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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 TBPN. It is Wednesday, 04/16/2025. We are live from the Temple Of Technology, the Fortress Of Finance,
Speaker 2:the capital of capital.
Speaker 1:Jordan, you wanna talk about what you're wearing?
Speaker 2:Oh, I got a new jacket on.
Speaker 1:New jacket.
Speaker 2:Merch. These are the moments you never forget. Right? Yes. The first time you put on a jacket that you really love.
Speaker 2:I have, you know, I put this on this morning. This is a early edition of a jacket that will be being sent out to the TBPN network very shortly.
Speaker 1:Pretty fantastic. How it
Speaker 2:turned out. I posted a picture of it a while Can
Speaker 1:you stand
Speaker 2:up? Stand up a bit.
Speaker 1:Yeah. Okay. So we got some Boom. Bezel, public, Eight Sleep, Ad Quick Wander, ramp on the front, ramp on the back, ramp on the left, ramp on the right. It's ramp all that you can see.
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Speaker 2:Anyway, let's Fantastic. Move
Speaker 1:on to the big news in tech today is clearly NVIDIA with the h 20. It has been restricted in China. And there's a bit of a debate emerging between Strathecari and Semi Analysis. Ben Thompson and Dylan Patel are they have slightly different takes. I think they agree on a lot of what's going on in with this project and with the story as it's developing.
Speaker 1:So we'll take you through some of the the debate that's raging about how important
Speaker 2:chip
Speaker 1:bands are, what this means for NVIDIA, what this means for China. And then also, I wanted to do a little bit of a deep dive again on the history of semiconductors in China and how we got to this particular configuration where America is kind of dominant, China's kind of catching up, but, you know, China's been working on this for a long time. It's not like semiconductors are new and they never thought of them. Yeah. They've been working on this since the seventies and they've had a variety of government programs and private enterprises programs that have driven them to kind of where they are today.
Speaker 1:Yeah. So Huawei is busy. Yeah.
Speaker 2:The conversation with Aaron yesterday, which if you haven't listened to, go back and listen to Aaron Gin's segment. One of one of my favorite guest appearances
Speaker 1:Yeah. It was great.
Speaker 2:To date on the show. And he basically said, what we don't want is Huawei going around the world, giving people worse but cheaper chips and just sort of like flooding the market and becoming dependent on Chinese chips.
Speaker 1:Yep. And so we have some posts from timeline to kick it off. The Kobeissi letter, Kobeissi letter. I don't know how to pronounce that. Breaking NVIDIA says the US government ban has banned them from selling h 20 chips to China for the indefinite future.
Speaker 1:NVIDIA says this will come with a $5,500,000,000 charge to q one earnings, and the stock traded down 5% in this screenshot. You can certainly pull up NVIDIA's stock on public.com and tell us what it's doing today. But Luke Metro quote tweets it and says, probably the right decision, but Lowell at NVIDIA designing a chip to get around export control laws then being so successful that they changed the laws. And so this is the nature of these chip bands. They're always evolving, and so we'll take you through some of that.
Speaker 1:But I thought it would be interesting to start with, some some history. So, China's semiconductor ambitions really began in 1978. They started working on semiconductor r and d. This is, during the Deng Xiaoping leadership that we talked about yesterday. China launched economic reforms aimed at modernizing technology and industrial output, including early research into integrated circuits, which, of course, The US was doing.
Speaker 1:But during the Cold War, the US export controls severely limited high-tech transfers, and so Chinese labs, were working with outdated technology. There were small state backed institutes that emerged, and the first big one that everyone kinda focuses on is this eight six three program, which is interesting. It's named after when it was, launched, which was March of nineteen eighty six. And so in Chinese, it's '86 is the year and '3 is the month, so August. And this prioritized strategic areas like semiconductors, telecommunications, and biotech.
Speaker 1:And so the program set conditions whereby foreign firms entering China had to share technology, although core IP usually main garden. But this is like it goes back to the eighties, like, the the strategy of, like, oh, you're coming here? Like, let's let's share some IP.
Speaker 2:We share IP. What's what's the big game?
Speaker 1:Come on. Just open the kimono. Yeah. Right? Universe the design file.
Speaker 2:We won't we won't do
Speaker 1:anything
Speaker 2:with
Speaker 1:it. Yeah. You can trust us.
Speaker 2:Yeah. Yeah. Yeah. You can trust us.
Speaker 1:I just just let us hold it.
Speaker 2:You can trust us.
Speaker 1:Just let us
Speaker 3:hold it.
Speaker 2:But you can trust us with your IP.
Speaker 1:Yeah. Just let us hold it. Just me hold it.
Speaker 2:Let me hold it for
Speaker 1:a second. Just let me hold it for a second. Universities and research institutions expanded semiconductor curricula, training a generation of engineers who later contributed to domestic breakthroughs. And so the Chinese government in 1988 designated semiconductors a pillar industry. So this is not like some new, oh, China's waking up to AI, and now they're like, this has been going on for a very long time, and they initiated early state sponsored projects and forged a bunch of joint ventures with foreign partners.
Speaker 1:And so reflecting on a nascent domestic industry, state plans began to include establishing manufacturing hubs and incentivizing technology transfers, as we mentioned. So imported equipment helps set up primitive fabs operating at suboptimal process nodes, And this this technology gap wound up persisting for decades, and it exists today. The three nanometer node works in Taiwan. Doesn't really work anywhere else. Although, we're trying to
Speaker 2:make sure that saying is, like, the the gap is is real, but not as significant as, you know, TSMC or NVIDIA would like maybe the market to believe.
Speaker 1:Yep. Yep. And so after the eight six three project that started in March of nineteen eighty six, they launched the nine zero eight project, which starts in 1990. And this was their first major attempt at creating a world class semiconductor manufacturer through state led initiatives. And so they had the state owned factory in Wuxi, and they converted it into a competitive, integrated device manufacturer or what's called an IDM.
Speaker 1:And so there were some partnerships with, American companies like AT and T's Bell's Bell Labs, and this was supposed to speed up technology transfer despite significant limitations on core process knowledge. So they didn't they didn't have everything that they could do in internally, but they would, yeah, pay Bell Labs to bring over some of the tech. The project execution was hampered by bureaucratic delays because it's state owned and state state run enterprise, and there were slow there were slow adoption of the advanced methods. And so by the time production began, the fab was already obsolete, which is, like, an ongoing theme. Now it's a little bit less relevant because if you can't if you're trying to build a three nanometer node and you wind up with a seven nanometer node, like, can put those chips in cars.
Speaker 1:You can put those chips in
Speaker 2:Yeah.
Speaker 1:Like, yes, you're not gonna be on the bleeding edge of AI or phones, but you're gonna be
Speaker 2:There's a use for them.
Speaker 1:There's a use for them. You're put gonna put them in smart fridges and smart toasters and smart thermostats and all sorts of stuff. There's chips Smart
Speaker 2:home will be dumb as rocks.
Speaker 1:And so, then there's project nine zero nine, which was designed as a rapid push to build an eight inch wafer fab that could meet international standards, though later, they ran in some trouble here. This was, ordered by president Jiang Jimin. President, project nine zero nine set up a modern eight inch fab in Shanghai within two years, marking China's First serious stride in modern wafer production. This initially showed promise because they achieved this point five to point three five micron process in 1997, but soon encountered profitability issues exacerbated by the 2thousand's.com crash. And so this is the this is the nature of building a fab.
Speaker 1:If you're not on the leading edge, you don't get the crazy margins. And so you you have to invest a ton in CapEx and then recoup that over a number of years. And so if you're not on the leading edge and you can't have those high margins, then then
Speaker 2:Yeah. It's basically already out commodity or, you know, do you actually have IP?
Speaker 1:Exactly. And so in the late nineties, China focuses on the for the first time on chip design. This is what NVIDIA does, but also Google with the TPU and Meta. Meta has a a new chip as well, Amazon and pretty much everyone at this point. Apple Microsoft,
Speaker 2:but that's more quantum focused?
Speaker 1:Yeah. I I think Microsoft is probably developing, like, an AI accelerator chip just like everyone else, but we haven't heard that much about Yeah. All these companies are still huge buyers of NVIDIA, but the the chip design is obviously different than fab. And so this was the the the China's First step towards self reliance in semiconductor design. Previously, they'd been licensing designs and then say, hey.
Speaker 1:We'll just be doing the manufacturing, but having that integration, seemed critical at the time. So Huawei's HiSilicon was formed to supply ASICs for telecom while companies like Godson or Longson, emerged to design CPUs. And so, you know, if you have a telecom tower, it needs to do certain calculations. It's not entirely a general purpose CPU. It doesn't need to be able to do any program, but it needs to be able to do very specific things again and again and again, and that's what an ASIC is great for.
Speaker 1:So it's essentially like an algorithm on a chip. It's how I think about ASICs. Like, Bitcoin is the classic one.
Speaker 2:Yeah. So they launched JVs at this time Yep. With with basically foreign firms. Yep. So alongside state projects, a growing number of private enterprises began designing chips tailored to for the domestic market.
Speaker 2:So remember this point, this is the nineties. We still have this feeling that that China wasn't necessarily gonna destined to be an adversary Yep. If we could turn them to the the fantastic incredible system of capitalism Democratic capitalism. We could, you know, get along and everybody would have a great time. And that that was like basically like top down sort of like admin view Yeah.
Speaker 2:At the time.
