tell you about Cognition, the makers of Devon. Devon's the AI software engineer. Crush your backlog with your personal AI engineering team. Do you want me to continue?
Speaker 1:So so real quick on this this concept of the government building and owning their own AI infrastructure. Yeah. So this concept has existed for a very long time in defense Mhmm. Where there there's things called GoCos, which are government owned, contractor operated.
Speaker 2:Mhmm.
Speaker 1:So the these the this model is popular in in weapons manufacturing where the government will own land and they'll own a facility.
Speaker 2:Mhmm.
Speaker 1:And then a contractor will actually basically run the facility Sure. Produce and sell the finished product Correct. To the government. But but that that has like worked fine Yep. Over time.
Speaker 1:Yep. And and so there there's some precedent here for that. I think it's very unclear to me to how building just a national reserve of computing power makes a lot of sense.
Speaker 9:I don't know.
Speaker 2:I could do a crazy steel man on it. But Of
Speaker 1:course, you can.
Speaker 2:I can steel man anything. But, yeah, let's stick to the let's stick to the semiconductor fabs because that's where Sam is saying that he's actually advocating. Loan guarantees for semiconductor fabs. This is seven layers away from his actual core business. You should is.
Speaker 2:It's like he's not he's not I mean, maybe he will be a bill of that. But, realistically, it's like he's gonna have a partnership with NVIDIA. He's gonna have a partnership with with Intel, and Intel's gonna do fab, and and there's gonna be a government loan guarantee for what, you know, the the the the the loan on the building that actually turns into the FAB. Like, it it's several steps away to the point where it doesn't feel it feels like it feels like when you have, you know, a founder like a Palmer Lucky talk about, you know, policy in a completely different area or something like that. Like, if Palmer's like, we should make, like, you know, land cheaper, energy cheaper, you're not like, oh, this is tied directly to Anderol.
Speaker 2:Like, you're just like, yeah. This is this is just a rational policy by itself. Anyway, the basic idea there has been ensuring that the sourcing of the chip supply chain is as American as possible in order to bring jobs and industrialization back to The US and to enhance the the strategic position of The US with an independent supply chain for the benefit of all American companies. This is, of course, different from governments guaranteeing private benefit data center build outs. There are at least three questions behind the question here that are understandably causing concern.
Speaker 2:First, how is OpenAI gonna pay for all this infrastructure it is signing up for? We expect we expect to end this year above 20,000,000,000 in annualized annual with an annualized revenue run rate and grow to hundreds of billions by 2030. We are looking at commitments of about 1,400,000,000,000.0 over the next eight years. That's longer
Speaker 1:than before. Of billion.
Speaker 2:Hundreds of hundreds of billion.
Speaker 7:Yeah. So these are all new numbers because
Speaker 2:These are all new numbers.
Speaker 7:There's 1,400,000,000,000.0. The the previous quote was over the next many years. Yep. So was kind of unclear. Yep.
Speaker 7:I think also the the revenue over 20,000,000,000 is new. I think the most recent number was something like
Speaker 2:14.
Speaker 7:It was like thirteen, fourteen.
Speaker 2:Thirteen, fourteen.
Speaker 9:Yeah.
Speaker 2:Yeah. So And so they've clearly grown a ton since that. Obviously, if they exit I mean, they won't exit the year at 20, but man, if they exit the this is phenomenal growth. Like, remarkable. I mean, they did, four last year or something.
Speaker 2:What do you think? Not good? Not big enough?
Speaker 7:I mean, no. It's like straight lines on logarithmic curves.
Speaker 2:Yeah. For now for now, we'll see. Okay. So, let's see. What else?
Speaker 1:So, obviously, this requires continued revenue growth. Each doubling is a lot of work, but we are feeling good about our prospects there. We are quite excited about our upcoming enterprise offering, for example.
Speaker 2:New categories like consumer devices and robotics that we also expect to be very significant. But there are new categories we have a hard time putting specifics on, like AI that can do scientific discovery, which we will touch on later. We are looking at way ways to more directly sell compute capacity to other companies and people, and we are pretty sure that this the world is going to need a lot of AI cloud, and we are excited to offer this. We may also raise more equity or debt capital in the future, but everything we current currently see suggests that the world is going to need a great deal more computing power than what we are already planning for. Second, is OpenAI trying to become too big to fail, or should the government pick winners and losers?
Speaker 2:Our answer on this is an an unequivocal no. If we screw up and can't fix it, we should fail, and other companies will continue on doing good work and servicing customers. That's how capitalism works, the ecosystem and economy would be fine. We plan to be a wildly successful company, but if we get wrong if we get it wrong, that's on us. Our CFO talked about government financing yesterday and then later clarified her point, underscoring that she should have phrased things more clearly.
Speaker 2:As mentioned above, we think that US government should have a national strategy for its own AI infrastructure. Tyler Cowen asked me a few weeks ago about the federal government becoming an insurer of last resort for AI in the sense of risks like nuclear power, not about overbuild. I said, I do think the government ends up as insurer of last resort, but I think I mean that in a different way than you mean that. And I don't expect them to actually be writing the policies in the way that they do for nuclear. Of course, this is just the soft backstop that exists generally in our in our economy and in our, democracy.
Speaker 2:Again, this was in a totally different context than the data center build out and not about bailing out a company. What we were talking about is something going catastrophically wrong, say a rogue actor using AI to coordinate a large scale cyber attack that disrupts critical infrastructure and how intentional misuse of AI could harm could cause harm at scale that only the government could deal with. I do think that the government should be writing insurance poll I do not think that the government should be writing insurance policies for AI companies. I agree with that. Third, why do you need to spend so much now instead of growing more slowly?
Speaker 2:We are trying to build the infrastructure for a future powered future economy powered by AI. And given everything we see on the horizon, our research pro in our research program, this is the time to invest to be really scaling up our technology. Massive infrastructure projects take quite a while to build, so we have to start now. Based on the trends we are seeing and of how people are using AI and how much of it that they would like to use, we believe the risk to OpenAI of not having enough computing power is significantly more and more likely than the risk of having too much. Even today, we and others have to rate limit our products and not offer new features and models because we face such a severe compute constraint.
Speaker 2:In a world where AI can make important scientific breakthroughs but at the cost of tremendous amounts of computing power, We want to be ready to meet that moment, and we are and we no longer think it's in the distant future. Our mission requires us to, to do what we can to not wait many more years to apply AI to hard problems like compute like like contributing to curing deadly diseases and to bring the benefits of AGI to people as soon as possible. Also, we want a world of abundant and cheap AI. We expect massive demand for this technology and for it to improve people's lives in many ways. It is a great privilege to be in the arena and to have the conviction to take a run at building infrastructure at such scale for something so important.
Speaker 2:This is a bet we are making. And given our vantage point, we feel good about it, but we, of course, could be wrong in the market, not the government. We'll deal with it if we are. I like that. Before we get Jordy Hayes' reaction, let me tell you about figma.com.
Speaker 2:Think bigger real faster. Figma helps design and development teams build great products together. Jordy, give me another reaction. What are you thinking? Do are you convinced?
Speaker 2:Does this update you more positively, or are you more bearish based on this?
Speaker 1:I think it's a good response.
Speaker 2:Okay.
Speaker 1:I think leading with more information Yeah. Always good.
Speaker 2:Yeah. New information.
Speaker 1:New information. New information. New information. Not even lead.
Speaker 2:Not even really. It's kinda sort of buried. Not but, you know, it's right there. It's right there.
Speaker 1:Yes. So you're saying Boom. We're excited about our enterprise offering.
Speaker 2:Yeah.
Speaker 1:Great. They have a solid enterprise business already. I'm sure it'll grow continue to grow quickly. New consumer devices and robotics Mhmm. Excited about that.
Speaker 3:Mhmm.
Speaker 1:I think it's hard for them to lean on those. Right? Because when I look at when when you look at the the history of big tech companies launching ambitious products Mhmm. Oftentimes, they either flop entirely or lose money for a long time. Mhmm.
Speaker 1:And OpenAI has a bunch of brilliant builders on their team. But, again, you look at Sora, even though Sora was innovative. Right? I don't I don't think it's Sora's. Gonna be What the I don't think I don't think SORA will be a successful, you know, consumption platform.
Speaker 1:I still remain pretty bearish there. And so I think it's hard for them to when I when I see that, you know, they're
Speaker 2:SORA has fallen. It's now fourth. ChadGBT, then Threads, then Google Gemini,
Speaker 1:then Let's get over Connor Hayes over at Threads.
Speaker 2:Threads is crazy. I mean, we were talking was it Anish yesterday at a sixteen z? He was like, have you posted on Threads? What that am I crazy?
Speaker 1:Yeah. Yeah.
Speaker 2:Yeah. No. It's him. Right? And and I was like, yeah.
Speaker 2:No. I I I take your point. Like, tech, my community is not on threads right now. But I still think it's actually worked pretty well. And it's I mean, certainly by the charts, it looks like it's working.
Speaker 1:But but look But Sora's
Speaker 2:holding on too.
Speaker 1:So so look at the history of big tech companies, which
Speaker 2:Wait. Hold on. You gotta see number five. Neon Money Talks. Get paid for your calls.
Speaker 2:It has 914 ratings, a 2.7 average. People don't love this app, but it happens to be the fifth biggest free app in the store. Soar, on the other hand, has 88,000 ratings, 4.7 stars. Like, people
Speaker 1:people Okay. So they
Speaker 2:get. Going Brent says 1,500,000.
Speaker 1:Going back to saying the categories he's excited about. Yeah. So new consumer devices. If Zuck's It's really hard. So so Zuck has been doing this.
Speaker 1:Yeah. Right? And just been, like Yeah. Literally just lighting money on fire for years now.
Speaker 2:Yeah. The enterprise offerings, I
Speaker 1:feel that's you're saying we are looking at about 1,400,000,000,000.0 of commitments over the next eight years. Yep. And you're saying that we're part of our solution to delivering on this is new consumer electronics. I personally, I don't lean on that too hard. Robotics too, I wouldn't be surprised to see form you know, various forms of robotics from OpenAI.
Speaker 1:Right? There's also Merge, is a separate company that OpenAI's invested in.
Speaker 2:Yeah.
Speaker 1:BCI. But none of these things scream cash flow to me, scream high margin revenue that we're gonna be able to reinvest against these commitments. Right? These these, to me, seem very likely like businesses new business lines that also lose money.
Speaker 2:Mhmm.
Speaker 1:You have a money a a company that's losing the I guess the sense is that they're losing about $10,000,000,000 a quarter today. That's probably let's assume that's accelerating. Mhmm. On they're going to finish the year at $20,000,000,000.20000000000 dollars run rate. Losses are also accelerating.
Speaker 1:They wanna launch new products that are probably also gonna lose money.
Speaker 2:Yeah.
Speaker 1:And and so, again, I I I'm I'm excited about these categories. I think they're gonna make cool, novel products. Yeah. But it doesn't give me more confidence that they can meet those Okay. Commitments.
Speaker 2:Let me pitch you, a encapsulation of everything we've been talking about. Keep the government out of the application layer. Focus on the energy layer. Just just work on driving down energy prices and let all the tech companies duke it out, and they will be benefit beneficiaries of of cheaper energy. Yeah.
Speaker 2:But I want I want, you know, tons of American jobs building everything from natural gas to Solar. That solar plan, I want 10 of those, and I want it staffed by Americans. How about that?
Speaker 1:Yeah. Yeah. Yeah. I'm on board with that. We could agree with I'm on board for the government financing the build out of Yes.
Speaker 1:Every possible energy source that we can. Right? Fantastic. I hate looking so Yeah. That's something we can agree on for opening
Speaker 2:up. Another pitch
Speaker 5:for you.
Speaker 1:Super on board with that. The other thing is we are also looking for ways to more directly sell compute capacity to other companies and people. And so when I look at this, you're you're simultaneously saying, we're so compute compute constrained Mhmm. That that they're making the AI lazy, and they're not launching new features.
Speaker 2:Yeah. Yeah.
Speaker 3:Yeah. Yeah.
Speaker 1:And then also also, we're looking at ways to sell compute to other companies. To me, this just again, this just says, like, OpenAI is is is a new hyperscaler.
Speaker 3:Mhmm.
Speaker 1:And it's so hard to compete with the hyperscalers that have huge amounts of cash flow
Speaker 2:Yep.
Speaker 1:That they need every advantage that they possibly can. Right? And Mhmm. One way they could get an advantage is through programs like Sarah suggested and then walked back.
Speaker 2:I don't think she was suggesting that at all. I don't think she was suggesting a backstop for OpenAI specifically.
Speaker 1:Not OpenAI specifically. Yeah. But there would be certain companies that would Like, in the supply would chain. Get in a part of these programs and could benefit.
Speaker 2:Yeah. I have another idea. Universal basic Vanta. Every American entrusted to Vanta Now that's something automate compliance. They could manage risk.
Speaker 2:They could accelerate trust with AI because Vanta helps the Americans get compliant fast, and Vanta doesn't stop there. Their AI and automation powers everything from evidence collection to continuous monitoring to security reviews and vendor risk, whether you're starting up or scaling. The timeline continues to be in turmoil. Jason Calicanas chimed in and said, if OpenAI were to fail, it would have zero impact on the future of AI. Zero, he says.
Speaker 2:They have a dozen viable competitors and 10 folks who would buy the assets. Let it rise or fall based on merit. Like, this is like, the fact that this is the reaction to that quote is, like, so crazy. Just like like, you talk about this a lot with, like, branding where where it's like like, you can get a lot of attention, but, like, you you need to zoom out and think about, like, what are the two words that are going out in people's mind? Right?
Speaker 2:And so you might have some funny rage baity viral marketing campaign. But if it's like, oh, we're gonna have our CEO dress up like, you know, like the, you know, the garbage, who's the garbage man from, Sesame Street? You know, the the Oscar the Grouch.
Speaker 1:Oh, yeah.
Speaker 2:Like, it's like, at a certain point, like, even if it goes viral for whatever reason, like, you're just associating your brand with trash. And, like, you zoom out, like, that's rough. And and and, like, the idea of, like, federal backstop just immediately conjures massive failure, and it just puts your company and failure right next to each other. So very, very rough. Very rough.
Speaker 2:Let's let's read what Gabriel said. He said, this is why traditionally CFOs are only allowed to speak fake accounting identities in public. Backstop is what the Federal Reserve calls it when they have to save 20 banks from exploding if invited in a global financial crisis. The word you were looking for, Sarah, was partnership. Yeah.
Speaker 2:That that makes a ton of sense. It's interesting. I I would I would be I'm actually more pro backstop than partnership because I don't love the idea of the government picking winners in any particular layer of the stack, but partnership just sounds so much more positive than Backstop, which conjures up the Yep. Like, it just conjures up financial crisis. It just feels like like major layoffs, recession, stock market sell off as soon as you start talking about about Backstop.
Speaker 2:So very rough. Doug over at Semi Analysis has another take. I think he's pro backstop too. I think he's AGI build. He says, I'm on a vacation, which I'm try desperately trying not to check work stuff, but I've been reading some books on railroads.
Speaker 2:And, like, the final piece is the government needs to just start passing pro AI legislation. We are in the gilded age. Tyler, did you read it the same way?
Speaker 7:Yeah. I mean, I I don't even think that the government needs to like spend a ton of money on building data centers. Yeah. Basically, all you need to do is just like remove a lot of the environmental regulation. Like, we're just not gonna get natural gas with the current, like, regulatory regime.
Speaker 7:Yeah. Or or we're not gonna get nuclear within fifteen years. We're not gonna get all these things. Yeah. So it's basically like, I don't even I don't think that you need to have some massive injection of, like, capital into, you know, the data center or the fabs or or any of this stuff.
Speaker 7:You just need to remove a lot of, like, the bloat and regulation.
Speaker 2:Yeah. It's it's it's a it's a wild, wild time. There was a bunch of other stuff that Sarah Fryer said in her, in her, Wall Street Journal appearance. They need a huge amount of money to stay on the cutting edge. Compute grew 20 x in two years.
Speaker 2:To do that again, it will take a trillion dollars of current compute costs. To pay for that. They have revenue. They have VC investment. But thirdly, they need financial innovation on financing their chips.
Speaker 2:I I was thinking to myself, I think, you know that meme that's like, what's an opinion that will get you canceled or something like that? And then you, like, quote tweet it with your opinion, or or you do, the the man standing, like, I believe. I I feel like, GPU depreciation schedules should be, like, thirty years. This is this is a hot take that I'm working on the the defense of, but I feel like I don't know exactly about how long they last, but I feel like the the the viable work that will be done by a one hundreds will stick around for a very long time. And I think that, we will be surprised looking back on how like, yes, we got better chips, but the old chips actually stuck around and were doing the, like, GPT four level workloads forever.
Speaker 2:And I don't know how much how much profit they will make, but I think just in terms of, like, will you have it still running, or will you be throwing it out? Because the the the narrative right now is like, oh, yeah. We're gonna be throwing out all these chips in two years. What do think, Tyler? You push back on that?
Speaker 7:I feel like it's not like it's kind of an objective question. Like Yeah. New chips come out. Old chips are worth less. They depreciate after, like, five years.
Speaker 7:Like, you gotta switch out for the new ones.
Speaker 2:No. You don't. You don't. Because you, like, you would say the same thing about, like, an Oracle database. Right?
Speaker 2:Like, you'd be like, oh, yeah. Like, you sold someone a physical mainframe computer. Like, now there's a better computer. Like but it's like, no. Like, it is it is serving its goal.
Speaker 2:It's serving its purpose, which is acting as a mainframe computer. And that's why mainframe computers stuck around for so long. Like, there were better computers, but you already have it. Already You have it, and you're just depreciating. It's not it's non cash expense.
Speaker 7:This is so I I guess it makes sense if you think that we're still gonna be serving cheap t four. Yeah. Think it's It's like why why would anyone want cheap t four if you can have a cheaper, better model?
Speaker 2:Why would anyone want Fortran when we have Python?
Speaker 7:Well, the like, those are, like, bloated old companies that, like, aren't important.
Speaker 2:Oh, so we're post bloat now? There's no more bloated companies?