Speaker 1:And so this is all pre World Trade World Trade Organization, but they joined, of course, in the late nineties. And this spurred greater open openness and then a lot of multinational corporations. Transfer. We love to see those. But they were also built out of, like, these high-tech parks.
Speaker 1:So Shanghai has a high-tech park that has semiconductor related research and light manufacturing going on. And this is really the key to what makes China amazing at, like, the IPhone City. IPhone City is not just Foxconn. It's not just the final assembly. It's that All the glass manufacturers, the lens manufacturer, chip manufacturer, like Camera.
Speaker 1:The yeah. All these different pieces start forming. And China is learning that having a somewhat free market, somewhat decentralized process for building these industrial parks is actually the dominant Yep. Philosophy. And so they let different companies compete in these segments, but they wind up creating this this, like, rainforest of value creation.
Speaker 1:And so the company China's still facing challenges at this time. They never really mastered the high end process technologies, and most advanced production remains abroad. But in February, this is the founding of SMIC, the Semiconductor Manufacturing International Corporation. Great name. And and you've been hearing a lot about SMIC now.
Speaker 2:These names are coming back too. Right?
Speaker 1:Seen this.
Speaker 2:Yes. Advanced Manufacturing Company of Yeah. Saw Alan Controlling up kind of fits in this week.
Speaker 1:General Mac.
Speaker 2:Somebody was kind of ripping SF Compute Oh, doing the general intelligence. Of New York. Of New York.
Speaker 1:The browser company of New York.
Speaker 2:The browser company of York. Yeah. So this meta is dead now.
Speaker 1:Yeah. Go back to
Speaker 2:short.coms. But but it's
Speaker 1:Portmanteau's actually. I I wanna go back to Portmanteau's Bitly, these, like, cute little fielly Just add an s
Speaker 2:add an s
Speaker 1:s dot y. We gotta bring those back now.
Speaker 2:TBP Enley.
Speaker 1:Yeah. TBP Enley. So SMIC was set up as a pure play foundry, and it was modeled directly on Taiwan's TSMC. So they saw what what Morris Chang was doing in Taiwan with support of the government. Remember, the government came in back TSMC, and and China's just like, yeah.
Speaker 1:Let's just do that with SMIK. And they've been doing that for twenty five years now, and they're and they're, like, slowly going down the learning curve, increasing the process nodes. And so they progress from a 80 nanometer to 90 nanometer nodes within a few years. Remember, we're down at three nanometers now.
Speaker 2:Yeah. And the interesting thing, you have these, you know, basically, like, run corporations that have bureaucracy. They aren't hyper efficient, but they are strategically important enough to the country that they just get, you know Totally. They just, like, you know, become these sort of, like, snowballs Yep. Of capital and over time sort of brute force their way into some amount of relevancy.
Speaker 1:Yeah. So SMIC is moving down the the the process nodes. They go from a 80 to 90. Remember, now we're down at, three nanometers. And some of these some of these terms are more like marketing terms now, like four k TVs have different specs and whatnot.
Speaker 1:At a certain point, I believe the the width of a silicon atom is one nanometer. And so you can't go you can't pack them closer. You could never have, like, a zero nanometer chip because it wouldn't work. So that's where, like, quantum comes in. Never say never.
Speaker 1:Never say never. Yeah. I I don't know. I'm not a physicist. Like, it's totally possible.
Speaker 2:Ben's working on something there.
Speaker 1:Yeah.
Speaker 2:We'll see.
Speaker 1:Someone's cooking something up. Someone's gonna raise a mango seed for that idea. Yeah. One nanometer chips. Zero nanometer chips.
Speaker 2:We're only one mango seed away from it.
Speaker 1:Yes. Yes. Never lose faith. But but at this point, like, SMIC is starting to position itself as a found as a serious foundry, not at the leading edge, but at the trailing edge. And so, in the early two thousands, there's a boom in Chinese chip design firms, which lays this foundation for more domestic semiconductor innovations, and companies are embracing the fabless model like what happened in America with NVIDIA.
Speaker 1:So Spreadtrum and Godson started designing chips specifically for mobile and computing applications. And, and just in general, China is improving, domestic r and d, state sponsored initiatives, university programs, that type of stuff. And so Sure. Corporate espionage as well. And so in 02/2004, policymakers acknowledged that domestic production was meeting only a fraction, around 10% of China's enormous semiconductor demand.
Speaker 1:So they're making a lot of electronics. Obviously, they wanna be a major player there, but they keep having to buy 90% of the semiconductors abroad, and that is seen as as unacceptable. And so they wanna continue to compete in semiconductors. So China's domestic chip production capacity was far from adequate to service its $40,000,000,000 annual chip consumption. So by comparison, China's only producing $4,000,000,000 in annual chips, but they're consuming 40,000,000,000.
Speaker 2:And so Trade imbalance.
Speaker 1:Yeah. Yeah. Yeah. I mean, they did have a trade imbalance in chips, and they wanted to take that very seriously. And that's how kind of how we got here.
Speaker 1:And so they and so they they they did some policy reforms. They set up some frameworks for future government supported r and d. They're just continuing to invest government dollars in new semiconductor projects. And so from 02/2005 to 02/2007, you're seeing a maturation of the global supply chain, foreign investment, and technology transfers. Intel actually expands into China, and this is all accelerating, these modern semiconductor practice practices, and China is going down the learning curve.
Speaker 1:So Intel built key assembly and testing facilities, including a major plant in Chengdu, and later a 300 millimeter fab in Dala in Dalian announced in 02/2007, marking significantly significant technology transfers to Chinese engineers. The spread of multinational semiconductor companies operations in China bolstered low local expertise and catalyzed market growth. Although NVIDIA was founded in 1993 and additionally and initially focused on The US gaming market, by the mid two thousands, it began establishing r and d centers in Shanghai to support increasing demand in
Speaker 2:China. The start of a long, complicated relationship.
Speaker 1:Yeah. I mean, these are global companies, and they have employees in China. And Yeah. So turning off the faucet, it sounds really easy when it hits the front page of The Wall Street Journal, but it is much more complicated than that because these all these entities are super intertwined. So then, of course, the global financial crisis hits 02/2009.
Speaker 1:Chinese government is is dropping huge stimulus packages and funding more and more semiconductor expansion. They don't want their fabs to go out of business if there's a hiccup in demand for the final goods. And so they are just continuing to back these semiconductor projects because they know that it's critical to their industry. So effectively, like a bailout for the Chinese semiconductor industry during the global financial crisis.
Speaker 2:Honestly, amazing, you know, foresight all around.
Speaker 1:Yeah. Yeah. You shouldn't let that die. It's a very big mistake. And, I mean, people have argued that America has made mistakes during downturns, not supporting certain industries, letting them deindustrialize or move abroad.
Speaker 1:So in around 2014, the Chinese government established the National Integrated Circuit Industry Investment Fund, or as they call it, the big fund. $20,000,000,000 going into semiconductor sector, all about innovation that is led in China, indigenous innovation as they call it. The big fund provided capital for upgrading fabs, design houses, and even research into next generation semiconductors. And many of China's now leading semiconductor companies like SMIC and Huawei's HiSilicon received funding boost to accelerate their competitiveness. Around the same period, NVIDIA set up r and d centers in China and deepened partnerships with companies like buy Baidu and Alibaba.
Speaker 1:Twenty fifteen, we we talked about this with Xi Jinping. The Made in China Twenty Twenty Five plan was unveiled, and we didn't dig into the details of that. But within the Made in China Twenty Twenty Five plan, they they specifically called out semiconductors and said, we need self sufficiency in semiconductors. And this was also while The US started restricting chip imports, and this affected Intel and Qualcomm most directly. And so the the the specific line in made in China Twenty Twenty Five is that they wanted to hit 70% of domestic production of chips by 2025.
Speaker 1:And I'm not exactly sure where they are. Maybe we'll get to that later. But you you can see how serious they're taking this. At one point, they're at 10%, and they're like, okay. But we have a firm plan, and we're willing to invest government dollars to get to 70%.
Speaker 1:This is very important. And so how And
Speaker 2:it's it's an interesting dynamic. Right? Because you can imagine, you know, these are these are state mandates and their goals, but there's real people's livelihoods on the line to deliver those. Yep. So you can imagine the pressure to actually deliver against these timelines is intense.
Speaker 2:This is not like, you know, a US, you know, corporation saying, you know, we're hoping to reduce, you know, energy, you know, use more clean energy in 2035. It's like, we are gonna do this one way or another, and they would cycle through executives in order to achieve these goals. Yep.
Speaker 1:And so
Speaker 2:even though it's bureaucratic, there's still, I think, this intense pressure that in many ways is greater than the pressure that even in individual companies feel from their VCs. Right? If you have the party saying, like, this is strategically important to the country and you need to achieve this Yep. And this is the goal we're setting as a country, then you better figure out a way to do it. Right?
Speaker 2:Yep.
Speaker 1:Yeah. And so Huawei is really emerging as a champion around this time. They actually have an internal chip design arm, HiSilicon. You can think about this like the relationship between Apple and the Apple Silicon team. So we think of Huawei as making phones.
Speaker 1:They make a lot of stuff now, but they also design chips specifically. And, the Huawei AI chip is the one that's the focus of, Dylan Patel's analysis and semi analysis, yesterday or today. So this is also starting to become the beginning of what becomes chip bans, chip acts restrictions. The US Department of Commerce blocked transactions with entities such as ZTE, and this was the beginning of this confrontational fray phase in semiconductor export controls. And so in 2016, Chinese companies, they're boy they're they're getting a lot of state funding, and there's clearly a lot of strategic urgency.