Speaker 7:The new companies that are using AI a lot are not gonna be the same ones that you are gonna want to use the old model.
Speaker 2:I think there might be companies that are just getting off off of, like, on prem data centers going into the cloud, and they're gonna be adopting GPT four in, like, 2032. And they're gonna be like, this is sick. And then from 2032 to 2050, they're gonna be like, man, GPT four is amazing. Like, that's the level of adoption for some of these companies. It's gonna be slow.
Speaker 2:And so you're just gonna be like, yeah. I got the a one hundreds for you. They're they're the best ever.
Speaker 1:They're Yeah.
Speaker 7:But I I think
Speaker 2:No. I I I I I agree with this. This is this is like, this is a truly a truly nuclear take. Ben Thompson wrote about it, a little bit. That was interesting.
Speaker 2:He said, start with the physical. So, I mean, you know you know we're you know we're in fun times when Ben Thompson drops on Strictory, the benefits of bubbles. That was the title of his article.
Speaker 1:Bub talk.
Speaker 2:Bub talk. This is, like, something that I think will be very memorable. Before I read it from this, let me tell you about graphite dot dev. Code review for the age of AI. Graphite helps teams on GitHub ship higher quality software faster.
Speaker 2:So start with the physical. A huge amount of the money being spent on AI has gone to GPUs, particularly NVIDIA, rocketing the fabulous design company to a nearly $5,000,000,000,000 valuation and the title of most valuable company in the world. The problem from, the the Carlota Perez perspective is that all of this spending on chips is relative to the sort of infrastructure she wrote about, railroads, factories, fiber, short lived. Chips break down and get superseded by better ones. Most hyperscalers depreciate them over five years, and that may be generous.
Speaker 2:Whatever the correct number is, chips don't live on as fully depreciated assets that can be used cheaply for years, which means that to the extent speculative spending goes towards GPUs is the extent to which this bubble might turn out to be a disappointing one. So if there's a bubble in railroads and we're like, we think railroads are gonna unlock 5% GDP growth, it's amazing, and then you build all the railroads. Like, the worst case scenario is you end up with a bunch of rails, and, like, you can still put cars on them. Like, they still work. But with a bunch of GPUs that, like, depreciate and get useless and they break, like, they don't stick around forever.
Speaker 2:But I don't necessarily think about it that way. I I I think that I think that some of these data centers might be useful for a very long time even if they're not on the margin. I don't know. I I I think they get fully depreciated. I think they still do useful things.
Speaker 1:The good thing, John, is we're gonna find out.
Speaker 2:We're gonna find out.
Speaker 1:Right we're effing around. Soon, we're gonna find out. Ethan in the chat says, the a 100 in my Eight Sleep Pod nine got me dreaming slop you cannot even imagine.
Speaker 2:Exactly.
Speaker 1:Let's go. Everyone Dean Ball says, Fryer is describing a worse form of regulatory capture than anything we have seen proposed in any US legislation I am aware of. A firm lobbying for this outcome is literally rather than impressionistically lobbying for regulatory capture. This is going back to what I was saying before. If there is some type of program where the government is guaranteeing loans made for certain data center projects.
Speaker 1:Yep. Like anybody will just get to be in that program. Right? Yep. You're gonna have to I'm sure the various players involved in a deal would have to be qualified in some way.
Speaker 1:Probably gonna need a lot of lawyers and things like that. And and you're gonna need a a trusted brand. You're gonna need to be able to show that you have demand, all these kind of things. And I'm I'm with Dean Ball on this one. And, you know, Sarah and the team have walked it back, but they said it.
Speaker 1:Yeah. Well,
Speaker 2:yeah. I mean, the administration basically said no immediately too. So even if that was what she meant, she was testing the waters. Who knows? David Sachs said there will be no federal bailout for AI, but he did address your comment, Tyler.
Speaker 2:He said, that said, we do wanna make permitting and power generation easier. The goal is rapid infrastructure build out without increasing residential rates for electricity. Let's hear it for that. Finally, to give the benefit of the doubt, I don't think anyone was actually asking for a bailout. That would be ridiculous.
Speaker 2:But company executives can clarify their own their own comments. Good point. What
Speaker 9:do say?
Speaker 7:I mean, also, it's like, obviously, the administration would never say that, oh, yeah. We are gonna backstop everything because that just, like, massively increases, like, you know, ramp and
Speaker 2:Totally.
Speaker 7:Circulation. It's, like, totally risky. Yeah. So it's like this basically does not mean anything of of what the administration will actually do because we've seen Yeah. Time and time again, like, they want see the stock market be going up.
Speaker 7:Oh, yeah. So if it starts going down too much, you know, it's only a
Speaker 1:matter time. White House dropped the reminder yesterday. They said midweek reminder, don't be a panicking. And they put up this pretty cool picture of Trump.
Speaker 2:Don't be a panicking. We figured it out, by
Speaker 1:the way.
Speaker 2:Are not Panicking American.
Speaker 1:It's panicking American. People aren't quite listening yet. Core Weave is down 19%.
Speaker 2:In the
Speaker 1:last five days.
Speaker 2:Crazy that this news cycle led to zero hedge saying there will be no federal bailout for AI, like Trump AI official on x. Like, that's where David Saxe's, like, message goes, which is crazy because, like, a a few weeks ago, no one was talking about needing a bailout. Now it has the aesthetics of, like, oh, you're you you need a bailout? Like, what's going wrong? Like, that it was going so well just a couple weeks ago.
Speaker 2:Like, it's just such a it is it is such a such a such a such an odd vibe. Very, very rough.
Speaker 1:NVIDIA down almost 8% over the last five days. Mhmm. So anyways, a bunch of other names are down a ridiculous amount. Duolingo's down. Is Snap up?
Speaker 1:Percent.
Speaker 2:Snap is up. Right?
Speaker 1:CarMax down 18%. HubSpot down 18%.
Speaker 2:Wow.
Speaker 1:DoorDash down 15%.
Speaker 2:Crazy sell off.
Speaker 1:And a lot of these, you know, what what's been notable this week, companies are selling off after an earnings beat.
Speaker 2:Mhmm. Well
Speaker 1:Palantir down 10.7% in the past five days.
Speaker 2:Whether you're going long or you're going short, do it on public.com.
Speaker 1:That's right.
Speaker 2:Investing for those that take it seriously. They got multi asset investing, industry leading yields. They're trusted by millions. Snapshares surged after the company announced a $400,000,000 partnership with Perplexity to incorporate AI powered search engine into Snapchat. The deal gives Snap a new business line and puts the social media company squarely into the mix around AI chatbots assistance.
Speaker 1:We were I said something about this Saturday, not this specific deal, but I was like, why is Snap not monetizing their half almost half a billion DAUs Yep. Of young people, and this is a great way for them to do it. I don't know how how long Perplexity can oh, they're using cash and equity. That's helpful. We'll see how long they can they can afford this kind of deal.
Speaker 1:Yeah. But in the short term, I think it's a smart way for them to at least at least, you know, a way to do a single deal that can really drive, hopefully, some some meaningful usage for them.
Speaker 2:Yeah. The partnership was made along the third quarter earnings. It seems like Snap jumped well. The shares jumped as much as 18% after markets opened in New York on Thursday. Stock was down about 32% so far this year through Wednesday's Wednesday's close.
Speaker 2:477,000,000 DAUs in the third quarter for Snap, an 8% jump from a year ago. So they're still growing. And the company also reported 943,000,000 monthly active users. So they're almost at a billion MAUs and half a billion DAUs, which is remarkable. So, yeah.
Speaker 2:I mean, if you can if you can kinda put those two companies together, that could be a really good outcome maybe. I don't know.
Speaker 1:Wild that Snap has almost a billion monthly actives and is valued substantially less than Perplexity.
Speaker 2:That is wild. Yeah. But maybe they'll maybe they'll tie the knot somehow, do some sort of merger. I don't know. Perplexity has been kind of in in on the hunt for a dance partner for a while.
Speaker 2:Right? Yep. And we've heard that Apple was maybe kicking the tires, and there are deals all over the place. And, and, I mean, we've also said it it was kind of odd that Snapchat didn't have a dance partner on the AI side, since every other major, social media platform is kind of bolted onto a lab at this point. X AI and x are obviously the the most prominent example, but even, like, LinkedIn and Microsoft and, obviously, what what Meta's doing and what Google's doing and you YouTube.
Speaker 2:There's so many different ways for them, for every other social network to be a beneficiary of whatever their foundation lab is doing. And Snap just doesn't have that, and you don't necessarily wanna stand that up from scratch. Yeah. Well, let me tell you about Julius, dot AI, the AI data analyst. Connect your data, ask questions in plain English, and get insights in seconds.
Speaker 2:No coding required. Rune also chimed in on backstop gate. He says, I don't think the US government should backstop data center loans or funnel money to NVIDIA's 90% gross margin business. Instead, they should make it really easy to produce energy with subsidies and better rules, infrastructure that's beneficial for all and puts us at parity with China. Yeah.
Speaker 2:Build your own wow. This is a this is an example of a person who's not into AI. Danny with a 142 followers here saying, build your own effing energy sources. Stop being parasites on the grid. And, Rune says, yes.
Speaker 2:All major data centers today compact with power sources. And, so it's interesting because the way the grid is set up, the way The US economy is set up is not, like like, we don't build separate grids for each use case. Like, we didn't build a separate grid for Netflix. The UltraDome. Like yeah.
Speaker 2:Exactly. Like, some people might say that hospitals deserve better access to electricity than Netflix. Right? Like, do we really need Netflix? Like, is that life or death?
Speaker 2:No. Like, we should route the energy resources accordingly. That's not how it works, in our economy. Like, we have one grid, and we all draw from it, and we pay whatever price that is. But this idea of the government putting the thumb on the scale of and basically doing away with, like, what is effectively net neutrality or grid neutrality is super, super alluring to people right now.
Speaker 2:Like, I think that I think you're right that that's gonna be, like, a major political issue, that people are gonna say, why are my rates going up for the thing I don't like? When it's kind of always been that way. You know? There's been, like, you know, why what what why is the why are airline ticket prices going up? Because people are ordering things that are, you know, shipping by air.
Speaker 2:Like, that happens. There's all sorts of different ways that that, you know, these services flow back and forth. But people are not into the AI one.
Speaker 1:Joe, Weizenthal says, what is the case against bailouts if winning the AI race against China is existential? I'm not actually making this argument or have this view necessarily, but public money backstops bailouts seem like the natural endpoint of how AI is discussed at these levels.
Speaker 2:Yeah. I mean, the case yeah. There there there is no case against bailouts. If if if winning the AI race against China is existential, America in every company should do everything possible. It should be the the sole focus.
Speaker 2:The question is just like this idea of AI being existential and and the AI race in China being existential is certainly decelerating because we're moving away from AI superintelligence. The prompt is, you know, invade Taiwan, and it just happens. Like, that doesn't feel like it's coming. And so people are like, well, let the Chinese have some slop. You know?
Speaker 2:Who cares? It is not that big of a deal because it's it's it's more about, you know, like, diffuse little gains in the economy here and there. It's not it's not
Speaker 1:I feel like I should I should read through a little bit of of this Feet article about Jensen saying China will win the AI race The US.
Speaker 2:Yeah. Before you do, let me tell you about Fall, generative media platform for developers, the world's best generative image, video, and audio models all in one place, developing fine tune models with serverless GPUs and on demand clusters.
Speaker 1:Well said. In the starkest comments yet from the head of the world's most company, Huang told the Financial Times, China is going to win the AI race. Huang's remarks come after the Trump administration maintained a ban on California based NVIDIA selling its most advanced chips to Beijing following a meeting between US president Donald Trump and Chinese leader Xi last week. The NVIDIA chief said that the West, including The US and The UK, was being held back by cynicism, and we need more opposite optimism. Huang said on Wednesday, and on the sidelines of the Financial Times Future of AI Summit, Huang singled out new rules on AI by US states that could result in 50 new regulations.
Speaker 1:He contrasted that approach with Chinese energy subsidies that made it more affordable for local tech companies to run Chinese alternatives to NVIDIA's AI chips. Power is free, he said. The Feet reported this week that China has boosted energy subsidies for several large data centers run by Chinese tech giants, including ByteDance, Alibaba, and Tencent. Local governments have beefed up power incentives after Chinese tech groups complained to regulators about the increased cost of using domestic semiconductors from companies such as Huawei and Cambercon. People familiar with the matter said, most such systems are less energy efficient than those made by NVIDIA.
Speaker 2:Mhmm.
Speaker 1:Huang had previously warned that the latest American AI models were not far ahead of their Chinese rivals, urging the US government to open up the market to its chips to keep the rest of the world dependent on its technology. But following his meeting with Xi, Trump said last week that he did not wanna let China use NVIDIA's cutting edge black weld chips. The most advanced, we will not let anybody have them other than The United States. Trump told CBS, we will let them deal with NVIDIA, but not in terms of the most advanced.
Speaker 2:Yeah. So there's a there's an argument here for selling chips to China and still competing and winning the AI race. Right? It's like giving both teams, I don't know, like, pumped up footballs and then turning them loose on the gridiron. Like, you're you're you're saying, like, we still want we want a fair fight.
Speaker 2:We want a free market. We want everyone who wants to buy chips can buy them, and then it's still a race. Like like, everyone gets a pair of cleats, and then you have to actually race. And so what are you racing on? You're racing on ingenuity.
Speaker 2:You're racing on ability to actually build things effectively, find valuable uses for the technology, and then scale those up. It's not the best argument given that he is, like the the the whole question of, like, trying to sell chips to China while making this argument is there is a little bit of a conflict there. But he's been very clear about this whole idea of the the way to win is to have China standardized on American technology.
Speaker 1:And we know from history Yeah. That even if we give China chips, they will still spend as much as they need to in order to catch up themselves? I
Speaker 2:don't I don't know. I I do think that there's I I do think that you can put supply pressure on the Chinese system.
Speaker 1:Maybe yeah. A little bit. Maybe you could slow it down a
Speaker 2:little bit. They've been they've been investing in semiconductors for Yeah.
Speaker 1:They've had,
Speaker 2:like years. Right?
Speaker 1:Like How many five year plans?
Speaker 2:Yeah. They're gonna they're gonna continue to do that with or without, but I I still think that there is a reasonable argument. It's not the best argument, but there there is a there is some level of an acceptable argument to this idea that if you continue to to push NVIDIA chips there, it just makes the Huawei Ascend just a little bit less exciting. Yeah. Because if you're in a hurry and you're High Flyer like, what did High Flyer do with Deepsea?
Speaker 2:Like, they trained on NVIDIA chips because it was, like, easier than, like, waiting around and and figuring out how to do it with Huawei for the most part.
Speaker 1:Yeah. The hard I mean, you know, one of the reasons that people the the people that are loudest about the AI race are currently building and enabling products that just look and feel like traditional tech products.
Speaker 10:Mhmm.
Speaker 1:Right? And so it makes it makes, you know, this this post, I think, is pretty reflective of kind of general sentiment, specifically outside of the tech industry from Elliott. He says, if OpenAI blows up and investors are saved by the government, I would vote for Fidel Castro. Again, I don't think this is not what Sarah Fryer was proposing. Right?
Speaker 1:Yeah. But but it is it is a funny
Speaker 2:Yeah. People are people are not not into it. There's also a little bit of cognitive dissonance there too because if if, like, if the products are just tech products, no one was really upset that that that Uber and Facebook and Google were trying to sell their products into China. No one no one was really upset about that. The whole reason why it became, like, don't sell AI to China was because it was like AI is so valuable.
Speaker 2:It's so powerful. And so if you don't believe AI is super powerful, then you should maybe be okay with selling it to China because you're just like, well, we'll sell steel and we'll sell corn and we'll sell, you know, software and we'll why not sell some chips? Because it's is it is it like, is it is it superintelligence? If it is, then yes. You wanna hoard all the chips.
Speaker 2:This is the whole Tyler says
Speaker 1:I just I just look at
Speaker 2:the not AGI though because he would hoard the chips for himself.
Speaker 1:The timing of Jensen coming out and saying China's gonna win the AI race and not even clarifying what that means. Right? Are they gonna build more better data centers faster? Are they gonna have better models? Are they gonna unleash super intelligence
Speaker 2:I mean, you've seen
Speaker 1:the at the same time because I assume Trump will see this quote. Yeah. And he's gonna say, well, I don't wanna lose to China on anything.
Speaker 2:Yeah.
Speaker 1:And that is the kind of like, getting that reaction is what can create
Speaker 2:Yeah. I think it it goes back to the original, like, AGI pilling definition of, you know, what is the scale of compute that you need to win? And if you have an order of magnitude more compute scaling AI models all over the place, like, you are in the lead of the race, you and wanna be in the lead. And so what's the risk? This is why when Dwarkash, like, mapped out the path to AGI and he had the probability distribution, China was like, if AGI happens in fifteen years, China is more likely to get it because they're on a steeper energy ramp than we are.
Speaker 2:But if AGI happens sooner, and it's and it is just sort of an algorithmic breakthrough, like, we do have an advantage in America because we have more data centers right now. And so the idea of, like, the energy race, like like, Jensen is making a good point here. Like, I I I think he is I think he is a 100% correct about, like, we need more optimism. We need to focus on these rules on AI that could result in 50 new regulations in all in every different state. And I'm trusted that approach with
Speaker 1:energy subsidies I think we're all very against state by state AI regulation. Yeah. A lot of these laws are just being created, and the various companies are not gonna be able to even comply with them. And Yep. You could have instances where companies just say, alright, we're not gonna we're not gonna sell into Colorado Yeah.
Speaker 1:At all.
Speaker 2:Yeah.
Speaker 1:But Jensen, in that at least in that Yeah. Bit was not advocating for government investment on the energy side.
Speaker 2:More deregulation. Yeah. Which is, I think, a fine point to make, and I think it's a fine I think it's fine to make that point in the in as a point of contrast with China. Like, you if you wanna get president Donald Trump's attention around energy regulation, this is a pretty good headline. This is a pretty good headline.
Speaker 2:Right? I don't see the problem. Like, you want you want to say, hey. Let's drive down energy cost in America. Make it about geopolitics.
Speaker 2:Why not? Do you have a problem with that?
Speaker 1:Making it about geopolitics. I I I It's pretty pretty effective.
Speaker 2:It's effective. Right? Like, you you you said you wanna get you like, you wanna get Trump's Trump's attention. This is the way to do it. It's good.
Speaker 2:Let me tell you about Turbo Puffer. Search every byte. Serverless vector and full text search built from first principles and object storage, fast 10 x cheaper, and extremely scalable. What where'd you wanna go next?
Speaker 1:This post from High Yield Harry. Please, bro, just subsidize our losses and then we're good. Please. We're a national strategic asset.
Speaker 2:Wall Street gossip just put the too big to fail thing, people. People are going wild.
Speaker 1:I mean, this is this has been
Speaker 2:Oh, this play by play from Aaron Francis is pretty wild.
Speaker 1:Sam Altman snaps at Brad Friday. Michael Burry shorts.
Speaker 2:Did he actually did Michael Burry actually short? I thought he was back and forth.
Speaker 1:I No. He did short. It was just exact the size was exaggerate.
Speaker 2:Oh, okay. That's what it was, Gon.
Speaker 1:Alex Karp crashes I out on didn't think that was that much. I I didn't it just seemed like a normal Karp interview. You
Speaker 2:you Oh, yeah.
Speaker 1:I think
Speaker 2:I saw a little bit of CNBC.
Speaker 1:He was like maybe slightly more annoyed. DoorDash misses. Open AI CFO. Floats a bailout, not not quite accurate.
Speaker 2:Mhmm.
Speaker 1:Floats a backstop maybe, and then takes it back. McDonald's is for the upper class. Did you see this? No. Like, the the con consumption lower income consumption at McDonald's is declining, which is concerning.
Speaker 2:That's not great. Well, will have to continue digging into that later. For now, we have our first guest in the show, Brett Taylor from Sierra. Brett, how are you doing? Good to see you.
Speaker 2:Doing great. Congratulations on all the progress.
Speaker 9:I appreciate it.
Speaker 2:We we we we have to hear your reaction to to backstop gate. We could definitely go over Sierra product updates first, but do you do you have any immediate reaction to this to to the the the timeline? Because it's crazy right now.
Speaker 9:The the timeline? Like, are you talking about yeah.
Speaker 2:The the x timeline, this idea of a federal backstop for AI build out, the build out that's going on, everyone's going back and forth. Do you have a take?
Speaker 9:I do not have a take.
Speaker 10:Okay.
Speaker 9:I I'm sorry for no hot takes on this one. Okay. It's like, as you know, we just got off of Sierra Summit. I've just been waiting in in, in the timeline today. No hot take right now.
Speaker 9:Sorry for that.
Speaker 2:Okay. In the trenches with Sierra, let's break it down. What are the biggest updates in your world?
Speaker 9:So, yeah. Yesterday, had our first customer conference Sierra Summit. It was awesome. I mean, you know, as an entrepreneur, I I was sort of funny. I had this like before and after post on X and it was like, you know, just a few years ago, was like Clay and me in a whiteboard and now we've got 400 customers in person.
Speaker 9:But three big product announcements. First was some new channels. So if you think about customer experience, you often think about things like phone and chat. We announced that you could publish your agent directly to ChatGPT. We think ChatGPT is the new front door for the Internet.
Speaker 9:And if you think about building your customer experience, it's on your first party properties like your mobile app or your website. But a third property properties like ChatGPT and eventually Gemini and others as well.
Speaker 1:So the Yeah. The flow there is somebody's looking for they they're having an issue with the product, they're talking with ChatGPT about it, and then theoretically, it could there there could be some type of pop up that would say, like, do you wanna talk with an agent about this specific issue? And then that the the individual company would have more control over that interaction. Is that right?
Speaker 9:Well, it's sort of it's built on ChatGPT apps which which was announced at Developer Day Mhmm. Earlier this month, late last month. And the idea is this. Let's say, you know, you're a home seller and you have a first party agent which you can go to your website and chat with it, maybe browse their homes. Well, a lot of your customers are starting on ChatGPT as well.
Speaker 9:So you've you've done all this investment to make this agent. You have to build it twice, which parts of your experience you want in ChatGPT. Now with a click of a button, you can just publish your agent directly via ChatGPT apps. And it really means you can have the same experience in your mobile app and your website as you have on ChatGPT with this new extensibility model they developed. Here's the big picture.
Speaker 9:I mean, you just think of any consumer brand, every new platform brings distribution channels. Right? The mobile had App Store, the web had portals and then search. In the age of AI, it's agents, it's ChatGPT, it's Gemini. A lot of our customers are thinking about what do we want our presence to be on our own properties?
Speaker 9:What do we want our presence to be when people are starting from ChatGPT? We think just the world of channels are changing now. It's going from chat and phone and your website to chat and your phone and your website. ChatGPT, Gemini, agent to agent communication. So when we help our our our customers build customer experiences, we're trying to, you know, help them reimagine what that might be in a world where, you know, a person's personal agent might be doing the shopping for them.
Speaker 9:You know, how do they set themselves up for success there? The complex part is, you you know, there's sort of two sides to that coin, you know. It's like, where do you maybe commoditize your brand? Like, what do you want to hold back on your first party experience? What do you want to be present on these third party sites?
Speaker 9:So, we've really tried to build a platform that's flexible, but we're really excited about it because I think, you know, it is just a brave new world. You know, people are trying to figure out where demand generation, demand fulfillment comes from in this age of AI and I'm really proud to be one of the first, first companies to enable it.
Speaker 2:Yeah. Help me understand a little bit more about the brand side. I feel like, like, as a consumer, there's so many times I'm sure so many people do this in ChatGee Petey. They're asking about a product, and they're just asking the underlying model. And they're just assuming that, if I'm asking about Diet Coke that, you know, that Chatuchipiti has hoovered up all of Reddit on Diet Coke and the actual Diet Coke website and the FAQ page that Diet Coke has been, you know, put up for years.
Speaker 2:And so if I ask it how many calories are in there, it's gonna get it roughly right. But at a certain point, the other side of the equation wants to have a little bit more control, and it feels like you can publish that as an app in the ChatGPT app store. But is there what is the funnel from I just went into a new chat, and I don't know that it's in the app store, but and I'm just talking about Diet Coke over here in just a chat. Is it is at some point ChatGPT gonna say, hey, you should actually just be talking to the real app?
Speaker 9:I think that is the big question. You know, I don't think the discovery model is completely known yet. Mhmm. And, you know, our it's sort of funny, but our reductive form is like no one really knows where consumer behavior is gonna go or even how these discovery models work. But step one is make an agent.
Speaker 9:Because if the only way to use your service is clicking around your website, there's no way to be present in that world because it's just going to be essentially the index content within the large language model. So, our philosophy now is it's like the early days of the App Store or the early days of the Internet. I mean, I remember when I was at Google in 2003, the index would update once a month. We called it the Google Dance because people's rankings would change. You fast forward twenty years, SEO and SEM is a super mature industry.
Speaker 9:Right? It's like something that is quantified. We're kind of in the 2003 of this, so no one really knows. But our whole philosophy is like, step one, take your customer experience at your website, your mobile app today, turn it into an agent. And what that means is enable it to be conversational, enable it to work over the phone, enable it to work on your own website, your own mobile app, then experiment with publishing parts of it to ChatGPT as a ChatGPT app.
Speaker 9:And the discovery model, how do people activate it with an app mention? Does it recognize your intent and light it up? I think the form factor here, just like News Feed has changed a lot of the years. I don't think anyone completely knows yet, but you can't wait until your competitors figure it out first. Right?
Speaker 9:So this is an interesting thing about these new technologies and one of the things we try to do at CERA is say, hey, we're going to be a partner to you to help navigate this world even though it's uncertain. And I think a lot of people also, you know, it's a question of commoditization, you know. If an agent is doing the purchasing on behalf of a consumer, what's the role of my brand? What's the role of my first party property? It's almost like if you look at the retail world in mobile, which retailers had the brand equity to have their own mobile app?
Speaker 9:Which were dependent solely on Instagram for the traffic Yeah. To their retailer? It's a very nuanced question and everyone's kind of figuring it out real time. So I don't wanna pretend we have all the answers.
Speaker 2:Yeah.
Speaker 9:But what's neat about what we've done is we're saying, hey, step one, make an agent and prepare yourself for this future and make it super low cost to experiment, which I think if if we're in the 2003 era of search, being able to experiment quickly is worth a lot. And that's kind of the value proposition for our customers.
Speaker 1:Have you ever seen enter like enterprises adopt a product like they're adopting Sierra? I'm I'm thinking about the post you did, Maybe it was a couple weeks ago at this point or ten days ago or something where it was like, excited to welcome and then you just listed off like 40 companies in the Fortune 500. I've never seen it. I've never seen a company ever make a a like that. It was pretty pretty shocking.
Speaker 1:But, yeah, I'm I'm curious if there's any any other moment in your career that you've seen this this kind of velocity of of adoption.
Speaker 9:I really haven't. And man, I can tell you, somebody started two companies before, I joke with Clay, my co founder, there's two kinds of stress as an entrepreneur. The existential kind because you're not growing or the holy shit, everything's on fire kind because everything is growing. And we're experiencing the latter and it's fucking awesome. Excuse my language, you know.
Speaker 9:It's like, just because, you know Oh, sorry. Don't like getting bleeped out here. You know,
Speaker 1:like No. No. No. I was just was just was an air horn.
Speaker 9:Yeah. Okay. Good. No.
Speaker 2:I figured,
Speaker 9:know, it's it is fun. And actually, here's the thing. Actually, I'll say one other announcement we had yesterday, but Yeah. Just to answer your question. Like, the world is changing a lot and right now, companies are looking for a trusted adviser to help them guide them on this new path.
Speaker 9:Whether it's what demand is gonna come from ChatGPT, what does a conversational version of my interface look like, are my competitors moving faster than I am. Just think about if you run a large telco right now, every basis point of attrition is worth millions of dollars. And if you can get even a small edge, these are the moments in technology where you can actually change market share even in markets that are sort of ossified. And so, I appreciated that post on X as well. It made me smile when I wrote it.
Speaker 9:But on stage yesterday, we had the Rocket Mortgage executive team talking about how the Rocket Assist, which they've built on our platform, has improved the conversion rate for refinancing by four x. We had the CTO of Wayfair on stage talking about how it's impacted the returns and warranty claims. We had the Chief Product Officer of SiriusXM talking about the same. And we launched this product called Agent Data Platform, I'm happy to talk about more, which is saying, hey, can we move the world of agents from conversational customer service agents into agents that have long term relationships, long term memory and actually drive sales. And I think, you know, why were we able to have all these people show up yesterday is we're looking towards the future, I think with a a bolder vision than a lot of our competitors in this space.
Speaker 9:We have a really, I think consultative approach with our customers to say, we're not going to just throw a software over the wall and hope you're successful. We're going to help you be successful with this technology. And just like our conversation about ChatGPT is, we're not going to predict the future perfectly, but if you attach your cart to our horse, so to speak, we're at least going to be marched in the right direction. And I think a lot of companies right now are trying to figure out what they want to be when they grow up as it relates to AI agents and I'm really proud that we're the partner for some of the best brands in the world.
Speaker 1:Yeah. I'm sure you saw or saw clips from the Karpathy interview on Dorrakesh saying that it wasn't, you know, it wasn't the year of agents. It's the decade of agents. Did you what what was your reaction to that? Because I'm sure internally at Sierra, it certainly feels like agents are having a moment.
Speaker 1:But I think broadly, agents as a category, at least consumers, have felt a like a little bit let down on on some of the product experiences today on the consumer side. Right? We've had we've been kind of promised these product experiences that aren't really good enough to use reliably yet. But on your side, you're obviously seeing companies get, you know, roll these out, get, you know, tremendous results. And so I I feel like it's here.
Speaker 1:It's just not so evenly distributed.
Speaker 9:I think that's right. I think both are kinda true at the same time. You know, there's there's basically AI agents and AGI. And I think as you think about consumer agents, for those to really work, it's not it maybe isn't complete AGI, but it's close because the amount you need to generalize for an individual like the three of us, if you looked at the home screens of our phones, there's probably very little overlap, right, to actually have an AI agent that can automate all of our lives. You sort of get the union of all the complexity of everyone's personal lives.
Speaker 9:In contrast, if you think about sort of, you know, Rocket Assist on on rocket.com, you're helping somebody go through the refinancing process. It's a relatively structured agent in the grand scheme of things, you know, it's and so, I think where the value right now in the AI market is where you can turn science into engineering. So, it's companies like Sierra helping with customer engagement, sales, customer service, or Harvey working in legal. And then the moment you say, we're going to make a computer using agent that does everything for all people, that's a science problem. Andrei Karbati is probably one of the smartest people I've ever met.
Speaker 9:So, I think he's probably right in a lot of ways. But I think it will be uneven. I think we'll end up with AI agents that make really great math discoveries, but at the same time you're going to have an agent that can barely use a computer effectively. And you're like, God, it's like somehow a genius and an idiot at the same time. And that's the complexity of this technology.
Speaker 9:But that's why I'm so bullish on the applied AI market. You know, I think I like to think of it as like we're taking the science and turning it into engineering. And, know, I I'm really proud that we work in healthcare with like Cigna and R1, the revenue cycle management firm. We work with multinational banks. We work in the mortgage industry.
Speaker 9:And it's because we're taking all this science and we're whittling it down, say, here's what shovel ready right now today. And I think the reason why we've had such traction in the market is that's really valuable. You know, there's a lot of science projects out there. We have been a term for at Sierra called AI tourism. And we're like, no, AI tourism is not useful.
Speaker 9:It's just, you know, peacocking for your board that you have an AI strategy. What you want are the things that can actually drive sales and cost savings today and that's what we're trying to deliver at Sierra.
Speaker 1:How is the role of, and and and responsibility set of customer experience teams changing already from the companies that you guys are working with? I mean, historically, it'd be like maybe start out as like an individual, like, CX rep or agent. You're, like, handling tickets. Eventually, you're managing a team of of reps and then you're managing a team of managers that are managing reps and you just go from there. Do you do you see it evolving already, or or is it or is it more, you know, an individual rep is managing tickets themselves, they get elevated and then kind of overseeing the work?
Speaker 1:How is that how is that kind of evolving today?
Speaker 9:One of the most fun and interesting things is with a couple of our customers, the team that was managing their contact centers changed their job titles to AI architects. And so you go from teams who essentially have operating roles, managing teams of people to teams who are responsible both for those teams of people but also the AI agent that works with them in concert. So, some of the AI agents answering questions automatically, some is actually managing the team that when the AI agent transfers goes to them, but it's a real organic system. One of the other features we launched yesterday was called Live Assist and it's saying, can you take the agent you made for your consumer and put it on the desktop of the people in your call center as well, but have a really seamless conversation? Because there's not going be things like AI agents are great, they're not great at everything, but can you have like a single system of intelligence that helps with that whole process?
Speaker 9:So it's dramatically changing the role, particularly of the teams managing customer experience because it's gone from just managing people and processes to managing this piece of software. And the thing, I mean, you all will understand this intuitively is when you take something analog like a phone call to a person and you make it digital with an AI agent, all the past two decades of digital technology are available to you. You can run AB tests. You have real time analytics. Yep.
Speaker 9:It can self improve. Those are all things that you you know, you can't run an a b I mean, you could. If you have a 12,000 person call center, running an a b test is like a huge operational burden. But now you can do it at the click of a button. And the interesting thing is it's it's stuff we've been doing on web pages for the past twenty years, but now you can do it on phone calls.
Speaker 9:And so it's actually for our product managers, like a lot of our inspiration is actually saying like, what have we been doing in the world of digital technology for the past two decades that we can just bring to this previously analog channel, which I think is a really exciting and oddly simplistic way of looking at the technology, but it's kind of how we think about it.
Speaker 2:It's awesome.
Speaker 1:Yeah. Do you care
Speaker 3:I'm bummed with that. Would it would
Speaker 1:it upset you if the models didn't improve at all for the next five years?
Speaker 9:It would upset me, particularly as the chairman of OpenAI. But, but, you know, I think I get where you're going with the question, which is like, how much breakthrough technology do we need for Sierra to make it applicable? And I think right now actually the agents work exceptionally well. I'll tell you two areas I think could really improve a lot. Native voice to voice models can get a lot better.
Speaker 9:They sound really interesting today, but a lot of them are prone to hallucination and you know, aren't great at rules adherence. And I think right now, a lot of applied AI, you might be in the world of speech to text and text to speech because you need better reasoning and better adherence. And I think that will change and I'm really excited about in general, video and voice feel like we're still in the early ish innings relative to, you know, the core reasoning models. And then the the other thing is I think, I always bring this up, we're like in the 1997 era of making agents. Like, if you look, I found this article for Sierra Summit about the creating websites in 1997 and there's this wired article, I'll send it to y'all.
Speaker 9:Yeah. And it was basically about banks spending $23,000,000 to add transactional support to their websites, like adding a login form basically. And then you fast forward to like the late two twenty tens and, know, Kylie Jenner starts a multi billion dollar cosmetics line with, as I read, seven full time staff. Yep. And you're like, that's kind of so I think we're kind of in the 1997 year of building agents where it's still like way too hard and you end up putting a lot of engineering around what is a very intelligent, you know, set of models just to make it work well.
Speaker 9:And I think, you know, I always imagine like, what do you need to have a seven person team create a multi billion dollar business on agents? And I think we just have a lot of product and technology work left to do. But for an applied AI company like ours, it's the models are actually pretty great right now. I would be disappointed if they didn't get better, but I don't see like a major technical barrier to progress right now, which I think is really exciting, you know, as a as a business person.
Speaker 1:Yep. Makes lot of sense. May seem to get the get the update. Congrats on the first summit and come back on again soon.
Speaker 2:We'll talk to you soon.
Speaker 9:Thanks.
Speaker 2:Have a great rest of your day. Before we bring in our next guest, let me tell you about Google AI Studio that create an AI powered app faster than ever. Gemini understands the capabilities you need and automatically wires up the right models and APIs for you. Get started at a i.studio/build. Our next guest is the CEO of
Speaker 7:The legend.