Speaker 1:They're starting to attempt cross border mergers and acquisitions, and The US regulatory system is saying, hold on. Like, let's not do that. So so Senghua Unigroup acquired domestic players, Spreadtrum, RDA, Microelectronics, we talked about before, in a drive to build integrated chip manufacturing and design ecosystems. And this is all waking up The US to the the increasing need to restrict technology transfer and stop Chinese firms from buying.
Speaker 2:A little late, but A
Speaker 1:little late. But this is the well, who who is saying this? Like, you know, America's like the the sleepy student that wakes up and then just goes for it.
Speaker 2:Yeah. Yeah. You wait you you you wake you wake up and you're sitting on the couch. You put on, you know, 50 extra pounds and you're like, wow, gotta get in shape.
Speaker 1:Yep. Yeah. And then and
Speaker 2:then we do it.
Speaker 1:Yeah.
Speaker 2:Historically, we've done it.
Speaker 1:We've done it.
Speaker 2:And so that's what we've right woke on the couch.
Speaker 1:It's a little chaotic.
Speaker 2:We because
Speaker 1:you're sprinting into the
Speaker 4:battle. For,
Speaker 2:you know, a couple decades.
Speaker 1:Couple decades.
Speaker 2:And now we're gonna get in the gym.
Speaker 1:Yeah. Now we're going to the gym. The gym. So in 2017, China unveiled the new generation AI development plan, and the global revolution took off. US Policymakers intensified react restrictions that would limit access to advanced chip technologies.
Speaker 1:So, a lot of this was driven by Google's AlphaGo success when they beat Lee Sedol. Everyone in tech and venture was starting to see the power of artificial intelligence, and so AI investment was increasing dramatically. This wasn't I mean, obviously, OpenAI was working on, like, superintelligence and talking about AGI, but even x that, people were thinking about, well, AI is just an incredibly valuable technology even in the context of, like, four u feeds and and automated data analysis and just back office opt like, automation, all that stuff is like AI is going to be an increasingly important part of the economy aside from all the AGI, ASI conversation. So the US administration blocks several Chinese tech deals, including targeting companies on the entity list. And and this is kind of like the precursor to the controls on AI chips that we've seen more recently.
Speaker 2:And it's so wild to put this in the context of OpenAI actually starting in 2015 Mhmm. Being a hyped but still under the radar organization because it was it it wasn't in the headlines constantly. Right? Totally. It was really a research organization Yep.
Speaker 1:And that was the branding.
Speaker 2:Like, yeah. That was the branding. Really cool initial branding. But you can guarantee that China was paying attention to this. Right?
Speaker 2:It's like, okay, if if Elon and Sam Altman and all all these people are involved in this project, there must be something significant.
Speaker 1:I remember there's this photo that Elon shares of Jensen Huang delivering one of the first kind of AI specific NVIDIA servers to the OpenAI team in, like, 2017, something like that. And I remember seeing posts on then Twitter about from, like, Greg Brockman being like, oh, we just got the latest box from NVIDIA. Thank you so much to them. This thing costs like a couple hundred grand. But it was really important because it had enough I believe it had enough memory on the single server chip that you could put basically the entire text of Reddit in it in memory and then train on that.
Speaker 1:And that's where like the GPT one, GPT twos were They weren't even trained on like massive clusters. I'm pretty sure they were trained on boxes.
Speaker 2:2017, I'm assuming that Greg and Sam already had a sense that they would go need millions
Speaker 1:of these GPUs to achieve scale pilled at this and kind of discovering the scaling laws, but not maybe fully realizing them. But globally, I think people are just realizing that increasingly NVIDIA is going to run away with the game when it comes to AI development. You can look at that server, and there was never a question that a team like OpenAI would train on anything but NVIDIA. And then that just had this compounding advantage that when they wanna scale up and they wanna go from one rack one rack of chips to 10 racks to an entire data center, it's just gonna be NVIDIA all the way because they're writing code that runs on CUDA. CUDA is this, like, ecosystem that NVIDIA's built, and it's gonna be very hard for them to port to something else.
Speaker 1:Even if another company is better on, like, a flop per dollar ratio, NVIDIA is just kind of running away with it. And this is, this is something that it's a meme that goes global. So China's major cloud provider start ramping up orders for NVIDIA chips, all the way back in 2017. And so in 2018, this is kind of the beginning of that first trade war that we talked about, the one that's kind of like a nothing burger now, but was kind of dramatic at the time. And so there were tariffs and export controls that we talked about, but this severely impacted companies like ZTE and enforced NVIDIA to recalibrate its product strategy.
Speaker 1:In April of twenty eighteen, the US imposed tariffs on hundreds of billions of dollars worth of Chinese goods, and China retaliated with similar measures. The harsh punishment of ZTE forced companies to reexamine resilience on US components. And NVIDIA, the gaming and AI division saw robust demand, solidifying the company's importance in both sectors, but, obviously, there's mounting regulatory pressure. And so
Speaker 2:We should go back and find interviews with Jensen around that time. Because again, he's always just been caught in this tough spot. Right? Yeah. Because NVIDIA had offices in Shanghai.
Speaker 2:Yeah. It had r and d in Shanghai.
Speaker 1:All of that doesn't matter. It just has shareholders that want to maximize value. And so, like, yeah, like, their money's green
Speaker 2:Yeah.
Speaker 1:As long as they convert it to dollars, I guess. But, you know, like, you want to expand your market. And every tech company tried to go to China. Many of them got blocked. NVIDIA was just the one hyperscaler that really didn't get blocked because they were just selling in the hardware.
Speaker 1:And China wasn't worried about that. But they were worried about Google. They were worried about Facebook. And and many other companies didn't have a good a good opportunity, mostly because of, like, free speech stuff. But NVIDIA, that doesn't matter because it's just hardware, and you can run whatever you want on top of it.
Speaker 1:So
Speaker 2:It was own it was a lowly $80,000,000,000 company in 2018 too. So it's hardly even on map.
Speaker 1:Exactly. Yeah. And so in 2019, Huawei gets added to The US entity list. This is kind of the blacklist. China accelerates investments in domestic chip design while NVIDIA deepens its relationship with cloud giants like Alibaba and Tencent.
Speaker 1:And so, being blacklisted meant that Huawei lost access to US technology, so they couldn't buy because if you're on the entity list, you can't sell or you can't do any business with any American company. And so that means that, it it also applies to companies like ASML that use patents that are American. And so if you can't buy a lithography machine from The Netherlands, you can't fab the chips. And so it's just a major setback when you get added to the entity list. And we've seen the opposite happen where, American entrepreneurs are now being added to the Chinese version of the entity list, and they can't buy products from China.
Speaker 1:Or they can't sell products to China, not that they want to.
Speaker 2:Yeah. Just to give you a sense of Huawei's scale, they did, over a hundred and $18,000,000,000 in revenue in 2024 Wow. As a private company.
Speaker 1:Oh, private. Interesting.
Speaker 2:Oh, private. Interesting.
Speaker 1:Yeah. I mean, they probably don't wanna deal with the oversight of being
Speaker 2:public.
Speaker 1:That's simply what it is.
Speaker 2:Simply don't wanna deal with.
Speaker 1:But but all these restrictions basically force the high silicon unit within Huawei to be, like, ultra self reliant because they're just like, we we we can never count like, we're probably never getting off the end of the list. Like, it is pretty bipartisan even though it's, a Trump thing. It's like, they're not expecting it to just flip. It's not like Americans are are yelling like, Trump is so crazy because he put Huawei on the entity list. Like, we gotta get Huawei off the entity list.
Speaker 1:Like, it's not a culture war issue. And so it's it's just truly not it's like, there's no sign that this would ever flip. And so as Huawei's orders dried up, the other Chinese tech giants stepped in to purchase NVIDIA's GPUs. And so the The US like, NVIDIA maintained significant share of the Chinese data center market because the Chinese data centers, they obviously they, you know, they kinda wanna support Huawei. But if Huawei is way on the back foot because they don't have amazing machines to build the stuff, well, these you know, Alibaba and Baidu, they just need to run servers.
Speaker 1:They need to do accelerated computing, AI inference, all sorts of different recommendation systems. And they're like, yeah, we just need the best. And so there was an entity list expansion that you know, covered even more advanced chip technology, and this has just been growing and growing and growing. So in 2020, there's even more, US restrictions. The four the foreign direct product rule or FDPR was expanded to halt Huawei's access to advanced chips, whilst China simultaneously launched its second generation big fund.
Speaker 1:Big fund. Size going for the big fund. NVIDIA attempted a $40,000,000,000 acquisition of ARM, and it was announced via this, like amid, like, all the turbulence in the FDPR expansion. And there was more sanctions on SMIC in December of twenty twenty that, again, set back China's progression down the learning curve into these advanced nodes and made it even more important that they focus on domestic semiconductor manufacturing capabilities. So now we get to the CHIPS Act.
Speaker 1:This is, like, where the story usually starts, but we went a little bit further back. But The US Chips and Science Act passed in 2021. This is a Biden administration law, and this had coordinated export controls by key allied nations, and it accelerated the decoupling of The US and Chinese semiconductor supply chains. And, of course, this was a multilateral effort.
Speaker 2:Is this is almost three years after The US had organized for the arrest of the CFO of Huawei, which was the founder's daughter.
Speaker 1:Yes. It wasn't that in like Canada or Canada? Was like really aggressive.
Speaker 2:So this feels like a really long time ago at this point. Totally. But it's important to understand like just just how serious kind of everybody in Washington was taking this at this point.
Speaker 1:Yeah. Yeah. Yeah. And so this is specifically restricting critical chip making equipment such as ASML's EUV lithography machines. That's extreme ultraviolet lithography machines, the most advanced machines that that can, you know, place the etch the silicon atoms, like, as small as possible.
Speaker 1:Right? And so The US is coordinating with The Netherlands and Japan because Japan also makes a lot of lens technology and a lot of different, things deeper in the semiconductor supply chain. And so all of that is now restricted. And so China, in response, is doubling down on on self reliance through the fourteenth five year plan, and they have extensive subsidies for semiconductor development. Just one more five year plan, bro.
Speaker 1:Just one more five year plan.
Speaker 2:Please. Just one more. No. It's actually if you're gonna be, you know, if you're gonna run do state run industries Yes. You know, working in five year increments, like, probably is pretty effective.
Speaker 2:If they're on their their fifth or their fourteenth five year plan
Speaker 1:Yeah.
Speaker 2:The five year plan model, I would imagine works.
Speaker 1:I think it's working pretty well.
Speaker 2:They they like it.
Speaker 1:And so NVIDIA struggled with delays in its ARM deal. Our ARM they were trying to buy ARM. And and they keep seeing resilience from the Chinese cloud providers even as political mounted, and so the China the the AI hardware race is just heating up even further. And so in 2022, 10/07/2022, US export controls targeted high end AI chips. This is banning NVIDIA's flagship products, the a 100 and the h 100, to China while forcing the development of workaround products.
Speaker 1:And so the new rules block shipments of advanced chips and manufacturing equipment for nodes below 14 nanometers for logic and 18 nanometers for DRAM, which is the memory.
Speaker 2:Yeah. And it's a NAND flash. NVIDIA do? They introduced the a 800 GPU. Yes.
Speaker 2:An adjusted version of the a 100 with lower interconnect bandwidth to skirt The US limits without fully matching performance. Yep. So again, this is like one of those situations where people in The US, I think, would be like much more frustrated with NVIDIA's behavior Mhmm. If they didn't we're not NVIDIA shareholders.
Speaker 1:Yeah. This always struck me as interesting because when you think about the US government regulating interconnect bandwidth on an AI chip, that's like extremely complicated. This is like the when I think of the government and technology, I think about, like, how does Facebook make money? Like, the Internet is a series of tubes. Like, the lawmakers typically get this stuff, like, wildly wrong.
Speaker 1:Clearly, they had some great consultants on this project because they actually got to a level where they were able to understand some of the trade offs in chip design to design a policy that targeted specifically AI training around interconnect bandwidth. Like, they did hit that. But at the same time, they weren't able to go deep enough to understand that DeepSea could, like, figure out a way around the Internet can the interconnect bandwidth limitation and still train a GPT four class model. Right? So they were, like, 99% there, but not a % there.
Speaker 1:And, like, way better than any layman, especially at the time, like, back in 2022, not many people could you you could just be like, hey, you know, oh, you you you know a little bit about semiconductors. Like, what's important
Speaker 2:right now?
Speaker 1:And people would be like, interconnect bandwidth? Like, yeah. Right.
Speaker 2:But somehow the a 800, and Yep. Chinese firms just go, oh, sweet. And they just start stockpiling these things. Right? They just start saying, like, we'll basically take as many as you can get us.
Speaker 1:Yep. And so in 2022 in December, SMIC gets added to the entity list. Kinda crazy they weren't on there before since Huawei has been on there for, like, years. Yeah. But this, like, further isolates China from The US semiconductor equipment and technology.
Speaker 1:They really can't buy anything now. Yeah. And and people start worrying about Nvidia's future revenues in China because of these controls. As market participants observed these trends, analysts begin to speculate about the long term feasibility of China specific products from NVIDIA, saying, hey. They have a workaround right now, but how long will this really stick around?
Speaker 1:There's a bunch of different ways to to create limits on chips. You can just do total flops or flops per dollar. Or, you know, Jensen, in his Blackwell presentation said, you know, we're no longer on chip scaling. We're on energy scaling, which is, like, the most foundational level of computation. So, like, not even flops per dollar, but flops per watt is, like, what really matters.
Speaker 1:And so you could just limit that. And and then and then but then there's a whole question about, like, how do you measure that? What what are you training on? And and there's ways to get around that. There's always, like, loopholes.
Speaker 1:But you could and and we're seeing this now that, like, the the the definition of what's banned is growing and growing and growing. And there clearly are a bunch of ways to basically just tell NVIDIA no, and that's kind of what's happening. Now there's a huge debate over whether or not these chip sanctions should be in place and whether or not they should they're effective. Right? So we'll we'll get into that debate, But let's continue with the timeline.
Speaker 1:2023, so China is facing persistent export controls, and, also, there's a global chip shortage, remember, from COVID and whatnot Yeah. And also just increased demand for AI chips. So they continue to innovate with tailored products specifically for the Chinese market, like the h 800. Has reduced performance Yeah.
Speaker 2:Sounds bad when you say it like that.
Speaker 1:It complies with export restrictions. At the same time, like, every company, whenever there's, like, there it's so easy to if if there wasn't the crazy geopolitical thing here, it's so easy to be, like, oh, like, the, like, you know, the the speed limit is 65 miles an hour, so I'm gonna go 64. Right? It's like every every business is like,
Speaker 2:oh, I I responsibility to shareholders.
Speaker 1:Yeah. Like, company is like, oh, I'm like like, I can't sell this product in this market. Okay. I just need to find a different product.
Speaker 2:This is why over the last couple weeks, if you're an American hedge fund manager Yep. And you're unclear of what's happening in the American market, even if you're a true patriot Yep. You're gonna look over at European defense companies and say, you know, I'm this suddenly is interesting. Yeah. Right?
Speaker 2:Because they're just like, their mandate is to chase yield
Speaker 1:Yep.
Speaker 2:And put up numbers for their LPs. Yep. And so that's just a unfortunate reality when it comes to these sort of geographic geopolitical Yeah. Sort of like hot button issues.
Speaker 1:And so even though the h h 800 is lower performance than the h 100, which is the popular one in America, Chinese cloud adopters or or cloud providers are just buying them nonstop because they need advanced hardware, and they're willing to work around the the limitations there. And so at this time, Ben Thompson writes, NVIDIA, on Tuesday, this was yesterday, said it would take a 5,500,000,000 charge after the US government limited exports of its h 20 chip to China. And that's, like, the kind of the main story that's driving the news today. So in 2023, Chinese tech giants accelerate their own product developments, and this is what we're this is, like, the hot topic in semi analysis right now. Huawei has this cloud matrix three eighty four, and this and this the goal here is to challenge NVIDIA's dominance.
Speaker 1:And so it's described by the South China Morning Post as a nuclear level product. Sick. It's like Stargate, but for China, basically. They're Morning, yes.
Speaker 2:I wonder if the South China Morning Post has any ties to the state.
Speaker 1:I think they're just pumping up their bros. You know? Who knows? They're just they're no. No.
Speaker 1:Obviously, they're
Speaker 2:It can be both.
Speaker 1:They're biased. But but, you know, they're they're they're talking their book. They're excited about this. So the CloudMatrix it's funny because I had never heard, like, the I mean, I've heard, like, the nuclear analogy once or twice, but Aaron Ginn yesterday wrote a whole piece about, like, this idea of, like, a nuclear a cyber nuke in the form of a massive data center. So the CloudMatrix three eighty four use utilizes 384 Ascend nine ten c chips to deliver up to 300 petaflops.
Speaker 1:So despite outperforming NVIDIA's NVL 72 system on raw compute, 300 petaflops versus 180 petaflops. The the system is significantly more power hungry and costly, thus highlighting trade offs imposed by export controls.
Speaker 2:So they're like, great. We'll
Speaker 1:Fire up the three gorgeous dam. Yeah. I mean, like, it it they are adding 20% energy every year now in China, and we're adding zero. So you play that out and being power hungry and costly, totally the trade you wanna make just to be able to actually run Smart move. The the the data center.
Speaker 1:Of course, there is an economic calculation. If if if they have, you know, like an ASI system that's less economically efficient, it's like having, you know, a hundred dollar drone shoot down a million dollar drone. You can only do that so many times. And so if you're running an AI system, it's fighting with another AI system. Oops.
Speaker 1:John lost his I lost my headset. If you have one AI system that's fighting with another AI system, like, at a certain point, you need to be able to
Speaker 2:You need to be efficient.
Speaker 1:You need to be efficient. Yeah.
Speaker 2:This is the issue we talked about with with US military countering drones Yeah. With missiles.
Speaker 1:Yes. It's
Speaker 2:like, okay, if your missile costs 500 k Yeah.
Speaker 4:Yeah.
Speaker 2:Yeah. And you're taking out a drone that costs $600
Speaker 1:Yep.
Speaker 2:Like, it just did the math.
Speaker 1:Yeah. That was the whole math behind the Roadrunner at Amrole.
Speaker 2:You would just, like, continuously launch them to just sort of, like, bankrupt the
Speaker 1:Apparently, I think I think a Patriot missile, which is an anti missile missile, shoots down a cruise missile.