Speaker 2:Roblox, Dave Bazooki. How are you doing, Dave? Good to see you guys. Good to see you again.
Speaker 1:You again twice in one week.
Speaker 2:Twice in
Speaker 1:one week. Week.
Speaker 2:They we we didn't stream our last conversation. I'm very excited that we are live for this one. But since it is your first time on the show, I would love for you to just give us a little bit of an update on where the business is. What's the newest? What's the latest and greatest in your world?
Speaker 11:Hey. So first off, thanks for having me on. I am a huge fan. You're reinventing really the future of business news. So I I love your multimodal streaming strategy, and it was great seeing you guys two days ago.
Speaker 11:Yeah. You know, every every day, about a 150,000,000 people now come to Roblox, and they play, they communicate, they hang out, not in games made by Roblox, but literally in experiences made by a huge creator community. So everything on Roblox is built by the community. And we've shared about a year ago, we believe Roblox will get to 10% of all gaming running on the platform. We're at about 3% rate now.
Speaker 11:Just came off a great earnings call last week. Our year on year bookings is growing 70%, and our year on year DAUs are growing 70%.
Speaker 2:Wow. So, I mean, I I I asked you this before. I'm gonna ask you again because it's a funny question. It feels like you have built such a powerful platform. The business is running so smoothly.
Speaker 2:You have this amazing cohort of particularly young gamers who are gonna grow up and probably stay with the platform forever. Can you just do nothing and win? Like, if you just if you just keep the servers online and keep the platform flexible, it's not like you have to come up with the next greatest piece of intellectual property because you are the platform. So if if I if I misunderstand that, what what do you have to do day to day to actually move the ball down the field to get to that 10% that your goal is?
Speaker 11:I like the way you think of that. And we you know, for those of us that are mathematicians out there, we sometimes think of the second and third derivative, not just the first derivative. And and what you shared is exactly right. If we walked away, just kept the lights on, there's enormous native growth in the platform. This is a a highly technical platform.
Speaker 11:Creators make experiences. They auto translate. They run anywhere in the world. We've now seen peak concurrency records for gaming all around the world. In August, Grow a Garden, one of the more recent big games on Roblox, hit 25,000,000 concurrence.
Speaker 11:So I I would say we cannot walk away. We need to support infra and support scale. But if we did walk away, I I think there may be some native growth that keeps going. What we think about when we're running the company though is the exact opposite of that. We think about are we constantly layering in systems?
Speaker 11:Are we building a machine that can keep growing? And are we building a machine that as we hit 10% of the gaming space, we're we're growing rate by that? And and the gaming, you know, the gaming market's pretty interesting. It's about a hundred and eighty to two hundred billion. It's arguably really, sitting right there for technical innovation, for new ways of distributing, for games that run really well on low end Android phones and on high end PCs, for games that incorporate AI, within the experience.
Speaker 11:So we just think there's enormous headroom in this market.
Speaker 1:What's exciting to you about AI as a creative tool or or or a tool that enables people to build games faster? And what's most exciting to you about AI that can be integrated into a gaming experience? Because I feel like they're kind of two distinct buckets.
Speaker 11:I think there's several buckets behind the scenes over the last four to five years. We've built out a real substantial offering of models we've built ourselves. We have over 400 models, teams that are building everything from cutting edge voice and tech safety models, teams that are building models that auto translate, teams that are powering our search and discovery models. We are starting, and and very shortly, we're gonna offer what we call inexperience four d generation, which is literally the ability to make a game that you or I are playing in, and we can prompt and ask for some type type of vehicle, for example, or some type of dwelling and literally build it as we're playing. So it's a it's a little bit of a wide open field here as far as what what types of games are people gonna build when they have unlimited AI not just for the creators, but for everyone who's playing in that game.
Speaker 11:And and I do think the future spec, which we think about, which is an enormous technical spec, is can we host one to a 100,000 people together? Can they be either photorealistic or cartoony, whatever the developer wants? Can they all be talking, listening, interacting with each other? And can they dynamically change the environment? Can one or two or many of them essentially be dungeon masters and and changing the environment dynamically with AI?
Speaker 11:That's a huge technical lift, but it's it's what we're working on.
Speaker 1:How how do you so so when I think of the Roblox business and and, you know, people are very excited about AI and gaming. I view, not not to kind of gas you and the team up too much, but I view you guys as having the kind of communication layer, the user base, the distribution. It gives you such an insane advantage because if I'm somebody who wants to create a game, I can go to I can create a standalone game. I could go to another platform or things like that. Or I could go to Roblox where I know there's hundreds of millions of people that want to play games.
Speaker 1:I I how, yeah. Talk about, yeah. Talk like, do you think there's a what percentage of game when you when you talk about, like, owning 10% of the gaming market, do you think do you think game developers are in of the future will just be kind of defaulting to Roblox? Is that a goal of, like, if I wanna build a game, it's like, why why go through the effort of, like, trying to build this build my own kind of, like, community and player base when I can go to where an existing player base is and have a much higher likelihood of of success?
Speaker 11:Yeah. I think we don't rest on our laurels, obviously, but I do think the gaming market is a bit different than, for example, the video market. And and in the video market, whether it's short, UGC, you know, TikTok, YouTube, Netflix, you name it, that's relatively mature technology. The the cameras are relatively mature. Video distribution playback is relatively mature.
Speaker 11:But the the spec I shared with you, a 100,000 people in a, you know, multiplayer immersive, world with AI is far from technically figured out. And that kinda goes to our vision that the next future of gaming is much more client server cloud integrated. It's why Roblox has many, many data centers supporting this. It's why behind the scenes, it's not just the game engine. It's the persistence engine and the analytics system and the economy system.
Speaker 11:And as you correctly noted, the social graph, a friend graph, where are your friends, can you find them, as well as the client system, which is does a game run on iOS, Android, PC, Mac, Xbox, PlayStation, Quest, and more to come. I I would say there's one other angle that we really focus on, which is the economics. The more efficiently we can build this whole platform and the more money that can flow back to the creators, the more that combination of technology and discovery starts to make a lot of sense. And so we do focus on running a very efficient company that that pushes money back to the creator community. Well over a billion dollars will flow back to Roblox creators this year.
Speaker 2:It it it reminds me of Substack. Like, there was a time when you if you wanted to write online, you started by spinning up a blog website, like writing the code or or at least forking the code or or managing your own server and making sure your website kept, like, stayed up. And now, you can just build an actual game in Roblox. And I I I understand that it's early, but that does seem like where it's
Speaker 1:What are what are the keys to, managing an economy? Because I feel like you have the unique challenge of managing you're running you're running and building Roblox, the business and the platform and the infrastructure. Yeah. And then there's the then there's the economy of
Speaker 2:chief economist, like a whole economics team? Like, how how serious is that discipline?
Speaker 11:It's really serious. We have a lot of PhDs. Mhmm. We have great econ brains. Mhmm.
Speaker 11:A lot of times, kids will say, hey. Why can't you just give me a trillion robots? And it's a great opportunity to tell kids that if we give you a trillion Robux, the average Robux will be worth about a a billionth of what it used to be worth. Yep. So we we actually actually know know about about money supply.
Speaker 11:We know we can't print currency.
Speaker 2:Are you the Jerome Powell of the Roblox ecosystem? You get DMs directly. People ask you to print to turn on the money printer.
Speaker 11:Well, imagine I'm a young kid. Why can't you just make Yeah. A a trillion Robux? And and so there's a lot of learning there Yeah. That the value of the ecosystem doesn't change when you print more currency.
Speaker 11:The currency is just worth less. So we're very careful with the value of our currency. We we've done something really right, I think, from the start. And there's a real temptation to do nonlinear functions, accelerators. If a dev gets really big, should we pay them, you know, more per hour, per minute, per robot than others?
Speaker 11:We've really stayed away from all those nonlinear systems, and I think that's added a a fairness to it. We we I do believe we have aligned incentives of creators and users in a good way so that if the system is working, it keeps working year after year.
Speaker 2:Is there any world where there there's an independent Roblox Fed either through crypto or some sort of spinning out or some sort of nonprofit or some sort of, you know, advisory group where, like, the monetary policy of the Roblox ecosystem is not set by anyone with, Roblox stock on.
Speaker 1:Sounds like a nightmare.
Speaker 2:It sounds like a nightmare. I'm not advocating for this. I'm just wondering, have you done the thought experiment?
Speaker 11:Yeah. Absolutely. There's just there there are some fun thought experiments around if I'm holding Roblox currency, is it backed by a digital vehicle? And is that digital vehicle stable and backed by a dollar? So there are you know, as we get bigger and people start to hold larger amounts of money Yeah.
Speaker 11:And we we have both Robux and Fiat currency, it is worth thinking what gives confidence to consumers.
Speaker 2:Yeah. Yeah. That makes a lot sense.
Speaker 1:How early can you tell that a game is a is a home run, like a hit?
Speaker 3:Oh, interesting.
Speaker 1:Like is there it like within like, let's say, like, 10,000 people try a new game. Is that enough? Can you get enough of a read from that to understand that that that game could someday have a million concurrence?
Speaker 11:I I have both two answers to that. One answer I would say is a more of a some companies work intuitively and they design great stuff. Other companies work hyperanalytically, and they they have systems and whatever. On the intuitive front, a couple years ago, I was I was just playing on Roblox, and there were about 800 people in a experience called Dress to Impress Yeah. Which was it was like a fashion game with their own avatars, their own clothing style, competitively put on your clothing and compete in a runway show.
Speaker 11:And it it felt really good. And I I forwarded it to the the team just because there's a lot of attempts to really get fashion good. Simultaneously, we have a great team of people who work on search and discovery. And our our our general philosophy is let's make search and discovery as predictable as possible, as transparent as possible, and as aligned as possible with both the users trying to find cool new stuff as well as the creators, which is bubbling up great new stuff on the platform. Dress to impress got picked up by that algorithm and got forwarded a bit, and that helped drive the speed of the viral success.
Speaker 11:So both, I would say, the users themselves share with word-of-mouth as well as our algorithm's surface grade content. Mhmm. It's why I believe in the last year, we had seven experiences hitting 10,000,000 daily active users at some point in q three, and I believe five of them were new in the last twelve months.
Speaker 2:How do you think about the layers of the Roblox economy? And I'd love for you to explain just to cut deeper maybe on the Grow A Garden example. But are there are there creators or do you envision in the future creators that are would would identify not as a Roblox creator, but as a Grow A Garden creator? And you're basically creating, like, a sub economy within the overall economy because the tools of game design are so robust that there's exchange rates? Like, how, like, how do you think about the layers of the onion on the platform that you're building?
Speaker 11:I like how you think about this layer thing. In a way, gaming is very different than video in that on a platform like Roblox, you can create an experience on Roblox. So you're a creator, and that experience can have creators within the experience. And so there are two layers there. There's a little bit of a long term future proofing in that there there are more and more experiences where, you know, they started initially as experiences like Lumberjack Tycoon, where you would build a lumber mill and you would be a creator in Lumberjack Tycoon and compete as a creator within that experience.
Speaker 11:I think where this goes is there are quote games on Roblox that have individual creators within them that may actually make money being a creator within an environment Yeah. Made by someone on Roblox. That's a really good long term, you know, essentially dual layer strategy that gives us a lot of capability to support a wide range of creation styles. We've seen that with some experiences like ClipIt, for example, was an experience on Roblox where you make short little three d vignettes and there are actually creators in that experience itself.
Speaker 2:Sorry. Before we move on, I have two wild card questions. First, everyone in the chat wants to know because we saw a lot of people yesterday with lots of fish in the background. What's the biggest fish you've ever caught?
Speaker 11:Oh my gosh. You may be talking I think it's, there's an experience that's gone lot really big in Indonesia.
Speaker 2:Yes.
Speaker 11:And we're really happy about the notion of more experiences being different in different countries rather than one experience being hot anywhere.
Speaker 9:Okay.
Speaker 11:So Fish It literally, we were thinking about why is it big in Indonesia. We were talking in our executive meeting on, you know, Tuesday. Maybe to go big in North America, you need like a giant bass boat with a big motor.
Speaker 1:Yeah. Cultural.
Speaker 11:Yeah. Where whereas Indonesia, it's a little bit more traditional fishing.
Speaker 7:What about
Speaker 2:personally? Have you ever been fishing? Have you ever caught a big fish personally?
Speaker 11:I I have been in fish it, but I've never caught a big fish.
Speaker 2:What about in the real world? In a big world No. No. Like like like not in Roblox at all, but in the like, on a vacation, have you ever in in the physical world caught a fish?
Speaker 11:In the physical world, I grew up in Minnesota and I caught one day a bunch of small little sunfish sitting in a small little boat on a lake.
Speaker 1:There we go. Okay.
Speaker 2:That's something. Second second question. How have you engaged with do you believe in the simulation hypothesis? Are you familiar
Speaker 11:with this? Are we so so are we in a simulation? Are we in a If we are in a simulation, are we in a simulation within a simulation? I I have two different views of it. View one, I would sure love the answer.
Speaker 11:Can you give me the answer, please? Because knowing the answer to this It really helps like that that is essentially the answer to the creation of the universe depending on what religion you are, what is God. Like, that is an answer to about a million things, so I would love the answer. The other one is it's a little unfathomable to me, but we're thinking about because a computer that could simulate the universe we are in starts to be a computer that is, you know, a 100 to the 100 to the hundredth power of processing and all of those types of things, and that just blows my mind anyways. So if we are in a simulation, the next layer universe that can support this simulation is pretty crazy.
Speaker 2:Yeah. Yeah. It's a it's a fascinating thought experiment. Absolutely wild.
Speaker 1:I I wouldn't be shocked if
Speaker 2:Yeah.
Speaker 1:This conversation that we're having right now is actually happening in Roblox.
Speaker 2:Yes. And
Speaker 1:In some dimension Roblox and it's just a it's a simulation.
Speaker 2:On something much more retractable.
Speaker 11:Actually, in the next layer universe, Roblox has been very successful. Yeah. And we don't even know it, but we are in the next layers, Roblox, hanging out right now.
Speaker 2:I believe it. I believe it. On something way more tractable, vibe coding for Roblox games, is that company? Is that features that you'll build? Does this already exist?
Speaker 2:Or or is is like, the ability to generate a website or the ability to, like, vibe code generally is just remarkable. It's lowering the barrier to entry on designing, mobile apps and designing websites. I imagine that the floor is going to go even lower on what it takes to build a game in Roblox. What are you seeing?
Speaker 11:I think, vibe coding is maybe an intermediate step Mhmm. To what we would call real time three d or four dimensional dreaming with other players, which is literally you and I are walking around an environment talking or doing things. And as we're chatting over there, a three d experience or game or object appears. So I think I think there's something even further than vibe creating a Roblox experience, which is how do we support, in a Roblox experience, a command line where you can basically ask for anything with a friend and you'll see it pop up, whether it's a game or an object or a piece of clothing. Jordy?
Speaker 2:We can talk about AI build out. I'm always fascinated by that.
Speaker 1:Yeah. I wonder yeah. I guess Is
Speaker 2:that affecting you at all? I mean, we talked a little bit about Yeah.
Speaker 1:Someone someone who's developed and manages data centers. Like, how have you been processing the broader AI build out and some of the timelines that some of these projects are happening?
Speaker 11:Yeah. I I would say you know, the good news is I feel for Roblox very early on. We started with a build our own data center philosophy, both core and edge data centers. We have data centers all over the world, in Brazil, in Singapore, in Poland. And when we hit these big numbers, like 45,000,000 concurrency, we're being able to do that at a reasonable cost because we've done that.
Speaker 11:Mhmm. We we are building out our GPU fleet as well. We already, as I said, have 400 models running. Mhmm. And we'll do that in the exact same thing we do with our our corn edge data centers, run the majority of the time on our own bare metal, complement it with burst at peak times to give essentially the optimal cost and reliability.
Speaker 2:Okay. Maybe take me through, like, the first big I'm gonna buy a data center moment. What was that like emotionally? Were you using debt for the first time in the company? Were you nervous, or was it just like, yeah.
Speaker 2:Of course, I'm financing it. It's like I'm buying a house. Like, psychologically, as a CEO, of a steward of capital, there's now someone coming in potentially higher in the capital stack. How'd you finance it? What were you thinking?
Speaker 11:The the good news is we generate a fair amount of cash, and we've always generated cash.
Speaker 5:So
Speaker 2:Paid for it in cash. He bought his house in cash.
Speaker 11:So we actually tend to buy a lot of things with cash. I think if you look at our balance sheet, you'll see billions and billions of cash and a billion of debt we raised a few years ago. So so far, we haven't gone heavily down that financing route. We build data centers, and they last for three, four, five years, whatever the depreciation cycle is. We're gonna continue to do that.
Speaker 11:And I I don't think, you know, we're getting near having to borrow. A lot of the data centers we build, we buy capacity and then put our own hardware and bandwidth in together. Mhmm. We'll continue that. We tend to build in many, many locations rather than all as at at the same place.
Speaker 2:Yeah.
Speaker 11:So so far, so good.
Speaker 1:When Yeah. When we've seen CEOs out there planning for six or seven year depreciation schedules, you said three, four, five. Do you think they're potentially being a little too generous? Not not to not singling out any any specific company, but I'm curious how you're planning with your GPU fleet around depreciation.
Speaker 11:Yeah. I know we we optimize the length and don't quote me. We should look up exactly what our deep depreciation is for CPU fleets. Yeah. I do think CPUs are generally aging better than GPUs.
Speaker 11:Mhmm. So I think it's worth taking a look at the speed of GPU development versus CPU development, and we may see those things end up in slightly different places.
Speaker 2:Yeah. A lot of that just comes from if if CPUs are increasing 2% a year and GPUs are increasing 20% a year. Right. You're just getting me way way way
Speaker 11:thinking about for a thousand dollars, what kind of GPU I'm gonna buy in seven years. There's a chance it's it's faster.
Speaker 2:Yep. Like, there's a chance. Small
Speaker 1:just a small chance.