Speaker 4:Yeah.
Speaker 1:It it costs like a million dollars, and it's not super reliable. So we fire two every single time, and they don't come back. Like, they're just gone. Like, if you if you sense a threat, $2,000,000. And so the Roadrunner, which I think is cheaper, I don't know the pricing, but, like, it can fly, and you only need one.
Speaker 1:And if it doesn't if it misses or there's a false alarm, it comes back. Right? And so in in theory, like, this economic warfare is is important. Yeah. But China has a huge advantage on power and energy.
Speaker 1:So the and just to set the table a little bit on this, like, what these systems are, the CloudMatrix three eighty four, NVIDIA's NVL 72. Basically, these are a bunch of NVIDIA chips that are racked together, and NVL means and NVLink, I believe, which is a system that links the different chips together so they can communicate kind of as one server. And then, of course, you do network them together, but it allows you to store even It allows you to treat the server as like a single abstraction, I believe. Yeah. And so the the main difference, again, power efficiency, and this is what Jensen has been talking about with Blackwell.
Speaker 1:He's really focused on energy efficiency, power efficiency, not pure petaflop output because this is becoming more and more of an economic calculation. So, 2024, last year, with further regulatory adjustments, 2024 marked the shift where US policy began targeting AI inference chips as much as training chips, prompting a pivot to inference optimized design. As the restrictions on training chips tightened, US authorities announced new export control parameters set to become effective January 2025 that also scrutinized inference performance metrics. In anticipation, NVIDIA began developing a range of China specific GPUs for inference. And this is the h 20, the l 20, and the l two, each tailored to slight to meet slightly different performance and regulatory thresholds.
Speaker 1:And so Ben Thompson, yesterday wrote, the h 20 is a pretty lousy AI accelerator compared to the h 100. It has fewer cores, much lower memory bandwidth, no NVLink support, and this underscored the workaround. The workaround chips were compromises rather than true performance products, but it doesn't really matter because you need to have the best like, if you're just thinking about the Chinese chip market, as long as it doesn't matter that you're worse than American NVIDIA chips if you're still the best in the market. And so NVIDIA can go still win in theory until these were banned and make $5,000,000,000. Yeah.
Speaker 1:But not anymore.
Speaker 2:Or High Flyer slash DeepSeek is saying, okay. We're gonna basically train our model on your model that you used all your h one hundreds Yeah. To to make.
Speaker 1:And and the inference is the inference in theory, if you can if you can if you can all these crazy workarounds to get the training done and, you know, maybe export a bunch of GPT weights and stuff and do whatever you can to get the training done, the inference is where the economic value is created. Like, you can think about training as CapEx, and then the the the inference is the OpEx that allows you to actually derive economic value from the intelligence, the magical intelligence from the static. Right? Like, no one cares if there's just a super intelligent model that you can't actually inference. And so having good enough models, having state of the art models, open source models, but then being able to pump them out in a way that all 1,000,000,000 Chinese people can use them on a daily basis for all sorts of things to create new businesses, optimize their current businesses.
Speaker 1:There's a million things that you do with AI that should lead to GDP growth. That's really important. And so inference is becoming increasingly valuable. And so the the phrase I was looking for that Jensen was using when he talked about the power efficiency metrics of Blackwell, it was isopower. And so he's he's really focusing on the the scaling laws as they apply to just energy specifically, not chips.
Speaker 2:And this is the advantage that NVIDIA has had by always being ahead is they have the luxury of, yes, they need to continue to innovate. They need to come out with Blackwell Yep. The chip beyond Blackwell. But at the same time, they're able to focus on these things that a second, third, fourth, fifth mover or somebody that's, you know, not in the same competitive realm doesn't have the luxury of thinking about energy efficiency.
Speaker 1:Yep. And so we're we're seeing like a bifurcation in the chip market and just the approach to design. So Jensen Huang is claiming that modern data centers, probably just in America, are power constrained. ISO power means delivering maximal compute within a fixed power envelope. Newer generations like Blackwell greatly improve efficiency when you're under that one megawatt constraint, which is kind of where most of the, I mean, I guess I guess a lot of data centers that wanna do inference are sitting.
Speaker 1:Contrast that with Huawei's CloudMatrix three eighty four. This sacrifices power efficiency in exchange for higher aggregate compute. Semi analysis noted, that while its raw performance is impressive, the trade offs in power usage make it unattractive outside of China where competitive pressures and cost structures differ. So if you don't have energy too cheap to meter, well, then you gotta get, you gotta go ISO power and deliver maximal compute within a fixed power envelope. So as there's the preparation for the regular regulatory changeover in 2024, the new export controls solidify.
Speaker 1:NVIDIA and other firms accelerated development of their next generation products aimed at circumventing increasing restrictions while meeting customer demands. So they, developed the h 20. Chinese companies, including domestic alternatives such as Huawei's in house designs and Alibaba's TEAHEAD initiative, continue r and d efforts, eventually replace depend to to eventually replace dependence on US origin chips because they see the writing on the wall. They're not gonna be getting any US chips in the near future, so they gotta bring it in house. So analysts are forecasting that by 2026, AI inference compute demand could outstrip training demand by a factor of four, increasing the strategic importance of these new designs.
Speaker 1:Remember, just a few years ago, it was all about inference because OpenAI would spend a hundred million dollars on a trading run and then be like, oh, like, it's a toy or, like, oh, like, some people are playing around with it or someone built a wrapper that's, like, okay. Now it's like everyone needs to inference constantly.
Speaker 2:Yeah.
Speaker 1:And so as Trump comes in 2025, US tariff and export controls tightened to unprecedented levels. Obviously, we talked about this a lot, raising rates to over a a a %. There's some internal debate, but the new policies reaffirmed a long standing US strategy to limit China's access to advanced semiconductors and semiconductor analysis strategies. In April 2025, the US government informed NVIDIA that its h 20 AI accelerator would require an export license for shipments to China effectively halting and triggering a planned $5,500,000,000 write off, triggering a planned $5,500,000,000 write off. So NVIDIA is expecting they're kind of messaging this to shareholders ahead of earnings, taking the taking the the hit on shoulder right
Speaker 2:NVIDIA is down 10% today
Speaker 1:10% today.
Speaker 2:On the news.
Speaker 1:Because that I mean, I think 10% of their business is probably in China still, and, like, now that doesn't exist. Yeah. And sure, they'll probably make some money selling to Malaysia, which will create a data center that China can train on.
Speaker 2:So all that stuff down to will
Speaker 1:be this
Speaker 2:comes down to how somebody feels about these type of restrictions on China
Speaker 1:Yep.
Speaker 2:Is going to come down to whether or not they truly believe that we are in an AI war with China. Right? We've been in a trade war. That much is obvious. We've had numerous cybersecurity incidents with China.
Speaker 2:We're clearly in this sort of economic war. And I think that NVIDIA, Jensen, NVIDIA shareholders are probably super frustrated with this. But it's very possible that this is, you know, 100% the right decision given how fast AI is accelerating and and, you know, even going back to the conversation with Aaron, you know, yesterday around The US needing to take this issue as seriously as we possibly can.
Speaker 1:And so the dividing line here is whether chip controls are good or not, and, Ben Thompson has been against the chip controls, and I'll kind of read from his position. He says, my hetero my heterodox position on this matter is clear For the same reason that I am against the chip controls, but in favor of banning the sale of semiconductor manufacturing equipment into China, I think that that this is a good thing that the CloudMatrix three eighty four is dependent on TSMC and Samsung because that is a reason for China to maintain the status quo with Taiwan in particular. Semi analysis is much more hawkish on chip controls than I am. At the same time, the reality is that right now, we are in the messy middle. We're not actually stopping Huawei from building a system that is capable of doing large language model training, albeit inefficiently, but we are hurting the fortunes of US AI champions of NVIDIA by and limiting their long term competitiveness.
Speaker 1:And, of course, we are incentivizing everyone in China from the government to private enterprise to ultimately remove the point of leverage that we can't even wield properly. And so he's is so Dylan Patel had a different flip on different take on this. Let me see if I can pull it up. He says
Speaker 2:We we might need to have a newsletter goat debate
Speaker 1:on this show. We should. I'm gonna I'm gonna invite them both. But but he basically said, like like, stop focusing on the chips. You have to focus on the entire supply chain.
Speaker 1:And as long as there aren't expert controls on everything in the in the in the entire chain, it's it's made it's it's mostly ineffective. And so what else? Let's see. I think we covered most of this CloudMatrix stuff. I mean, can go read the full deep dive on semi analysis.
Speaker 1:It's fantastic and extremely deep as usual. But let's move on to the other story with Mark Zuckerberg. Yeah. He's but first, if you're selling chips all over America, you're gonna need to pay sales tax.
Speaker 2:That's right.
Speaker 1:Get on Numeral. Go to numeralhq.com. Spend less than five minutes per month on sales tax compliance.
Speaker 2:Numeral works with a thousand plus different companies helping them with sales tax compliance and automation. And we weren't working with Numeral when we got the sample ordered, but we got a place for them right here.
Speaker 1:Right here. Love to
Speaker 2:see it. Thank you to Numeral for supporting the show, and go to numeralhq.com to check it out.