Speaker 2:Wow. Wow. Hot take of the century. I love that. Thank you.
Speaker 3:How do
Speaker 1:This is so much. Internally with the team, like, what what are, like how how are you how would you kind of describe some of the messaging? I mean, we're in such an insane market right now. Roblox went public in 2021 during the the the peak of Zurp, had to navigate through quite a lot over the last few years, now we're in feels like an even, even more volatile, unpredictable market. With the team, are you do you is is are the conversations like, hey.
Speaker 1:Let's kind of zoom out and kind of look at you know, you started the company in in 2004. So, know, every you've seen a few cycles by now. But how how how have you been leading through this through this year?
Speaker 11:I think earlier what I said is, you know, we couldn't predict if all we did was keep the lights on, what the growth curve is. I do feel we treat the business as if we have to be innovating at maximum velocity constantly. And we we can imagine this spec, and we we can imagine what our product would be like with some of the things I mentioned earlier. And we do also think there's a future for for massive innovation in three d communication relative to the gaming market and beyond. So we we have our heads down building stuff, shipping stuff all the time.
Speaker 11:We focus a lot on how we've organized the company. We we have it's almost as if Roblox is eight or nine companies within a company given the breadth of our tech stack. I mean, we are
Speaker 1:Yeah.
Speaker 11:An economy, an AI company, an infrastructure company, a game engine in the cloud company, search and discovery, user social graph company. So we we have great leaders across that. And in each one, we have enormous innovations we're trying to bring to market.
Speaker 2:Fantastic. Well, thank you so much for coming on the show.
Speaker 1:Great to hang out. Great Congratulations to the whole team. Congratulations. And
Speaker 11:congratulations. Hey. Congratulations to you and the model, and I love what you're doing.
Speaker 2:Yeah. We'll talk to you soon. Have a great rest of your day.
Speaker 1:Goodbye. Bye. The man.
Speaker 2:Before we bring in our next guest, let me tell you about ProFound. Get your brand mentioned in chat GBT. Reach millions of consumers who are using AI to discover new products and brands. We have Vlad Teneff from Robin Hood in the restroom waiting room. Let's bring him in to the TVPN UltraDome.
Speaker 2:Vlad, how are you doing today? We'll bring him in in just a minute. What else is going on in the timeline? Andreessen Horowitz announced an a 16 z new media fellowship. Eric Tornburg has these Neo media.
Speaker 2:As many no. One new, not neo. These are different things. We describe this as we work through this. Or as many people are saying the Thiel fellowship for the terminally online, finding highly functional people who are also very online is hard, so we're creating a fellowship for them.
Speaker 2:Tyler had a hot take on it. What'd you say? What was your what was your new media fellowship question?
Speaker 7:It was like the riff on the teal question.
Speaker 9:It's like, who
Speaker 7:are who are your mutuals that are like?
Speaker 2:No one else has mutuals with or something like that. Anyway, congratulations to everyone over at a sixteen z on the new media fellowship. And let's bring in Vlad
Speaker 9:Bring in Vlad.
Speaker 2:From Robinhood. How are doing, Vlad? Good to see you.
Speaker 12:What's up, John? How are you doing, Jordy?
Speaker 9:This is amazing.
Speaker 1:To see you. You always you always impress with the with the The camera quality is fantastic. Quality.
Speaker 2:I also love it because last time you were a little bit further away from the camera and you're getting closer.
Speaker 1:Is good.
Speaker 2:And in ten years when we're interviewing you for the fiftieth time, you're
Speaker 1:gonna be eyes. Gonna You're be in
Speaker 7:the studio, actually. Person.
Speaker 2:Yeah. Yeah. Maybe just be in person. Just come to LA. The next time you're in Hollywood, please, you're welcome.
Speaker 2:But, anyway, let's get to what's new in your world. Take us through what's top of mind. There's a lot going on, but break it down.
Speaker 12:Let's see. We did our earnings yesterday.
Speaker 2:Mhmm.
Speaker 12:And earnings was incredibly strong. Basically, just relentless product velocity continuing
Speaker 2:Mhmm.
Speaker 12:Leading to just increased market share across all assets. You have all of the blue chip assets that we've had for a long time, equities, options, crypto, but then prediction markets have just been ripping. Okay. You know, we've we've been doubling every quarter, quarter over quarter since we launched just about a year ago.
Speaker 2:Yeah.
Speaker 12:And so far in October, October's been bigger than all of Q3 put together.
Speaker 3:Wow.
Speaker 12:And we started at beginning the of q three, we had nine business lines that generated a 100,000,000 plus of annual revenue.
Speaker 1:Get the Gong.
Speaker 2:Now I
Speaker 12:have 11.
Speaker 1:11. They have 11 now. Dre here. Get the Gong. So we're use for $11.09 figure revenue business lines.
Speaker 1:Amazing.
Speaker 9:What Oh, I love that
Speaker 12:you guys also have a Gong.
Speaker 9:I have one. I will. But
Speaker 2:Take me through, like like, what what are the second order readings on how your business is doing? Like, there's one read where I could say, okay. Robinhood's If doing well, that means the market's booming. Maybe there's higher volatility, so people are trading in and out. There's a general trend of people, trading, maybe more on their app or more on their phone.
Speaker 2:There's younger people getting into the market. There's all sorts of different reads. Like, did you learn anything this quarter about the trend of, your or the like, how Americans are participating in the economy broadly? Are there any lessons that stuck out?
Speaker 12:I mean, I think that you're right. I think we also get this question of, like, how much of your success is driven by Sure. The broader market.
Speaker 2:Right?
Speaker 12:Yeah. That's why we try not to dilute ourselves and get too confident Sure. When volumes are going up. And we also try not to beat ourselves too bad if volumes are going down in the broader market. We really look at market share and we publish these numbers.
Speaker 12:It's in the slide deck on earnings. Market share growing across pretty much all the assets
Speaker 2:that we have. Just a very old legacy infrastructure of, like, you know, the we've all seen Wolf of Wall Street. Like, there's the stockbroker that calls you. That's probably going out of fashion, and you're kind of eating that dinosaur one bite at a time probably. But that's the part that people don't necessarily see because they're familiar with you and the company and the product.
Speaker 2:But you are taking market share every single quarter probably, something like that.
Speaker 12:And we're still very small Yeah. Actually in the grand scheme of things. Yeah. Like, have a third of a trillion of assets on the platform, which Yeah. Sounds like a big number, but there's gonna be a 120 plus trillion in assets handed down from older generations to younger over the next few decades.
Speaker 1:How many sorry.
Speaker 12:What the great was wealth transfer.
Speaker 1:What was the number?
Speaker 12:A 120,000,000,000,000 plus in the great wealth transfer.
Speaker 2:So That's wild.
Speaker 12:Robinhood currently is like less than a third of a percent of that. I think we've got a lot of room to run.
Speaker 2:Yeah.
Speaker 12:And if if you're a young person in this country, millennial, Gen Z, soon to be Gen Alpha, you don't really wanna do your finances at a brick and mortar store. You don't wanna call someone on the phone. I mean, you'd like to have someone available if you do want that, but these are digitally savvy, digitally native people that are comfortable doing everything on the smartphone. So what they care most about is having great technology.
Speaker 2:Yeah.
Speaker 12:And I think Robinhood has a real shot at being not just your primary, but also your secondary financial account. We wanna be both. So, we're we're just marching along on that vision.
Speaker 2:Talk to me about how research is changing. I had this interesting we Jordy and I have been joking about we wanna, get into buying a lot of land. I went to I went to, Chatuchi BT, and I said, how can I buy land whether I have a a $100 or a million dollars? What are the options? What's the most underlying asset that's maybe in an ETF or a REIT?
Speaker 2:And it gave me some options. And I feel like this idea of people coming up with investment theses from listening to stuff, but not necessarily getting, like, a specific ticker or a specific portfolio. And then they wanna go and construct that and actually build something that expresses their belief. Maybe they believe in America, and they want and they wanna express it that way. How can how do you think, research is changing and actually servicing the assets in more of a conversational way?
Speaker 2:Maybe there's AI in there, but how are you thinking about research changing?
Speaker 12:I think one of the things we're seeing is it's becoming more granular. And a lot of people thought that it wouldn't happen necessarily in this way. You know, for a while, the the trend was really toward indexing. And ETFs as a as a new product got adoption. They started getting tons of assets.
Speaker 12:When we were first starting Robinhood, we were kind of moving in a different direction, and there was some skepticism from investors who thought that everything was just going to be indexed and indirect, and it would just be people investing in broad market indices and diversified funds. And we made a bet in the other direction that in fact, no, people want to move away from indexes. They actually want to express their viewpoints more precisely. And so you're seeing more granular investments, individual equities, but not just individual equities, you're seeing options trading, the rise of zero day options, same day expiry. And I think prediction markets are a continuation of that because you're starting to see markets for stocks and whether they're going to outperform earnings, for example.
Speaker 12:A lot a lot of of people used to play the presidential election Yeah. And have a thesis there that they would play by trading stocks or crypto. But now you can do that directly. So I think I think it's getting even more granular. People will have very specific theses that they understand and they have conviction on, we're giving products for them to express that.
Speaker 12:And on the LAN side, that's super interesting because I would bucket that under alternatives.
Speaker 2:Yeah.
Speaker 9:Right?
Speaker 12:Yeah. Like, people want access to alternatives. The only way to have access to alternatives right now is through REITs or these diversified indices.
Speaker 1:Yeah.
Speaker 12:But what people really want is to invest in an individual private company as easily as they can invest in a public stock. And maybe they want an individual piece of land or a property in a neighborhood that they think is gonna do well, rather than just some like commercial real estate fund that has that has a portfolio everywhere. Because they can they can better understand whether that's gonna go up or down. And I think we're moving in that direction. Tokenization is is is solving a lot of the technical problems with that.
Speaker 12:And, of course, there's regulatory hurdles that once we get through, I think will will open up lots of alternative assets to retail investors.
Speaker 1:Yeah. What Yes, sir. What what companies and and CEOs do you think the best do the best job at at shareholder engagement? And and what do you think are best practices around shareholder engagement today? I think, I would I would point out, Rob, like like you guys as as a company that does this incredibly well, I think part of your strategy is maybe like, let's do what we wanna tell we want other companies to do.
Speaker 1:Right? Because if the the better that that management teams get and companies get at at having and building relationships with shareholders, the better experience it is to be shareholder. But what what have been your kind of inspirations that have guided your guys' strategy? And who else do you admire in the market?
Speaker 12:Yeah. I mean, that's that's such a I love talking about this because yeah, I mean, our, IR team, Chris Cagle, who leads IR from us, has been getting a lot of calls. I think he's become a little bit of a luminary in the how to engage retail shareholders using traditionally kind of like boring forums like earnings. Mhmm. And we've been on a journey ourselves.
Speaker 12:I remember watching our earnings call a year ago. And, you know, like many people, I go on YouTube and I see, let's see who's talking about our earnings, and there were actually groups of influencers that watch our earnings live and kinda talk about it. And I sat through the experience, and they were looking at, for a long time, just a slide deck with our logo in there. It wasn't even the new brand of our logo. It was the old one.
Speaker 12:And then it's just like, you know, we were on a Polycom. The the analysts were on the call. Nobody knew whose turn it was to talk. It was a bad experience. And we started just by wanting to clean that up.
Speaker 12:So we did our first video earnings call three quarters ago. And every quarter, we've been thinking about how can we do a little bit more. And if if you view it from the perspective of a retail shareholder, it can't just be we're reading scripts of information. It has to be engaging. Yeah.
Speaker 12:And so it's video. It's getting more stakeholders that can ask good questions live on video if possible, asking those questions in real time. And, you know, you guys have figured it out in your forum. I think that what earnings is is a community event, and you should think about it as such. And I think the best CEOs, the best companies who really care about engaging retail have to move from thinking about it as a chore to actually one more event where you can get your brand and what you stand for out to as many of your stakeholders and community members as possible.
Speaker 12:We were inspired by launcher.
Speaker 1:Thinking about it like a product like, if you think about, like, the earnings call is like a product launch where the customer is the shareholder. Yeah. Like, you know, most companies today, their earnings calls and and the way they treat earnings does not reflect that at all. And it's and it's such a relatively small investment compared to just operating the company at large for potentially much better experience. But you were talking about Palantir.
Speaker 12:Yeah. I mean, what what I'll tell you is we're helping companies. Whenever someone comes up to us and asks us how can we improve earnings, we we always wanna help. Like, I win if more and more retail access the markets and more companies treat retail as first class citizens, so we're more aligned there. And we have products.
Speaker 12:We've got Say Technologies, which offers shareholder Q and A to retail. And we're actually piloting a program where we livestream our own earnings in our app, and we'd like to make that available to other companies. So Opendoor after the close today is the first, company outside of Robinhood that's streaming their earnings live on video via our app. So I I think and we've gotten a lot of a lot of companies asking us if they can do that, And we we can come we can put together a whole bunch of things that really center around how to make the experience really engaging.
Speaker 1:On the topic of retail generally, how are conversations going around IPO allocations? I know in the past, you've been very loud about getting more and more allocation for, you know, not not even just Robinhood users, but retail broadly. What what's the update there?
Speaker 12:Yeah. So when we launched IPO Access, which is our product for getting retail exposure to to IPOs, it was 2021, and we did it in advance of our own IPO. But we always wanted to make it more broadly available. At first, people were skeptical. You know, CEOs and their bankers would try to talk them out of it more often than not.
Speaker 12:They would ask, why am I doing this new thing? I should just focus on running my business and get my bankers to, you know, me what to do for my IPO. There was not very much incentive to do things differently. So we really had to, like, claw and scratch and ask for favors to get retail allocations and IPOs back then. Then the IPO window shut for many years, but when it reopened, it's been a huge change.
Speaker 12:Now basically every single company comes and asks us about their retail strategy because they've seen what happens in the public markets to companies that engage retail effectively. And so allocations have been generally going up. Retail's more engaged. CEOs are talking about how, you know, they're giving bigger and bigger allocations. You guys probably saw bullish, which was after Figma.
Speaker 12:You know, bullish CEO came out and gave retail a huge allocation, 20% of his deal. 10% of that went to Robinhood.
Speaker 2:Wow.
Speaker 12:And that used to be considered a crazy number. I mean, when we gave retail allocation of 25% in our IPO, people kind of understood because it's your Robinhood. But the idea of any company doing that seemed outlandish. So I we're we're doubling down on that. I think it's clear to companies what we bring to the table, which in many cases, the demand on the Robinhood platform for retail shareholders is larger than the total amount they're raising, which has been a huge a huge thing.
Speaker 12:We can give them all sorts of information about the demand curve and how much retail wants at any given price, which is very valuable. So we're building out that business. We're also going earlier stage. We wanna give retail access to companies before they go public. And in The US, we've got Robinhood Ventures, which is our big initiative towards that vision.
Speaker 1:Mhmm. What, yeah. How how much can you share on Robinhood Ventures specifically and and and, how that will enable more more retail access to privates?
Speaker 12:Well, I could tell you it's it's a closed end fund, and it's going to be a diversified vehicle for non accredited and it'll be like closed end funds traded on an exchange.
Speaker 2:Got it.
Speaker 12:So when we looked at what kind of vehicle retail would want to invest in, We knew that it had to be liquid. Most people don't like their money being tied up. We knew they wanted high quality names. And, you know, ideally, would want it to be individual names, but Yep. That's not easy to do for unaccredited and with liquidity.
Speaker 12:But I think we're moving in that direction. So we're in the quiet period. We're moving towards an IPO of this fund. And I think it's just a big step towards our vision of you know, being the go to place for investing, whether it be public company or or privates.
Speaker 1:Yeah. I've been I've been thinking a lot lately about the the challenge right now that the big labs are going through where there's relatively there's such a relatively small number of people, individuals, and funds that are, you know, even these cap tails cap tables have swollen, but they they don't have a lot of public support we've seen when they go through kind of rocky periods in the in in the same way that, you know, if Tesla, for example, has a bad quarter, there's an army of people that are saying, I don't you know, this is just a blip. We're riding. We're riding, etcetera.
Speaker 2:Everyone wants to know about prediction markets. How are you thinking about partnering, on other products? I mean, I remember when Robinhood launched Bitcoin, it was I I I don't believe it was in partnership with anyone under the hood, but actually, I don't remember. So how do you think about partnerships, prediction markets, call sheet, where everything is going there, and and how you how you got Yeah.
Speaker 1:And even even place. Even did you did you predict how quickly prediction markets would grow? I mean, in
Speaker 2:That's a great question.
Speaker 1:In a year, they've gone from being, like, something that were felt like it was just, like, something that online people talked about and believed in the potential in, but It
Speaker 2:was a presidential tracker. Exactly.
Speaker 1:That's what it was. Exactly. We went from a presidential tracker to mainstream in a year.
Speaker 2:So, yeah. Let's let's let's talk through this.
Speaker 12:Yeah. I mean, I think that initially, before the presidential election last year, prediction markets were part of our 2026 plan. And we were planning on offering futures out rights, like oil and gold and all the standard futures contracts, and we thought, well, prediction markets could be a way to make it a little bit more mainstream, but they haven't really worked in the past. But then there was something that happened that changed everything, and it was the Supreme Court decision allowing presidential prediction markets. And we jumped on that.
Speaker 12:As soon as that result came out, we were about a month before the presidential election, we, like, reorganized our road map. We launched the presidential election market Mhmm. In advance of futures outrights. And that did about half a billion contracts in one week, which is a big business, particularly week one in. And then that's followed with the Super Bowl, which we had to pull back, but then we relaunched sports with March Madness, and it's just been on a tear ever since.
Speaker 12:And I think the story is people thought of it as an election only thing, but prediction markets are much broader. We now have over a thousand contracts on the platform. And in in the same way that, you know, options trades and zero days allow traders to express a more granular viewpoint, Prediction markets do the same, but they have this other added benefit that they're a source of news and information.
Speaker 2:Mhmm.
Speaker 12:So even if you don't wanna trade, if you wanna know about what's happening or what's likely to happen with a sports event or a political event or an election, you're going to those prediction markets as a more accurate source of information, in many cases, accurate than polls.