Speaker 1:So Adam Carlson posted some screenshots from a story in The Wall Street Journal. But, basically, it's about how Mark Zuckerberg spent millions trying to suck up to Trump, so Meta only had to pay 450,000,000 instead of 30,000,000,000 that the FTC wanted to settle an antitrust case against them. This is, of course, about the, Instagram and WhatsApp acquisitions and the and the accusations that, Meta is running a monopoly. And so, Meta Meta has offered $450,000,000 to settle the antitrust case. This is far less than the FTC's thirty billion dollar demand.
Speaker 1:Yeah. And Zuckerberg has cultivated ties with Trump. FTC sued Meta in 2020, accusing it of stifling competition by acquiring startups. And it is crazy. I mean, this feels like tech history, like Instagram and WhatsApp.
Speaker 1:That happened in like, what, 2012, '20 '15? Yeah. Like that era. And we're now ten years later and we're still litigating this. It is pretty wild.
Speaker 1:We went through some of
Speaker 2:the it's interesting. At the time at the time of the Instagram acquisition, it was a photo sharing app Yep. That was not monetizing. Yep. Maybe did they have any monetization at this time?
Speaker 1:Don't think they did.
Speaker 2:I don't think had any answer. So it was impossible to know at the time that this was gonna be a historically significant acquisition. And it's very possible that there's no other company in the world that would have been able to unlock the value of Instagram the way that Meta has.
Speaker 4:Yeah.
Speaker 2:Right? And so It's not
Speaker 1:just that. Like, pundits and analysts at the time said, like, this is a massive waste of money. Like, why is Zuck spending a billion dollars on Instagram? This is such a big acquisition. Why Yeah.
Speaker 1:He should just build it himself. Like, it doesn't it doesn't it's not necessary.
Speaker 2:Back then, social media apps didn't just immediately copy all their most successful features. Right? Yeah. It was like people kind of like stayed in their in their lane a little bit more. Yep.
Speaker 2:You went to YouTube for long form. You you had, you know, sort of short form iterations on over on Snap, on Stories. And so everything has converged dramatically since then. Yep. And anyways, all all the drama around this is just funny in the context of that we can't force.
Speaker 2:We have not been able to force the sale of TikTok despite it being
Speaker 1:It's wild.
Speaker 2:Against America's national security interests.
Speaker 1:So the initial offer was 30,000,000,000. Meta wanted to pay half a billion, I guess. FTC chairman Andrew Ferguson found the offer not credible and was ready, wasn't ready to settle for anything less than 18,000,000,000 and a consent decree. As the trial approached, Meta offed its upped its offer to close to 1,000,000,000, and it wasn't enough. On Monday, the trial kicked off.
Speaker 1:The FTC called Zuckerberg who privately expressed reluctance about taking the stand to testify for four hours. That's brutal. He had to throw on the suit. He was not posted
Speaker 2:we pull up that picture that John posted this morning?
Speaker 1:I mean, he looks fantastic in the in the Wall Street Journal photo. But he's not able to wear his his dripped out designer t shirt. He had no chain today. It's it's very sad when when a tech CEO has to put on a suit. It's always a sign that things aren't going well.
Speaker 2:But you mean you can tell that jujitsu is working. You can tell that he's hitting the weight. He looks extremely strong. His neck is going to clearly, if he keeps, growing at 1% daily, eventually be as wide as his shoulders are.
Speaker 1:Yes. Yes. But he's I mean, he is looking in in fighting form because he is fighting all the time. Fighting in the FTC courts and also fighting in the ring or the octagon or whatever he fights in. I don't know how it works.
Speaker 1:Zuckerberg was back on the witness stand Tuesday where he faced questioning from an FTC lawyer over whether Facebook had paid $1,000,000,000 to buy Instagram to neutralize a competitor, asked if he would have preferred that Facebook's own camera app would have grown faster. Zuckerberg responded, I guess so. Yeah. A billion dollars is very expensive. Love it.
Speaker 1:Former FTC chair, Lina Khan, told The Journal that the company's 450,000,000 settlement offer was delusional. Mark bought his way out of competing, so I'm not surprised that he thinks he can buy his way out of law enforcement too, said Khan, who was nominated by former president Joe Biden. His proposed remedy, like his marketing like his market strategy is, let my illegal monopoly keep monopolizing. So Lena Khan's coming for Zucks. What is
Speaker 2:he what's Lena doing these days?
Speaker 1:Free agent? Associate at a a multibillion dollar, multistage venture firm. I could imagine that being a good good spot to move on to. Clip some fees, earn some carry. What's not to like?
Speaker 1:If she can identify a monopoly with the best of them, she's gonna be a great VC.
Speaker 2:That's right.
Speaker 1:Think about it. Just flip it over. Start it. Start printing. And so we can go through some of, Ben Thompson's analysis here.
Speaker 1:I liked his framing. He describes the three Facebook eras. He is very against this case. He says he thinks it's a poor one and the government's market definition in which Meta's only cap only competitors are Snap and Miwi.
Speaker 2:What's Miwi?
Speaker 1:I've never even heard of Miwi.
Speaker 2:Miwi. Miwi dot com, the next gen social network.
Speaker 1:We have to buy shares in Miwi, I guess.
Speaker 2:Miwi. If it's competitive with Meta, one of the greatest businesses of all time,
Speaker 1:it must be a bad.
Speaker 2:Must be a fantastic business.
Speaker 1:I I now I feel bad because I feel like there's probably an entrepreneur who's working really hard behind Miwi. You're welcome to come on the show. We'd love to learn about
Speaker 2:this on.
Speaker 1:We'll come on. But no offense, but not typically in the conversation with Meta, but good luck out there. I hope you're printing. Probably doing very well if you're being mentioned by the FTC. Is absurd, says Ben Thompson.
Speaker 1:Unsurprisingly, I find Meta's opening statement presentation, which is particularly focused on the market definition question, very persuasive. What is striking to me, however, is the temporal aspect of this case makes everything a bit of a muddle. To my mind, there are three distinct periods at play. Facebook in the mobile transition, that's 02/2004 to 2013. Facebook started in the browser, only really became Facebook in 2016 with the invention of the news feed.
Speaker 1:And then it was mobile that forced Facebook's hand. Mobile made Facebook more just an app, which was good news for the company's fortunes. The dominance of the iPhone and Android left Facebook no choice but become an ad company and to give up on its platform ambitions. Remember the whole, like, sign in with Facebook. Facebook's gonna be everything.
Speaker 1:Messaging. Like, of that kind of
Speaker 2:need to take back step. You go back to AOL. Yep. That was America Online. Yeah.
Speaker 2:They had platform ambitions.
Speaker 1:Right? Totally.
Speaker 2:And so that that seemed like probably the best thing you could do if you wanted to create a lot of value.
Speaker 1:Yep. And so then Ads
Speaker 2:are a great business model. Yeah.
Speaker 1:Then he defines the second era as Facebook's monopoly period, 2014 to 2019. Facebook's most dominant period coincided with the worldwide growth of the smartphone market, which was for the company a worldwide expansion in its addressable market along with a worldwide expansion in its advertising base, which was predominantly mobile apps. This is when Facebook most definitely, most definitively won the social networking competition. Probably the peak of the company's dominance was in 2016.
Speaker 2:This is interesting. So in August of that year, he wrote the audacity of copying well about why Facebook's plan to compete Snap, which is supposedly the behavior the FTC wants to encourage, was likely to be successful. Yes. And so they were like, yeah, we want competition.
Speaker 1:We want competition. You're gonna compete with Snap directly in Stories and all the different features and then eventually Reels. And yet and yet, it's not enough competition.
Speaker 2:Yeah. And so this, he says, the the reason slots in very nicely with the FTC's current case. This is why it is so fascinating that Facebook is leveraging Instagram in this way. For all of Snapchat's explosive growth, Instagram is still more than double the size with far more penetration across multiple demographics and international users. Rather than launch a stories app without the network that is the most fundamental feature of any app built on sharing, Facebook is leveraging one of their most valuable assets, Instagram's five hundred million dollar sorry, 500,000,000 users.
Speaker 2:And so Ben says it's not a surprise that the initial version of this case was filed in 2020 just after this era ended. Unsurprisingly, the FTC hadn't yet caught on to this reality. The initial version of this case didn't even include the name TikTok, which is interesting, which is why the government's arguments are rooted in the assumption that personal and social networking is one, the only pertinent market and two, defined to be whatever it is that Meta's apps do. So Yeah. Ben, putting them in the true zone.
Speaker 1:So it closes out with Facebook's competitive convergence. This era is 2020 to the present, 2025. By 2015, I was already writing that Facebook needed to move beyond mere social networking from Facebook and the feed. And this is the video slop era where everyone everything converges on the identical feed of vertical video, algorithmic content, comments, likes, shares, we saw
Speaker 2:the following list doesn't matter anymore. Yep. It's just about the app serving you what it thinks you're most likely to, you know, keep using the app.
Speaker 1:And there's a slide in here. What people want to do today? Consume video. And that's why we're doing this. Well, we have a an early investor in Facebook coming on the show, Ali Pertovy.
Speaker 1:He's announcing NEO and a bunch of fun stuff, but it'll be interesting. Maybe we'll get his take on what's going on with Facebook since he's been in the company and been involved in Silicon Valley and in angel investing for for decades now. But until he joins the studio, let's tell you about Eight Sleep. They got a five year warranty, a thirty night risk free trial, free returns, free shipping, And pod four has all the signature features you love about the pod plus new groundbreaking updates. It's it's a fantastic product unless you're up late negotiating, and then you get a terrible sleep score.