Speaker 2:Yeah. How do you think about the the shape of the team at Robinhood that will work on prediction markets? Is it fundamentally a different legal structure or financial team? Like, do you have, like, a desk market making or different market making partners, or is it a different technology? Because I imagine on the all of the crypto stuff, you need developers who understand how to write smart contracts at a certain level.
Speaker 2:Are prediction markets any different from other products? Are they fundamentally different, or is it somewhat similar to what you've already been doing?
Speaker 12:It's pretty similar to what we're doing. I mean, they're CFTC regulated Yeah. Event contracts. And so it's under the same license that we use to offer futures.
Speaker 2:Mhmm.
Speaker 12:If you think about it, you've got market data coming in, and the trades go on an exchange. Right now, we partner with two, CalSheet and ForecastX. And market makers plug into those exchanges to provide liquidity. From a risk management perspective, in some ways, the contracts are even simpler instruments than options and futures. There's no leverage, for instance, that poses more complicated risk management challenges.
Speaker 2:Got it.
Speaker 12:How we are investing a lot. I mean, a product and design standpoint, I know there's a lot more that we can do. And if you're paying attention to the Robinhood product, it's changing on a weekly basis.
Speaker 2:Yeah. Yeah. That makes a lot of
Speaker 1:How do you how do you what's the framework for prioritizing new product lines? You've now gone from very rarely do companies create a $100,000,000 revenue business and create a second $100,000,000 revenue business. And even more rare is to go three, four, five, six, seven, eight, nine, ten, 11. So now you guys have built the muscle to take new products from zero to one. I'm sure that that but at the same time, story of Robinhood is like focus and delivering, you know, great customer client experiences.
Speaker 1:So I'm curious what the framework is. What what justifies net new investment when you're already at this massive scale and it's hard to when you have these products that have, you know, insane product market fit, you have this incoming wealth transfer that I'm sure a lot of that, you know, will flow to Robinhood and other other new players. But how what what what qualifies something as as worthy of, you know, real investment?
Speaker 12:Yeah. I mean, I think the North Star is really how do we become your financial super app? How can we get all of your finances, done on Robinhood and make it so that you don't have to leave? And the reason that's our goal, by the way, I think it's not obvious because a lot of companies have found great success just going super deep and finding a narrow niche. We don't aim to just be the best prediction markets platform.
Speaker 12:Right? We want to be the home for all of your money, your primary and secondary financial account. And the reason is we found that fundamentally, customers love the simplicity of having all of their money and all their financial accounts in one place. And and there's advantages to that too because if we can if we can handle all of your finances and offer you all of these products, then we can actually take a cut. We can take a hit on the economics for each one knowing that in aggregate the relationship and the average revenue per user is is still gonna be a big number.
Speaker 12:So we can operate each one of them at lower margins by virtue of offering more of these. And you ask our GMs, you ask Johan what the best Johan's our crypto leader. What's the best Robinhood feature? What's his favorite one? He'd point to the brokerage business because the main one of the main advantages of having your crypto on Robinhood is you can easily sell your crypto by an equity even over the weekend.
Speaker 12:And and we're we're the only platform that allows you to trade these things in one place. You get prediction markets, get crypto, options, futures, equities, all using uniform KYC, great funding rails that make it easy to move money in and out. We've got a great credit card, and banking's rolling out. And because we have all these other products and sources of revenue, we can be super competitive on our banking offering too. I mean, early reads from customers that are testing it out is that they love earning a competitive rate on checking, for example.
Speaker 12:You know, most banks don't give you anything on checking, and they make it hard for you. They say, okay. Well, you know, checking is just for moving money in and out. Savings is what you put where you put money if you want to earn interest. Of course, they don't pay much interest in savings either, but that's beside the point.
Speaker 12:The reason is, they have to earn money somewhere, and and checking is like the the the most simple straightforward way. So I I think it allows us to break that model a little bit more and offer more differentiated value across all products.
Speaker 1:Makes total sense. Recently, we've seen a number of both public and private companies doing layoffs and a lot of the messaging they they use around that is around how much efficiency they're getting out of AI. Our theory or my theory personally is that a lot of these management teams need a good answer for why they're doing a layoff and saying we're getting efficiency out of AI is one of those. How much do you think that that's that's real Or or do you think a lot of these companies are getting so much efficiency that that layoffs are justified purely on on the capabilities of AI today?
Speaker 12:Yeah. I I'm sure you guys have seen that chart on social media that it has, like, ChatGPT launched in September 2022, and then S and P goes up and job openings go down. Right?
Speaker 1:Yeah. Totally. And and I Yeah. ChatGPT is a great product, but it is not replay you know, we run a company that does research and creates content, which ChatGPT is great at. And we have not we have not been able to replace anybody.
Speaker 1:There's that we're still, like, hungry to to hire people. And so in our view, even though we're getting leverage out of it, I It's been
Speaker 2:an incredible tool.
Speaker 1:Like tools. It's an incredible tool, but it's not
Speaker 2:It hasn't been replacing it.
Speaker 1:Causing us to lay off and it's not causing us to hire any less.
Speaker 2:It's been SaaS. Yeah. Yeah.
Speaker 12:I mean, what I tell you is that chart is interesting. Right? Because Mhmm. The time that ChatGPT launched also coincides with the time in, like, startup history where companies were starting to get fit. Right?
Speaker 1:Yeah. So And interest and interest rates were going through the roof.
Speaker 12:Interest rates were going up, but you had Elon taking over Twitter, and then you started seeing lots and lots of companies doing layoffs. You know, Meta started doing them. Even Alphabet Google did one, which it it became it went from being this taboo topic where almost if you were doing it, it was a sign of your company failing into everyone's doing it. So it had, like, this mimetic quality to it. So I think there's an element of that.
Speaker 12:I don't think it's just AI, but I do think AI has significant impact. I mean, we really felt it ourselves. So so we focus on AI across the business, but with a particular emphasis on engineering and customer support. So we track, for example, on customer support, one of the top metrics is AI deflection rate. What percentage of tickets that would have come in anyway are now being handled by AI agents?
Speaker 12:And on the engineering side, we track what percentage of code is generated by AI and the average amount of code that that engineers contribute on a monthly basis. And what we've seen is the there's real progress. I mean, we had a a infrastructure issue that affected our AI chatbots a couple of weeks ago, and, you know, we saw an immediate influx. The phone started ringing like crazy, during that time period. Yeah.
Speaker 12:So it felt very theoretical at first, like maybe you're just seeing these numbers go up, but do you really know the impact? Yeah. That saying
Speaker 1:saying that we're getting value in engineering and customer experience is like the that's like pragmatic and and very real. That that to me is the places that companies are getting leverage at scale that's like undeniable. It's when people But
Speaker 9:there's also
Speaker 1:people do a layoff and they're laying off Yeah. You know, 10,000 people, like and they're not necessarily engineers or customer support, you know, reps, that's when I go, like, okay, what were they doing and how is AI kind of replacing their work? Or maybe they just weren't providing that much value and that's why the layoffs
Speaker 12:I I completely agree that it's a very effective smokescreen because it makes it makes you seem you you could argue that it makes the company seem better. Right? Though they're really front footed on AI. So anytime there's an opportunity like that, you should assume there's an incentive for companies to overembellish what's happening.
Speaker 2:Absolutely. At the end of every interview, we ask you about Harmonic. Now I'd love to know if there's any sort of change in your thinking. We were just talking to Brett Taylor, and he was saying that, his one of his predictions is that, we might have AI that can do advanced science and novel math, but still not really requires a whole bunch of harnessing to just, you know, answer a service ticket effectively. And, you know, his business will continue while AI is doing advanced math.
Speaker 2:He kind of laid out a bull case for both Harmonic and Sierra coexisting, which which, you know, in the in the singularity didn't really make sense for a while, but now I think people are wrapping their minds around it. Have there been any updates to your thinking about AGI superintelligence? Just how tractable attacking science with AI is. Are we on a decade long fight for this, or do we think we're gonna be making breakthroughs sooner? Just how's your how's your thinking about, mathematical AI?
Speaker 12:Yeah. I think that it's for sure happening. Mhmm. And I'm sure your guys' x feeds are a little bit different than mine. I follow all the math researchers.
Speaker 2:Sure.
Speaker 12:And what you've seen happening over the past couple of months in particular is mathematicians who are maybe professors at top universities. Mhmm. There's a UCLA professor, Ernest Raiu, for example, who published a thread. It was pretty it it went somewhat viral where he's like, hey. I used AI to actually, like, prove this new result, that that didn't exist before.
Speaker 12:And, you know, it was a little clunky. I had to go back and forth with the AI. Some of the ideas didn't make sense. But there was this one idea that it had that actually ended up being true. And then we followed up with our our harmonic API and formalized his result.
Speaker 9:Oh, So
Speaker 12:we formalized it so that the machine actually validated his correctness. Yeah. But you're starting to see this this happening. And I think at first, it's gonna be in these kind of like obscure small results, like a Erdos problem or a little challenge here and there. But you could see that just like the length of autonomous tasks increases over time
Speaker 2:Mhmm.
Speaker 12:The complexity of mathematical proofs is gonna increase over time as well. So we're on the path and a lot of people predicted it, but there was skepticism about can it do anything new? We're a 100% going to get novel mathematical results that are significant. Yeah. And and what Harmonic can do with our API is make it so that when you have a thousand plus pages of AI generated mathematical proofs, it doesn't take a team of, you know, 10 mathematicians four years to validate the result.
Speaker 12:Yeah. Verification's gonna be the bottleneck, and you're just gonna want the machine to to take care of that as well.
Speaker 2:You mentioned that the API future is. Yeah. You mentioned the API. Is there a world where, mathematicians need a, like, cursor for math? On top, is there an opportunity for you to do sort of a copilot or an application layer product on top of the API just to increase and, you know, get into the Centaur era of the mathematicians day to day.
Speaker 2:Like, what is what is enhancing their productivity look like if you're not just one shotting every math problem, but you're actually working collaboratively alongside a mathematician?
Speaker 12:Yeah. 100%. I mean, what we're building right now is very close to a Claude code for math. Yeah. And if if you think about a lot of mathematicians that are using Lean, which is the formal theorem prover, it's a
Speaker 2:Yeah.
Speaker 12:A programming language that is useful for math, they're not working on a chalkboard and chalk anymore. They're in Versus Code, which cursor is basically a a fork of Versus code. So mathematics and computer programming are converging, converging into one. And it's pretty amazing for me as a former mathematician because people thought that math was like nowhere close to being computerized in any real way. Like for a while, big challenge was how do I like type my math formulas so that I can actually, like, save them to a PDF?
Speaker 2:Sure.
Speaker 12:And we figured that out, but now real mathematics work is is being done on computer for, I think, the first time in history.
Speaker 1:Everything is computer.
Speaker 2:Everything is computer. Yeah. You know what? Not computer. Our last question, which is a very silly question, but everyone wants us to ask, what is the biggest fish you've ever caught?
Speaker 2:Have you been fishing? We wanna know if you've caught any fish. And if so, what's the biggest fish that you've caught?
Speaker 12:Oh, let's see. My brother-in-law and I love going fly fishing in Montana. We've we've done some fly fishing in on the Blackfoot River down there. And and I'd have to say, I'm not as good as him. I've I've caught I've caught trouts of all kinds.
Speaker 12:Great. Rainbow trout. Okay. Bull trout.
Speaker 2:Yeah. Not this big. Yeah. Trout.
Speaker 12:Maybe a little bit bigger.
Speaker 1:Okay. Okay. We're off
Speaker 13:the screen. We're off the screen.
Speaker 1:We're off the screen. That's
Speaker 2:good. Well,
Speaker 12:I had some difficulty curling the trout, so it must have been at least fifty, sixty pounds.
Speaker 1:Okay. Wow. There you big.
Speaker 2:There we go.
Speaker 1:Air horn.
Speaker 2:Well, thank you for for playing along with the silly fishing question. But we somehow got on fishing yesterday, and That's our new
Speaker 1:that we would ask all of
Speaker 2:our guests what the biggest fish they've ever caught was. But thank you so much for taking the time to come chat
Speaker 1:with the update. Always a great time.
Speaker 12:Always a pleasure, gentlemen. Fun hanging out with you.
Speaker 9:Have a
Speaker 2:great one.
Speaker 1:Have great
Speaker 2:rest of your day. Quickly, let me tell you about Linear. Linear is a purpose built tool for planning and building products, system for modern software development, streamline issues, projects, and product road maps.
Speaker 1:Up next, we have Yuri from Overwolf. Overwolf is the leading platform for in game creators with over 1,500 supported games, 178,000 creators, and a 113 monthly active users. Overwolf enables creators to build, distribute, and monetize in game apps, mods, and private game servers.
Speaker 2:Waiting room. Let's bring him in the TV at UltraDome. Welcome to the stream. How are you doing? What is your background?
Speaker 2:What what is this beautiful office you're in? I'm fascinated by this.
Speaker 3:No. It's supposed to something like halfway through COVID. Yeah. I just could not work anywhere from the house. So in our backyard, we built this, wooden shed.
Speaker 2:No way. This is it.
Speaker 3:This is, like, my small man cave.
Speaker 2:This is amazing. And you have, you you have power and air conditioning in there, I assume?
Speaker 3:Yeah. Yeah. I mean, you have to have air conditioning for sure. Okay. I air conditioning.
Speaker 2:I need this yesterday. I'm gonna email you right after the show and get you to tell me exactly what happened because I I truly am in the market. Anyway, we're not here to talk about cool backyard offices. We're here to talk about your business. Please That's right.
Speaker 2:Us a state of the union and and give us any updates on how you're explaining the business, where it fits into the video game economy, and then how the business has grown recently because it's absolutely it's an absolute monster.
Speaker 3:Sure. So we're the guild for premium creators. And the way we think about our business is our responsibility in the world is we build a new profession. We call this profession in game creators. In game creators are developers, software developers who are building apps or mods or private servers or websites
Speaker 2:Mhmm.
Speaker 3:Around existing games and making a living building those products. For game studios that wanna enhance their games with UGC but don't wanna go through the whole kind of length of building something like a Roblox or like a UEFN on Fortnite, we're an engine that allows them to do that. So, you know, if Unity is an engine Sorry.
Speaker 2:On Fortnite, UEFN?
Speaker 3:Sure. So Roblox, I'm assuming, you know, folks understand how Roblox works and the ecosystem and everything and maybe have heard Dave earlier today. Yeah. UEFN is, like, the creator program for Fortnite. So everyone knows Fortnite.
Speaker 3:Right?
Speaker 2:Yeah.
Speaker 3:But if you want to build your own Fortnite experience, you could go to UEFN. This is the engine, and you can build like your own Fortnite experience.
Speaker 2:Yep.
Speaker 3:Makes sense?
Speaker 2:Yeah. Makes a lot of sense.
Speaker 3:So what we do is we we do that kinda same thing but horizontally. So I'm assuming most people know about Unity or Mhmm. Unreal, the game engine. So if you wanna build a game cross platform, you could go use Unreal or Unity to build a game. You could use us as a platform to horizontally power these games with UGC.
Speaker 3:So this is what we're about.
Speaker 2:Where are the where are the walls of the garden? I feel like
Speaker 3:Walls of the garden.
Speaker 2:Every every big platform has somewhat of an incentive to throw up walls. And this this came up during, like, the the NFT boom where a lot of people were pitching like, oh, well, like, you'll be able to take your, you know, like, your custom skin in Roblox and bring it over to Fortnite. Right. And and whenever it was somebody pitching that, I was just like, no. They won't.
Speaker 2:That makes no sense.
Speaker 9:I agree with
Speaker 2:They have no incentives. And but but I feel like you're you've been able to, you know, build a business that is somewhat cross platform, but there's probably places where the big game, engine developers and the big platforms kinda don't want you playing. So how do you think about do you actually, like, call people up and just say, hey. Can we do this? Or do you understand the economics?
Speaker 2:Like, how do you think about where the, where the okay. Don't dip your toe in that particular walled garden because company x wants to own that experience from start to finish.
Speaker 3:Right. So the gist is we respect the rights of the IP owners, and we wanna make sure that we're communicating with game studios Yeah. That we're sharing with them what's done in their ecosystem. If they wanna go deep and they wanna partner and they wanna integrate our code within their game, they could do that. This would make modding available on Xbox and PlayStation, not just PC.
Speaker 2:Sure.
Speaker 3:But if they don't and they prefer to kind of keep an arm's length and just be aware of what's happening, that works for us as well. So I think the key is indeed respect the walled gardens. And what we're seeing, I think, with time is this evolution of, you know, a decade ago or fifteen years ago, it was like not too many studios were open to folks creating content around their games. And now it sort of gradually becomes the new standard. And you have massive IPs like Harry Potter who are all of sudden open to UGC with all its risks.
Speaker 3:Right? You would think one of the biggest IPs in the world. Probably pretty risky to allow creators to do whatever they want. But if you provide an environment that's safe, that does moderation, creation, make sure that the content is consistent with what the IP owner had in mind, you can have wonderful things happen. So so the the gist is we, you know, stick with the game developers, have conversations, and make sure that the community supports them with whatever goals they have and their perception of the world.
Speaker 2:How are you measuring impact of the business? Obviously, you run sort of a two sided economy. What what are the key metrics these days?
Speaker 3:So we have one North Star, which is greater payouts. Yeah. The the reason we chose that North Star is we're building new professions, so it kinda makes sense. We wanna make this whole thing sustainable. But because we're UGC and we're freemium, so it's all, like, free to play pretty much, if there's no money, there's no quality, there's no product market fit, there's no retention, there's there's really nothing.
Speaker 3:So our one core KPI is creative payouts. And, yeah, that that's the key one. Obviously, we look at a bunch of other things, but this is the main one.
Speaker 1:How how many people globally are make of have a full time job, you know, contributing to the to video game economy as in, like, independent developers or small teams that that do this full time?
Speaker 3:You mean in the UGC space or just in general? Do you wanna Yeah. Just count Roblox and UE fan or games Yeah.
Speaker 1:Yeah. I I guess I guess globally, and then if you can kind of separate it out between, you know, and all the different kind of categories that you just laid out.