Speaker 1:I got a 54 last night. It's awful. Anyway,
Speaker 2:Brutal night. Let's see how I did. I actually oh, I got a hundred.
Speaker 1:Oh, you got a hundred. Wow. Smoking.
Speaker 2:Proof of work, eight hours and thirteen minutes slept. Oh, well. Two and a half hours of REM sleep. That feels like a lot. Which is a lot.
Speaker 1:That's great. Is that Do
Speaker 2:you know why it's a lot? Because autopilot made adjustments to the temperature of my bed to
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Speaker 1:You got boosted.
Speaker 2:I got boosted.
Speaker 1:Okay. Well, in the meantime, while we're waiting for Ali to join, I thought this post was funny. Pratik Joshi says, someone accidentally referred to Eric Lyman as Eric ramp man. And as a founder, that's how synonymous you wanna be with your startup. I thought that was very funny.
Speaker 1:And Juwan says, my fearless leader knows no bounds, synonymous with saving businesses, time and money. He is Eric Boss King, time, money saving man. His last name rolls right off the tongue.
Speaker 2:Ramp man.
Speaker 1:Yeah. This is a this Eric,
Speaker 2:it's not too late to you can actually change your name.
Speaker 1:Yeah.
Speaker 2:Whatever you're born with, it's possible to change it.
Speaker 1:Ramp man.
Speaker 2:And if you're gonna change if you're gonna go through the hassle of changing it Yeah. At least make it an ad. This is the This
Speaker 1:is the concept of, like, the method entrepreneur, like, live your brand. I mean, you're doing it right now with this. Bring it right now. You're you're you're living the TBPN brand by wearing all of our sponsors on your jacket.
Speaker 2:Not all. We're missing a few.
Speaker 1:Oh, yeah. Yeah. Most of our sponsors.
Speaker 2:They're getting on the next round.
Speaker 1:Anyway, did you see that someone is selling a mint Mint Fitbit Inspire three on the Bloomberg terminal for $66? Special situation says someone got margin called so badly last week that they have listed a mint condition Fitbit Inspire on Bloomberg marketplace. The terminal itself costs like $3,000 per month. It's rough.
Speaker 2:I just gotta say, we gotta get a Bloomberg terminal at the new office.
Speaker 1:100%. And I definitely wanna This exceptional. Mean, this seems like just just this access. People are selling cars on here. There's a Cayenne Turbo v eight for $57,000.
Speaker 1:They're selling all sorts of stuff. VW Golf is on here for 6,000. Porcelain Jar, two hundred years at Citi for a hundred dollars. Some of these seem like great pickups. Nespresso.
Speaker 2:Somebody here saying brand new Rolex Submariner Date, skip the Q. Put that thing on Bezel.
Speaker 1:Put that
Speaker 2:thing on Bezel. Better.
Speaker 1:Your Bezel Concierge is available to help you source any watch on the planet. Why stick to what's just on the Bloomberg terminal? Head over to Bezel. Find for find exactly what you want. Create a create a wish list.
Speaker 1:Create a a a talk to the concierge. Get the perfect watch. Don't don't don't leave it to chance on the Bloomberg terminal unless you're trying to get a Lexus LX 05/2009 model year for 1975. Very funny. Anyway, I always find these screenshots from Bloomberg, like sales are always so funny because it'll always be like, oh, the market's down.
Speaker 1:Somebody's selling their private jet or something.
Speaker 2:It's great. But it's a good meme, but it's actually going on all the time Yeah. Regardless of market conditions.
Speaker 1:Anyway. Did you
Speaker 2:see this post? Yeah. Somebody in the admin said the golden age of American innovation
Speaker 1:It's just somebody in the admin, it's Michael Kratzios.
Speaker 2:Michael Kratzios. Sorry, didn't even look at his name. He said, the golden age of American innovation is on our horizon. If we choose it today, we share the Trump administration's technology policy agenda. And then if you look in the agenda, it's got a bunch of it says, stagnation was a choice.
Speaker 2:We have weighed down our builders and innovators. The well intentioned regulatory regime of the nineteen seventies became an ever tightening ratchet, first hampering America's ability to become a net energy exporter and then making it harder and harder to build. We seem to have lost focus and vision to have lowered our sights and let systems and structures and bureaucracies muddle us along, but we are capable of so much more. Our technologies permit us to manipulate time and space. They leave distance annihilated, cause things to grow, and and improve productivity.
Speaker 2:And somebody highlighted that this line, our technologies permit us to manipulate time and space, which sounds really dramatic. I think he's potentially just referencing
Speaker 1:I think Kratios has discovered time travel.
Speaker 2:Yeah. Very possible. Was
Speaker 1:formerly the CTO of America. He went away for a couple years, worked at Scale AI. Maybe while he was there, was thinking on time travel. You never know. You never know.
Speaker 1:Teleportation.
Speaker 2:You never know.
Speaker 1:We're so bad.
Speaker 2:He's got a clearance.
Speaker 1:Anyway, we have Ali in the studio. Welcome to the show. How are you doing?
Speaker 3:Hey, guys. Do you hear me okay?
Speaker 1:Yeah. You sound great. How are you doing?
Speaker 3:Great to see you. I'm awesome. I'm so excited to be here. Love the show. To see you, John and Jordi.
Speaker 1:To have Can you can you kick us off with just a recap of the announcement, what's going on today? Give us a little bit of your background, then we'll go from there.
Speaker 3:Yeah. I'm so excited. Today, we just announced that we have raised $320,000,000 in new funds. Congratulations. For thank you.
Speaker 3:It's our fourth fund, on the heels of really successful bets on companies that we were the seed investor in, like Cursor Mhmm. Kalshi, Blue Sky, and many more. And I'd say more importantly, I'd say this is the moment where Neo is really coming into its own as becoming Silicon Valley's premier community for tech talent and startups, which is, you know, I've been a member of a lot of great tech communities and, you know, and it's it's very exciting to be building what I think is the, you know, the next really great source for innovation in Silicon Valley.
Speaker 1:Yeah. You talk about some of your early career investments and how your strategy around investing at the earliest stages has evolved over the last, like, I I don't know if it's been, like, twenty years of investing for you, maybe more. How long have been doing this?
Speaker 3:Well, my I I was a CS student at Harvard Mhmm. And started a company shortly after college with two other, Harvard grads. Mhmm. A company called Link Exchange that was one of the first advertising networks on the Internet. And the success of that when I was 26, we sold to Microsoft.
Speaker 3:Ever since then, I've been a mentor to other startup founders. And I realized the the most surprising and important lesson of my career was the difference that a single individual can make. And I realized there was a super skill I wanted to have, which was the ability to spot talent, at a very young age. At the time, it was trying to hire the smartest young people to join my company, but then this kind of pivoted towards being a mentor to young founders and then an angel investor in those founders. And so I was fortunate enough to be really early in companies like Facebook, Dropbox, kind of Airbnb.
Speaker 3:I missed the very early round when, Brian Chesky accidentally kind of pitched me in a restaurant. He was not even at my table. It was like a chance encounter.
Speaker 1:Listening.
Speaker 3:But I invested in invested in a later round. So, yes, also Zappos, Uber, couple of others. And, yeah, I'd say the common theme that was not just being an investor, but helping these companies build their early teams and impressing on them the importance of hiring exceptional people. And in 2017, I started Neo with the really audacious belief that it is possible to identify future tech leaders when they're still in college. And not only that, but that we could build a machine, a systematic institution that identifies superstars and helps them maximize their potential.
Speaker 3:And today, I have to pinch myself that I really feel like we've proven that this is possible and that we're doing it systematically. Neo scholars have founded companies like Cursor, Pika, Cognition, Chai Discovery, and many more. And and at this point, it's an institutional system, not just, like, one person going around with a knack to make investments.
Speaker 2:The the the meme of dropping out of college to start a startup has been, you know, fundamental to the history of Silicon Valley. Do you think more students should be dropping out? Is it not enough dropping out?
Speaker 1:And how early is too early? Yeah. How early Should
Speaker 2:they get a year in the dorms to get a little bit of
Speaker 1:I got a four year old if you wanna write a check. He's ready.
Speaker 3:I love it. First of all, when you mentioned meme, I thought you were talking about this. There was a Twitter meme a month or two ago saying these are the institutions that, you know, students would drop out of Harvard and Stanford for. It it showed Neo. It showed the Thiel Fellowship.
Speaker 3:But I loved it because it also showed Zach Frankel.
Speaker 1:It showed there's some locals and then just this one
Speaker 2:guy We don't that word on this show. We don't say the the f word on on this show. But but he's
Speaker 3:a legend. He's a one man institution. But to your question, first of all, if you have a four year old, have them use Code.org, which is the nonprofit my brother and I founded that teaches young kids how to code. Literally, that I started my four year old on it. Highly recommend it.
Speaker 2:Yeah. But
Speaker 3:So the question about dropping out of college, I think about it all the time. I mean, some of the names I mentioned were dropouts, and one of our best investments of the past year was in Sapient, which was three dropouts who didn't even finish sophomore year at Harvard, Stanford, and UT Austin, respectively. Having said that, I think there's way too much of a emphasis on you have to drop out, and you're not good enough if you don't drop out. Among Silicon Valley, obviously, not everywhere. But in the tech industry, I think it can be a little unhealthy.
Speaker 3:What we offer is a gap semester grant.