Speaker 3:Alright. So let's let's do a bottoms up analysis Yeah. With the different categories. So, obviously, we have, studios and publishers. Let's put them in one category.
Speaker 3:Yep. And this includes, the Blizzards and EA, but also the smaller indie studios that would then go ahead and distribute their game on Steam or on one of the mobile platforms. So I'd say this is one category of folks making a living in the video games industry. I'd say the second category is calling UGC creators, and this includes Roblox developers, UEFN developers, UEFN, the Fortnite example that we've just, given, and also folks that are creating with us. I'd say this is the second category.
Speaker 3:People who are not necessarily building the fundamentals of the game, but they're enhancing an existing game or an existing ecosystem. Now, obviously, there are a lot of service providers, like, you know, studios that would do work for hire or would help with QA or would help with localization. So this would fall into the service providers category. And then I would go to infrastructure. So you have folks like, again, Unity or Unreal or an engine like, I don't know, SpeedTree that is doing planting and shadows and, like I I don't know.
Speaker 3:Like, a bunch of tooling in the ecosystem. And then you have the go to market. Right? We have influencers. You have a lot of folks just doing, say, Minecraft content on YouTube.
Speaker 3:And, you know, they make a living off of that. So I don't know off the top of my head what the number
Speaker 1:Yeah. Yeah.
Speaker 3:Of people who are doing that and make a living.
Speaker 1:I But it but it feels like the kind of best possible time if you if you love video games, you can just live any anywhere in the world. And probably if you try hard enough, you can make a living kind of contributing to these different ecosystems.
Speaker 3:Yeah. But I do wanna emphasize, it's you know, just like on YouTube, there's a small percentage of creators who are actually making a living building content.
Speaker 1:Yeah. Same
Speaker 3:dynamic. Same thing across the board. Yeah. Like, you know, it's very easy to enter, you know, like, a Roblox and start creating. But, you know, there's only a small percentage of folks that are actually successful and have recurring success and can make a living doing that, and we're seeing that too within our own ecosystem.
Speaker 2:How much have you actually paid out to creators?
Speaker 3:So today, it's, in the neighborhood of 800,000,000. With the last, twelve months 25, it's, 300,000,000.
Speaker 1:Wow. Wow. We they we got a gong to hit for you. That those are That's insane number. Fantastic.
Speaker 3:That's Yeah. Another thing I wanna emphasize is we started back in 2010, I'd appreciate an overnight success.
Speaker 8:Oh, yeah. Yes.
Speaker 1:That Remarked That's wild.
Speaker 2:Yeah. And a 150,000,000,
Speaker 1:rates How big is
Speaker 7:the team?
Speaker 3:It's, like, 240 now? 240. Yep.
Speaker 2:Wow. Well, congratulations. I mean, what what what a remarkable what a remarkable company. Very exciting.
Speaker 1:Yeah. What what what what is, what is you know, you've been at it now for, what, over fifteen years? Something like that? Yeah. Yeah.
Speaker 1:What what is is is, people ask us all the time, what's the future of TBPN? And we're like, more more of this. But I'm curious is what your answer is.
Speaker 3:You know, I I started this company when I graduated from computer science, and I started as a modder. Like, our strategy was not platform when we started. We were basically modders building both the engine and the content ourselves, and, we weren't successful. Like, mid twenty thirteen, we ran out of money, and we had to figure out what to do. And only at that point, we pivoted and we've committed to just building the engine and becoming a tools and services company versus building both the mods and the engine to build this.
Speaker 3:And I feel very fortunate, you know, waking up in the morning and knowing that there are people like Sandy in San Diego making a living building mods, and we're a big part of that and enabling that. I feel like that's a life worth living for. So what's next is just more of this. You know? Our our target is we wanna get to a billion dollar for creators a year.
Speaker 3:Yeah. But when we get to that, it's not like the KPI is gonna change. It's probably gonna be, alright. Let's do 1.5 or maybe two or, like, well, how else can we contribute to creators? The this is sort of what juices us up in the morning.
Speaker 3:This is what we intend to continue doing.
Speaker 2:That's awesome.
Speaker 1:Last question because we didn't follow it super closely. What's going on in in Counter Strike world, and, what what's kind of the takeaways there? I know they they made some changes to their in game economy, and a lot of people were pissed off, but I don't know a lot more than that.
Speaker 3:So you're right. There's a huge skin community around Cisco and Counter Strike. I guess the the the challenge is, and we're sometimes seeing this with studios, they make their own decisions based on what they think is right and based on what they think is right for the game. And once they make a change to the economy, obviously, a lot of people lose a ton of value from their skins, and there's as a result, they, you know, lose a lot of money. I'd say that in advance, Vault did not provide any guarantees that, you know, this is a thing that should happen.
Speaker 3:I don't know if they've intended for skin trading to kind of be as big as it was, and, you know, they end up making a decision to change. And, you know, sometimes as people creating in the ecosystem or working around the ecosystem, we're, like, at the mercy of the IP owners. And then the the IP owners have the right to do that. I don't know exactly what were the reasons behind the change, but those are some pretty smart people. I'm sure they have their good reasons.
Speaker 1:That makes sense.
Speaker 2:I'm checking the price of my m four a four skin on csgoskins.com. I think I'm down bad. I don't know.
Speaker 9:But I
Speaker 2:did buy it
Speaker 3:Down 70%.
Speaker 2:Over a decade ago. And it brought me a lot of joy when I played CS GO back in the day.
Speaker 3:Price list.
Speaker 2:And I haven't logged in in five years or so or ten years, so, I think that, I'm happy. I see it as a tip. When I bought it, I saw it as a tip. I was like, this game's free. I played it ton.
Speaker 2:I'm happy to throw some money in. I understand that people do take it way more seriously, and they even build whole businesses around it. And so, you know, there's a lot that goes on there. But, for me Yeah. I feel like even if it's worth zero, the memories will stay with me forever of of, of holding down dust too on the b on the b bomb site.
Speaker 2:It's good times. Anyway, you so much for coming. Congratulations
Speaker 1:on all the milestones. Come back on.
Speaker 7:You're hitting a billion. We'll talk to
Speaker 2:you soon. Have a good one.
Speaker 3:Sounds good. Alright.
Speaker 10:Cheers.
Speaker 2:In other news, numeralhasa.com. Now numeral.com sales tax on autopilot. Spend less than five minutes per month on sales tax compliance. We gotta hit the gong for newworld.com.
Speaker 1:That.com is too good. Also Too good.
Speaker 2:ESPN bet is shutting down. ESPN and Penn Entertainment's ten year $2,000,000,000 deal will end eight years early after the sports book saw lackluster demand. ESPN is now partnering with DraftKings. The interesting thing here is that everyone draws that Disney that Disney oh, Walt Disney drew on the napkin, all the different interplay between everything. They didn't include gambling on there because Disney was gonna get into ESPN Bet.
Speaker 2:That's what happened.
Speaker 1:They gotta have
Speaker 2:They did. Gambling. Update the Disney
Speaker 1:market map.
Speaker 2:Update the Disney ecosystem chart. Chart. And also go to fin.ai, the number one AI agent for customer service, number one in performance benchmark, number one in competitive Bake Offs, number one ranking on g two. Our next guest is already in the restream waiting room with Alex Israel from Metropolis with some very good news. Good to see you, Alex.
Speaker 2:How are you doing?
Speaker 1:See you again.
Speaker 8:Welcome to the show. Good, Jordy John. Good to see you guys.
Speaker 1:You so
Speaker 2:much for hopping on the stream. Give us the news. What's going on?
Speaker 8:Busy day here in New York. We just raised $1,600,000,000.
Speaker 1:Woah. That congratulations is on saying the biggest number.
Speaker 2:Said the biggest number. Congratulations. Not
Speaker 1:not easy, not easy to do, but, today, you got it done.
Speaker 2:Okay. But but it's 500,000,000 series d equity, 1,100,000,000.0 term loan. Lot of people are getting jitters. They're asking for backstops. Well, how do you manage a billion dollars in debt?
Speaker 2:Debt sounds scary. A lot of startups don't use debt. How why are you confident that debt makes sense in this in this world?
Speaker 8:You You know, I think for us, it's all about the success of the platform. We just scaled to such a significant rate. We're doing now over $5,000,000,000 of payments. We have over 20,000,000 members on our platform.
Speaker 2:Mhmm.
Speaker 8:It's given our scale, given our free cash flow profile, we're confident we can service the debt, and we're confident that we continue to scale into new verticals.
Speaker 2:Do you think about matching the capital structure to the shape of the business? Is it important to have, debt backed by physical assets or something? How do you think about the financial engineering that you're doing?
Speaker 8:Yeah. It's a good question. You know, for us, it's all about the lowest cost of capital, the lowest dilution with the right partners that can facilitate the strongest level of long term sustained growth. Mhmm. For us, it's all about growth.
Speaker 2:Yeah. And what and what are the growth levers right now? Because, some some people, when they wanna grow, they go film a vibe reel. I imagine you're not, filming $1,600,000,000 worth of vibe reels and trying to go viral every day. This isn't the It's all about vibe coding.
Speaker 8:All we're doing is vibe
Speaker 2:coding vibe reels. But but I I honestly would imagine that, $1,100,000,000 of debt, that's not even going towards r and d because that's something that if there's risky r and d, you'd wanna be funding that with equity. Walk through some of the growth levers that you're pulling over the next couple of years.
Speaker 8:So I think, Jordy and John, one of the last times we connected, we were pioneering the growth buyout, this idea that we Yeah. Take a legacy old world business, and we could acquire it directly by a traditional technology company.
Speaker 2:Yeah.
Speaker 8:Right now, we're pioneering something brand new, which we're qualifying as the recognition economy. Yep. This idea that we can leverage AI and computer vision in the real world Yep. To drive seamless payment and commerce experiences everywhere. Yep.
Speaker 8:And we've proven that with parking. Now we're scaling it to gas stations, car wash, quick serve retail. Soon, you'll see our technology moving with you from a biometrics perspective into hotels, and into other environments where you can facilitate seamless access and payments.
Speaker 2:So you're when you go and buy a company, obviously, there's an established business, so that's accelerated. Then you're trying to use AI to accelerate growth and cut costs. How do you think about what you actually do as you build the portfolio?
Speaker 8:So we don't really look at it from a cost cutting perspective or a cost synergy perspective. It's all about revenue synergies. It's all gross. It's all about how do we drive gross profit, and it's all about how we work with our partners to drive revenue to their businesses.
Speaker 2:Mhmm.
Speaker 8:So it's all about revenue synergy. Everything for us is about sustained revenue growth. I think too many companies think about cost synergies. Too many private equity firms think about cost synergies Yeah. And short term gains.
Speaker 8:For us, it's all about long term gains driven through revenue.
Speaker 2:Do you think too many private equity firms think like that? I feel like there's a rule there's a world for both. Like, I've studied like, we've talked about private equity, like, titans. People have been in the business for decades where their whole model is, you know, they take a big company private, change the business model, grow it a ton, IPO it again. Then there's sort of the bottom feeders that are picking up scraps and cutting costs even more.
Speaker 2:And I don't necessarily know that every company is built to grow forever. I I actually am somewhat receptive to the idea that some companies, like, they've just done their job, and they just kind of need to, like, go out to pasture and retire, and the company's retiring. And so I think that they that that type of private equity guy gets a bad rap. But, again, I'll defend every private equity guy because I have private equity. So, yeah, he came on the record.
Speaker 8:I I love private equity as well, but I think the capital markets has a natural inclination to operate within boxes. Sure. And once you go outside that box, once you create a model where you're actually taking a technology business and acquiring old world businesses, that doesn't fit in a traditional box. And you have to take creative investors. You have to take best in class investors like Todd Boehly, Tony Manila.
Speaker 8:You have to work with players like Aria Berkoff that can think outside of the box and think how they can mitigate or create what I'd say is an asymmetric return profile. So all the downside risk mitigation of a traditional private equity play with all the upside potential of a traditional venture capital play.
Speaker 1:I I have to double click on on you you talked about biometric payments in retail, quick service, hotels, I think you said. Fueling. Fueling. What does that actually look like, in practice today? What are what are some of
Speaker 2:these Biometric payment is when you're you're checking out and they take a pint of your blood, and they run it through a centrifuge
Speaker 1:A little more than a pint.
Speaker 8:Look. Think about how much of our lives we spend wasting time
Speaker 2:Yeah.
Speaker 8:Checking out at a grocery store. Think about every time you go to a meeting in New York who waiting to get in to a class a office building, showing your ID to a stranger, giving all your privacy information over. That actually ID has your address on. Think about a future where you just belong, where you can seamlessly walk into any class a office building. Think about a future where you go into your coffee shop, and they just know what you want because you always order the same cup of coffee.
Speaker 8:Mhmm. So how can you leverage computer vision to create a new paradigm in privacy and reduction of fraud through leveraging biometrics? And that's exactly what we're doing.
Speaker 2:Yeah. Feel like this kind of already are you here you see glimpses of this in China, in Japan, in
Speaker 1:different Amazon's Yeah. Experimented with it. All different stuff. What do you think the the key to success will be in in terms of, like, you know, the we have we have the technology now.
Speaker 2:Yeah. My question here is, like, do we need the technology, the models to get better? Is it an implementation problem, or is it you need to buy a series of services and just implement them effectively?
Speaker 8:I think more than anything, you need to build trust and a dynamic with a consumer base. So right now, we're crossing 20,000,000 members on our platform that are leveraging our technology every single day to facilitate seamless access and payment at over 4,200 locations across The United States. It's that trust. It's that empowerment. It's that seamless access that people want to come back to time and time again so they're no longer wasting time.
Speaker 8:And if you have that network and if you have that flywheel, I think that's the the core ingredient Yeah. In order to scale into new verticals.
Speaker 2:Are you on a collision course with Clear at all? The the the biometrics? I don't know. There's something there the chat was asking.
Speaker 8:No. It's a it's a it's a good question. I'll tell you, I think Clear has done a remarkable job in a very specific use case. Yeah. And I think Karen and their team have built a a remarkable product.
Speaker 2:Sure.
Speaker 8:And I think that we're very focused on mobility right now as it pertains to gas stations, car wash, quick serve retail, parking. Anytime a transaction is facilitated in a vehicle, and then we're moving past the vehicle. But I think what that team done has done is really unique as tied to identity, and we're scaling into additional and differentiated verticals.
Speaker 2:Yeah. Differentiated verticals.
Speaker 3:Yeah. Very Different problem.
Speaker 1:Yeah. Very cool to think about a world where you can drive through, you know, drive through a a restaurant or just
Speaker 2:I like Ryan here in the chat who says, I will make it impossible for AI to ever guess my coffee order. He's gonna keep the clankers guessing
Speaker 1:different order every single drive drive through a drive through just be like, this is what I want. And then you just drive forward and they hand it to you and you never have to do the whole like, you know, mobile payment. You're reaching out of your car or whatever. So
Speaker 8:Imagine a world if it just, you know, could be precognitive, knew what you wanted before you ordered it. Yeah. It's pretty fast.
Speaker 1:Yeah. It will work for everyone except for Ryan in the chat. Thank you Thank you so much for joining Massive Milestone four.
Speaker 2:To you,
Speaker 1:you now. Congratulations.
Speaker 2:See you
Speaker 8:guys in LA. Talk soon.
Speaker 2:See you. Talk soon.
Speaker 1:Bye. Cheers.
Speaker 2:Let me tell you about adio.com customer relationship magic. Adio is the AI native CRM that builds, scales, and grows your company to the next level. You can get started for free. Also, Semi Analysis has launched ClusterMax two point o, industry standard GPU cloud rating system, and the number of AI clouds has exploded. We are seeing a fast takeoff in data center construction and neo cloud development very clearly.
Speaker 2:Fascinating newsletter. 200 page document breaking down how all the different clouds fit together. They tested 209 providers. They rated 84 of those providers. They have a 140 customers that they surveyed, and the article is 40,000 words.
Speaker 2:I would encourage you to go read it, sign up for semi analysis, or tune in to TBPN on Monday because we will be interviewing the semi analysis analyst who wrote the piece. Until then, we'll bring in our next guest, Paul, from FOMO, Benchmark's latest investment. What's happening? How are doing, Paul? Good to meet you.
Speaker 1:Welcome to
Speaker 11:the show.
Speaker 13:Going on. Great to meet you guys.
Speaker 2:Welcome to the show.
Speaker 1:Hey, K.
Speaker 2:Introduce the company. Give us the elevator pitch that you gave to Benchmark in their elevator.
Speaker 13:Yeah. It's a it's a great question. I think there's a misconception about FOMO that it's a crypto trading app. And right now, all of the assets currently available are digital assets and a lot of these attention based assets. But the goal in the long run is to be the largest financial platform ever built natively on crypto rails.
Speaker 13:And I think that there's a rare opportunity here. The only other time I could think is the early Internet where a hundred years of infrastructure was created, amazing infrastructure. Everyone's trying to build on new infrastructure, but it's time for real users. And I think FOMO is building the bridge to allow for accessibility to these new markets. And so on FOMO, you could download the app.
Speaker 13:You could onboard with Apple ID in seconds. You could buy digital assets with Apple Pay. And core to the feature of FOMO is the social features. So and these are uniquely enabled by on chain. So on FOMO, you can basically have full visibility into pay people's balances and discover new assets in real time.
Speaker 2:It's very interesting that the last deal that Benchmark did was Chainalysis because, both of these like, you don't have your own token yet. Is that correct?
Speaker 13:Yeah. That's correct. And there's there's no plans for a token.
Speaker 2:There's no plans for a token. So this is something where it feels like if I'm reading between the tea leaves, like, Benchmark doesn't want necessarily the underlying exposure to a fluctuating asset. They want a business that's but they're they're interested in businesses that are built on top of crypto rails, and that's where you come in. Correct?
Speaker 13:Yeah. I think Benchmark is just incredible builders of consumer products. And I don't think we're really thinking about the exit right now. We're trying to build generational company Yeah. To compete with the behemoths of the industry.
Speaker 13:I think that ten years ago, it made sense to have a centralized exchange where you have to KYC to onboard, where you have to do all these checks, where it takes three days to deposit from a bank account. Right? But you also only have access to about 50 to 70 to 90 digital assets on most of these exchanges. On FOMO, when you download the app, you have access to millions of assets instantly. And I think this is where the future is headed.
Speaker 13:And what's beautiful is if you guys went on the app, I can go to Jordi John's profile, and I could see every trade you ever made on any asset. So right now, it's mostly digital assets, but eventually, you'll have equities. You'll have repoed assets. You'll have prediction markets, bonds. You'll have FOMO savings accounts where users can earn on chain yield, which is super hard to access, and everything else.
Speaker 1:What's what's the pathway to equities as an example? Like, you know, this is something a lot of people are excited about, but I'm curious, like, what what the practical path is to on chain equities. Some some of, they sort of exist in various ways already. Is that is that correct? But, what I guess I guess, doing it in a way that is, you know, compliant in a in a in a regulatory environment that's kind of constantly evolving?
Speaker 13:Yeah. I think it's inevitable that everything gets commoditized into digital assets. Right? It's just the most efficient architecture for value transfer that's ever been created. So given that, given the ability to permissionally access, the ability to hold stuff in self custody, a lot of institutional players are starting to create equities on chain.
Speaker 13:But I think with the market structure build and other things in congress and over time, you'll see more clarity on native digital asset equity issuances. Right? But in the interim, it is wrapping a lot of these traditional equities on chain, movers like Robinhood, Kraken, and a lot of these big players are putting equities on chain. And the goal is to access all of those permissionlessly in decentralized noncustodial wallets. The problem is, historically, that's impossible.
Speaker 13:Right? It's really hard to do these things. If you want to onboard to any of these AMMs or these on chain protocols, you need to onboard to a centralized exchange. It takes three days to get funds there. Then you need to download a decentralized wallet.
Speaker 13:Then you need to create and save your seed phrase. Then you then you connect to the exchange, and there's tons of fraud. There's not great fraud warnings, and users are just getting rugged. Then you go to a block explorer, and the user experience is terrible. So we're trying to take that whole experience and, make it super simple and then have this social layer where people can discover new assets really easily.
Speaker 1:How are you thinking about building the the team? Feel like there's a lot of pressure in crypto. Obviously, Jeff at Hyperliquid has kinda set the bar on, scale, scale to, team size. But how how are you guys thinking about it?
Speaker 13:Yeah. So our team is about 10 right now, and this is by far our competitive advantage. Our team is incredible. All ex builders of protocols like DYDX, Uniswap, OpenSea that paved the way for consumer crypto. And it's the missing piece of the puzzle here is most teams have been either really good at building trading infrastructure, which is a really hard problem.
Speaker 13:Right? You need to have a router aggregator, potentially build your own routing. There's tons of MEV, which is people taking spread on user when they are trying to execute on chain. But then you also need people who can build an amazing user experience. Right?
Speaker 13:And those two pieces matched is what's been missing so far. So I really believe this is the first accessible platform for digital assets on chain that has ever existed that's really accessible to the mass market. We launched six months ago. We've already onboarded a 120,000 users. We have added many of those users to our platform recently.
Speaker 13:We're doing 20 to $40,000,000 in volume a day. Wow. And currently, Solana on chain volume thanks. And currently, Solana on on chain volume is a $320,000,000,000 market, meaning we're doing point 1% of that quarterly volume, and that's just Solana. Yeah.
Speaker 13:So our goal is to add all of the chains and dominate the whole on chain spot trading market in the next six months.
Speaker 3:That's fantastic. Ambitious.
Speaker 1:Love it. Let's give it up for the sun let's give it up for the sunset in the back too. That thing is just absolutely
Speaker 2:How much did you raise?
Speaker 13:We raised $17,000,000.
Speaker 1:There we go.
Speaker 13:I was gonna say, Vlad had a nice camera, but I got the nice sunset.
Speaker 1:So I mean, that's that's insane. That's insane. You're you're in New York?
Speaker 13:Yeah. In Soho, New York.
Speaker 2:That is that a real sunset or, like, virtual background?
Speaker 13:That's a real sunset. It's actually really incredible right
Speaker 1:It's just it's just Real deal.
Speaker 2:Well, thank you so much for coming on the show.
Speaker 1:Yeah. Congratulations. On the round, and, I'm sure we'll have you back on soon.
Speaker 2:Have a good one.
Speaker 13:Awesome. Thanks,
Speaker 2:Bye. How'd you sleep last night, Jordy? Back in your Eight Sleep. You can go to 8sleep.com. Get pod five.
Speaker 1:Code, t p m. I put up. I've just settled into the $80.80 low eighties.
Speaker 2:Low eighties? Because I was in the high eighties. I got an 87 play
Speaker 1:How many hours? Music for me. Six hours, forty four minutes. I got seven I got seven hours eleven minutes.
Speaker 2:From Beacon. He's in the Restream waiting room.
Speaker 1:I'm excited for this one.
Speaker 2:Neelam, he's the ex president of Instacart. Welcome to the stream. How are you doing?
Speaker 1:What's happening? Welcome to
Speaker 2:the show. Thanks so much for taking the time to talk to us.
Speaker 10:So excited to be here. Big fan. Excited to chat with you guys.
Speaker 2:Thanks so much. Great to
Speaker 1:have you.
Speaker 2:Get us up to speed. Give us some talk to speed. Yourself and the company, please.
Speaker 10:Yeah. We we, my cofounder, Divya, and I started the company a year and a half ago. What we are is a AI first holding company. We acquire, operate, and then we grow niche vertical market software businesses that serve under under looked at markets. We call them main street businesses.
Speaker 10:Mhmm. So think about campground operations, k to 12 private schools Mhmm. Construction companies, things that usually don't have large IT departments. They're not the first place big tech goes to bring technology and innovation to. Divya was leaving Sequoia.
Speaker 10:I was leaving d one. We both were thinking about ways that AI was gonna transform Main and that's what got us together. And we felt like access to the best technologies usually doesn't diffuse evenly. And we thought the easiest way to get the best technology in the hands of end customers on Main Street is by partnering with entrepreneurs that already run these businesses, already have these relationships, and then turbocharge them with our team, tech, process, and, you know, having been there and done that and scaling businesses in the past. So that's a bit about what we're about.
Speaker 3:Yeah.
Speaker 1:Very cool. Where can companies that you're that you've acquired to date or plan to acquire get the most leverage out of AI so far? We we had Vlad on from from Robinhood earlier. He was talking about getting leverage at the CX, in CX.
Speaker 2:He was also talking about fly fishing.
Speaker 1:Well, yeah. Me too. But getting leverage in CX, getting leverage in engineering, what what are the other kind of buckets that you think, AI efficiency is is real today? Because Mhmm. We've been having this debate, you know, ChatGPT is an amazing product.
Speaker 1:But at least in our day today and I think many of our of our peers, it's not exactly, like, replacing a full time hire at this point.
Speaker 10:Yeah. Yeah. I I think Vlad definitely can use some of our products to find a spot to to fly fish. We own three businesses in campgrounds, but
Speaker 2:but other yeah. Than that
Speaker 10:Yeah. Truly.
Speaker 3:That's cool.
Speaker 1:Okay. So so so yeah. Like, per perfect example because I'm I I feel like some of these categories just looking at the business and saying, how do we build soft you know, software, not even AI to make them more efficient? There's already efficiency that you could create. But but, yeah, where where's where where are really getting an edge?
Speaker 10:I'll give you that one. So this let me give you the campground example since we're talking about it. We partnered with an entrepreneur who was building a business out in Saskatoon in Canada Mhmm. That that served, private campgrounds. There's 18,000 of them across North America.
Speaker 2:Mhmm.
Speaker 10:He built great software campgrounds to take reservations and, you know, manage bookings, manage space allocation, all of that stuff. We bought the business. We Mike runs it for us. We tend to work with our entrepreneurs, they continue to stay with the business after we we acquire it. And the first thing we worked on with him was how can we apply AI to help him find new campgrounds?
Speaker 10:And this sounds like a very basic problem, but most of the businesses we buy do no outbound at the point that we buy them. So they all of their sales happen through word-of-mouth and referrals. They don't they tend not to have, you know, what we know in Silicon Valley, the the formal go to market motions. So we built some in house tech to be able to first find, Mike, a list of 18,000 campgrounds, then score them, do some lead lead scoring, some multimodal communication, like when do you text them, when do you call them, when do you email them, when do you LinkedIn them. Many of them are not on LinkedIn.
Speaker 10:And within the first year of running that business, it's gonna grow more than 80%. So that's that's an example of of AI on the go to market side. The second thing we did with Mike is we we were doing product road map review, and one of the features he had built was a lot of his campgrounds actually had boat slips and marinas attached to them. So he built a a feature so that you could actually, you know, kind of reserve a spot in a marina within a campground operation. Mhmm.
Speaker 10:And I knew nothing about the space, but we started, helping Mike. We put someone on the project with him to scope out and do calls with marina operators. So we found him a bunch of marina operators, figured out their tech needs, and then we gave him, all of our companies get Cognition instances, so we gave him and his development team, Cognition. Our forward deploy engineers worked with him, and then we launched a brand new product, called let'sboat.com. So, like, a brand new product.
Speaker 10:We built the UI, Cognition, and our developers built the product, and now we're live with that, which is a, you know, kind of a net new company within within our campground operations. And we know, you when I was building Instacart, that whole process probably would have taken us a year. We did it in, like, a month and a half. And I I think, you know, AI for code development is just table stakes now, so I don't think it's a competitive advantage. But the matching, like, customer needs, customers who are in Main Street that no one's talking to with tech, that's where I think Beacon's magic comes in.
Speaker 1:Yeah. It's interesting that at least the edge today seems to be there's a bunch of businesses that you can now build software for that previously would have not been able to justify engineering hours that suddenly can. I mean, we we experienced this. Tyler and our team builds a bunch of internal software that we use to run, the show more efficiently. And, you know, this was, I don't know, ten years ago, we probably wouldn't have, wouldn't have been able to justify it, but he can just be so productive because of that.
Speaker 1:What about some of the other categories? I'm curious with, we've talked about, Alpha School on the education side using AI in the curriculum. Yeah. What what are the ways in which you can get, efficiency Yeah. In in education at kind of like a business level, or are you thinking more at the actual curriculum level?
Speaker 10:It's probably more today at the business level. So we partnered we have we have a number of, software companies in the education space. I'll I'll bring up one because I was talking to their customers earlier today. We work with a company called College Kickstart. It's based in California, and their customers are k to 12 private schools, specifically the college counselors in k to 12 private schools.
Speaker 10:And they vacuum up a bunch of data and signals publicly available to be able to help college counselors in private schools work with parents, high anxiety parents and students, through the matching process of, hey, where should my kid apply? Where should they apply early decision? How should they help present themselves to the, you know, kind of target schools, etcetera? And really at the heart of it, that's a data problem and it's a computation problem. So we partnered with College Kickstarter.
Speaker 10:It's one of our newest businesses. It's a it's a situation where the general manager was retiring, so he's he's gonna be transitioning out over the period of this year. We brought in a great general manager from Whatnot and Uber, and Cool.
Speaker 3:His name
Speaker 10:is Tom. He was previously at Teach For America. Tom's gonna work with the the old founder and and the the CEO to be able to build net new algorithms to help college counselors make better decisions for their students. And that's like a I I have a twelve year old daughter. The anxiety that goes around, you know, where your kid's gonna end up in in college is like a really big deal even for a Right?
Speaker 10:12 Yeah. Something like that, I think, yeah, can add a ton of value.
Speaker 1:That makes sense. How how much is traditional private equity pitching AI to their LPs to your knowledge? Because I imagine, you know
Speaker 10:I I think a ton. Yeah. Honestly, I think a ton. And, look, I I think we Divya and I very purposely designed Beacon as a holding company. So we buy our businesses not to sell them.
Speaker 10:We wanna hold them forever, and there's there's a couple of reasons for that. First, there's, like, a financial benefit to duration and reinvesting the cash flows that come from these businesses, either within those businesses or in other businesses that we own. But the real benefit is, as we thought about the AI transformation, I don't think anyone really knows how long all this stuff's gonna take. People have great ideas. I was listening.
Speaker 10:You had Brett on earlier. He has great ideas. There's tons of really smart people with great ideas. But my best guess is no one can handicap how long it's gonna take for the, like, full transformation to happen. So we wanna have patience and we wanna have duration to be able to keep improving our products and keep building net new stuff for our customers.
Speaker 10:I don't wanna be held to having to sell these companies in three years or five years or seven years if that's, like, the moment that the magic's really gonna start to kick in. Private equity can't make that promise to to founders, so what they end up doing is, you know, and not that there's anything wrong with this. Their model tends to be buy a business already with a plan of how to exit it, with the underwrite that's based on a bunch of cost takeout, which they do in the first eighteen months, then they start dressing it up for sale in the second eighty eighteen months.
Speaker 2:Mhmm.
Speaker 10:And increasingly, smart founders, the ones we work with, they just that's just not the model for them.
Speaker 1:Yeah. That's a that's a huge advantage for you guys. Well, super exciting massive milestone, and you're officially our our AI roll up correspondent. Mhmm. So expect expect to call as as more of this stuff is, is in the news.
Speaker 2:Yeah. Yeah. What an amazing story. Thanks so much for coming on and breaking down.
Speaker 10:Thank you, guys. Take care. Great
Speaker 2:to meet. We'll talk to
Speaker 1:you soon. Cheers.
Speaker 2:Let me tell you about adquick.com. 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. Elon Musk's pay package has been approved.
Speaker 2:Tesla shareholders approve Elon Musk's $1,000,000,000,000 pay package for reference. It it received 75% of the vote. The $1,000,000,000,000 stock award is tied to business goals. It nets Musk 878,000,000,000, I guess. Board chair warned Musk could leave if pay was rejected.
Speaker 2:Many unions and some investors called the payout excessive. I'm sure there will be pushback on this, but if he does it
Speaker 1:Milestone base.
Speaker 2:He hits the milestones, you kinda gotta give him some credit. And what better way to give him credit than with $1,000,000,000,000. He's at half a trillion right now. He has 500,000,000 500,000,000,000 to his name. This would more than double it, but he's he's within spitting distance even without this.
Speaker 1:Yeah. This also this also has this also allows him to have, I think, 20% of the voting power at 25% of the voting power at Tesla, which is something he's talked about publicly around, you know, building this robot army and, wanting to make sure that that he can't be, you know, terminated for political reasons, or or other reasons, if he's gonna go and Yeah.
Speaker 2:Look at
Speaker 1:this scale.
Speaker 2:Look at the way this, this package rolls out. So the the operational milestones are more interesting than the market value milestones in my opinion. You know, the we all know the goal is to get to 10,000,000,000,000 in market cap, which is unprecedented. But at the same time, you know, NVIDIA's halfway there already. So if you can just build a company that's two NVIDIAs, you're good to go.
Speaker 2:But the operational milestones are interesting because they tell more of a story in my opinion. The first is 20,000,000 vehicles delivered, then 10,000,000 no. The the the website just updated. Here we go. 10,000,000 active full self driving subscriptions, then 1,000,000 robot deliveries, 1,000,000 robotaxis in operation, and then you get to the EBITDA, and you want, at the end of this, 400,000,000,000 in adjusted EBITDA to really get up there in those tranches.
Speaker 2:So you can't just pump the stock. Now the stock is pumping. It's the at the highest level, of price to equity, since 2018. So, Tesla shares are at $447 each, which is 230 times earnings per share, and the analysts of the automaker reporting over the next twelve months. So, it is at a high price to earnings ratio.
Speaker 2:The S and P 500, for comparison, is trading at 23 times expected earnings. NVIDIA, at the center of the AI revolution, is valued at 20 at 32 times earnings, while Microsoft has a PE of 30, and Meta Platforms is lagging at just 21. Tesla, on the other hand, 10 times the private the the price to earnings ratio.
Speaker 1:Absolutely wild.
Speaker 2:Well, one reason why it might be so highly valued is because Tesla shareholders are optimistic about Optimus, the humanoid robot. Elon Musk called Optimus an infinite money loop. You love that.
Speaker 1:On the call just now?
Speaker 2:Oh, yeah. He said, he predicted other uses for the Optimus robot, but Musk declared Optimus is an infinite money loop. In the future, there may not be any money, he mused. Don't sell your shares, he added. I guess what I'm saying is hang on to your Tesla stock.
Speaker 2:I love it. Let's go.
Speaker 1:Not financial advice.
Speaker 2:We have to hit the gong for Elon Musk.
Speaker 5:Let's hit it. Let's hit it. 1,000,000,000, baby.
Speaker 10:Sorry to
Speaker 1:Alex from Metropolis. He thought he had the biggest number of today's show, but
Speaker 2:Elon came in from the top rope. Also, Elon, you got a trillion dollars. You got half a billion, half a trillion already. Head over to getbezel.com. Buy every single watch they have on sale.
Speaker 2:They have 25,000 luxury watches fully authenticated in house by bezel's team of experts. Elon, you could buy all 200 all 25,000 today.
Speaker 1:26,000.
Speaker 2:All 26,000 today. You could also, book every single Wander forever, Elon. So why don't you do that as well? Head over to wander.com. Find your happy place.
Speaker 2:Find all of the places and that will make you happy. Imagine just having a network of every wander permanently reserved for you wherever you go.
Speaker 1:Land. Land. Go long land for going long.
Speaker 2:Book a wander with inspiring reviews, hotel great amenities, dreamy beds, top tier cleaning, twenty four seven concierge.
Speaker 1:And It's vacation home, but better. On that note Yes. We gotta get on with London. We do. So thank you for tuning in
Speaker 9:Thank you.
Speaker 1:To the show today, And we will be back tomorrow. We have a number of very cool guests. We have Mikey from Suno is gonna be coming on. We've got Colin and Samir. Mhmm.
Speaker 1:We have Catherine Boyle
Speaker 2:Yes.
Speaker 1:From Andreessen joining as well. So I cannot wait. And we hope you have a wonderful evening. Goodbye. Cheers.
Speaker 1:Bye.