Speaker 1:Mhmm.
Speaker 3:So it's like a Till fellowship, but much less scary because at the end of the semester, you can go back to school. In fact, that's expected. It's just spend this take a semester off, but build something of your own, experience entrepreneurship. And if you strike it big, keep going. You can then drop out.
Speaker 3:You can then and then would fund you and, you know, there are some people for whom that would totally make sense. But if, you know, but if that doesn't make sense, I would say it's better to stay in school Yeah. Until you have found the thing worthy of leaving school for, the thing that your heart and your passion is really to ready to commit to for
Speaker 1:years. Yeah. This is kind of the story of Mark Zuckerberg. He takes the summer off and is actually on deferral and then eventually never goes back, but then gets the honorary degree years later. But but I I have to ask.
Speaker 1:I mean, I wanna go into the present, obviously, but how did you get in the early Facebook rounds? Like, what was that story? I know Brian Chesky, you meet at a restaurant. Was it a a different restaurant?
Speaker 3:My stories as an investor are mostly about what an idiot I am, and I'm really honestly, I I'm not being humble. Brian Chesky, I'm at a meeting with a Wall Street Journal reporter
Speaker 1:Mhmm.
Speaker 3:That I thought was an important meeting. Random person at the table next to me pops in and starts entering our conversation. I think the Wall Street Journal guy actually started you know, asked him a question.
Speaker 1:Mhmm.
Speaker 3:And then before I know it, like, this guy's pitching me his, you know, his thing, Airbnb. And I remember thinking, this is such a cool concept. It's batch it. It's super ambitious, but if it works, this would be huge. But I was also annoyed.
Speaker 3:Like, don't you see I'm in an important meeting with a Wall Street Journal reporter here? So I never forgot him, but I didn't didn't follow-up to my to my regret. I invested in it later around.
Speaker 1:Yeah.
Speaker 3:Facebook, I cannot claim any credit for. My twin brother, Hadi, who is absolutely brilliant, deserves all the credit for that connection. He was introduced to them by Sean Parker when it was a nine person startup, And we we, referred the very first summer intern to Facebook, Darian Shirazi, and, you know, served as advisers. But at the time, I remember talking to Hadi and saying, this company seems like a online fraternity. Are you like, I'm not sure I see the business here.
Speaker 3:It seems like it's really cool, and I wish I could be back in college and be a member of this. You know, it was you had to be a college student to be able to use it. It had, like, maybe a million users. And I remember Hadi saying to me, no, Ali. We're not betting on the company.
Speaker 3:It's the person. And this, you know, 19 year old Mark Zuckerberg reminds me more of Bill Gates than anyone I've ever met. Mhmm. And the team around him were stunning. You know?
Speaker 3:And so How how do you think it hadn't been for my brother, I would not have been, involved in Facebook. But this was February '5 or so and 02/2005 and was the germ of this belief of investing in people. Yeah. That is the core of what NEO is today. Yeah.
Speaker 3:And NEO today, we discover college students long before they start startups and start mentoring them. We invest in them by investing our time.
Speaker 1:Mhmm.
Speaker 2:Yeah. Do you think it is has been very like, my friends that are investors, think it's actually helpful if they get a huge win early in their investing career because they, one, know what what great really looks like. They know what great operators look like and they have less FOMO in the sense that, you know, when they get pitched an idea that they like but the founders maybe not the right fit, it's just easier for them to pass. Do you think do you find that do you find that like, you know, getting, you know, big early wins has allowed you to like, you know, be better
Speaker 1:More risk on even?
Speaker 2:Yeah. Yeah. More more risk on, but also just being okay, not like having that sense of FOMO, being like, know, I like this idea, but, you know, I'm not gonna invest.
Speaker 1:That kind
Speaker 2:of thing.
Speaker 1:Yeah.
Speaker 3:I'd say I still have all sorts of insecurities, both the FOMO as well as, you know, sometimes being unsure about what something is the right investment. But what I've definitely got incredible confidence about is my ability to spot talent. And and, you know, when I started Neo, this idea that you could find future tech leaders when they're still in college, this was a, you know, kind of a crazy suggestion. Now I feel incredibly sure about not just my ability, but the company's ability to do that. But the other thing I'd say for me, I would say my path as an investor has grown more from my mistakes than from those early wins.
Speaker 3:You know, I, I remember when the smartest engineer at my own startup left to start something. He was a contractor. This guy Max Levchin, who was 22 at the time, started what was called Confinity, which became PayPal. We all knew Max is brilliant, brilliant as an engineer. And we also all thought that Confinity was kind of a joke.
Speaker 3:It was like an app for the PalmPilot to send money with infrared. And today, I didn't I would I would just say if Max is involved with anything Mhmm. How whatever involvement I would invest in it because of the person. Whereas back then as a 26 year old, I had a lot of hubris. I just sold my company.
Speaker 3:I thought I'm the, you know, bee's knees. And so when you're too arrogant as an investor, you start trying to pretend like you're the smartest person in the room and poke holes in the other person's idea and, like, come up with ways it would fail. Whereas today, approach is maybe I'm not the smartest person in the room. Let's figure out if the other person is actually the smartest person even if they're half my age. And if so and if they're committing their life to something, I just wanna, you know, support them and help them.
Speaker 3:And maybe I have wisdom to give or ways to help, but not miss out in any way. I should say similar, miss, same time frame, 1999 or so. My, one of the smartest people from Harvard computer science, Craig Silverstein, kinda reached out to a whole group of us saying, hey. I need advice. I'm joining as the CTO of this startup.
Speaker 3:My Stanford PhD friends, Larry and Sergei, are starting. And I remember thinking, poor Craig. He used to be so smart. Doesn't he know there's 10 other search engines, this Google company just because they have a better algorithm? You know?
Speaker 3:And, honestly, it was a foolish business idea. Like, if you were to apply kind of MBA type, is this a good business plan? You'd be like, it it wouldn't make sense. What made sense is that the people were freaking brilliant. And today, I would, in a heartbeat, bet on people of that caliber even if they're taking on much bigger companies.
Speaker 2:Those are great stories. Raw intelligence, what are what are what's your what are what are you looking for?
Speaker 1:Yeah. What's a conversation with you like if you're a sophomore in college? What are looking for?
Speaker 3:Well, I mean, the one to talk about is Michael Trull, the CEO now the CEO of Cursor. Mhmm. I met him when he was a rising sophomore between freshman and and sophomore year in college, when I was interviewing him to become a NEO scholar. And so at the time, today, to become a Neo Scholar is thousands of people apply through our website. But back then, I was basically the website.
Speaker 3:I was like, you know, it was such a grind visiting different campuses and so on. And and I would give people technical interviews instead of what's today an online coding test. So I gave him a, a coding test equivalent to what it would, you know, evaluate whether he could get a job at at a big tech firm or so on. He crushed it within the first ten or twelve minutes, which meant we had the rest of the hour. I let him give me a coding test, which was actually much harder than the test I had given him.
Speaker 3:And I I kind of, I solved it, but that ate up much more than the other one. But the real thing I look for besides I'd say technical ability is a kind of it's an important prerequisite. We back technical founders. But I asked myself how magnetic is this person? That word magnetic, specifically, I'm asking myself, if this person started a company, how many of his or her smartest friends would drop whatever they're doing to join it.
Speaker 3:Mhmm. You know? And you can get a sense of that just from your from the vibe of a person. You can also get a sense of that from looking at what else they've done. You know, Michael Trull had two had had two startups when he was in high school.
Speaker 3:I wouldn't call them startups, but they were like small businesses that he had run. And, you know, and there's other people you can see where you can see what their role is in campus organizations. Do they join campus organizations, or do they become the president of the campus organization, or do they start a new organization? Mhmm. And yeah.
Speaker 3:So how magnetic are they? And then I'd say the other thing is willingness to kind of not not accept the rules or not accept the status quo. I'm not talking about breaking rules or breaking laws, but just to see beyond them and to, you know, to have such a kind of dogged commitment to what you're doing that if you see a rule or a law or people saying this has never been done before, never been done before, to figure out a way around it, including changing the law or getting the, you know, getting the government approval. So a company like Kalshi, we were the, one of the earliest backers in. This is I guess it's a tech company, but I'd say their biggest innovation is regulatory.
Speaker 3:They have legalized trading on event outcomes Mhmm. Starting with things like pandemics and COVID to election results, and now they're, they're now largest sports. Within two months or three months of launch, they're the single largest sports betting market in The United States. All legally, when everyone told them this is not gonna be legal, you'll never succeed at this Mhmm. We bet on them because of their doggedness to kind of see beyond those naysayers.
Speaker 1:Mhmm. Jordy?
Speaker 2:How much time do you spend thinking about the future today versus just obsessing over finding talent? Right? We That's a great question. There's a lot of venture capital firms that spend a lot of time thinking about their visions for the future, you know, understanding markets. Right?
Speaker 2:And that's really fun to do and it's a strategy that can work. And when it does work, it's like amazing. Right? We all love these stories where VC puts out like a request for startups and then they get, you know, and then somebody kind of like goes and does it. Like, it's it's amazing.
Speaker 2:But at the same time, like, to me, you probably I I would imagine you're spending time thinking about the future in the context of what an incredible founder's vision for it is.
Speaker 3:Yeah. It's a great question. Look, I love business ideas. In fact, you know, I I am starting a new business on my own on the side with that I've got an amazing team that's that we're incubating now. And I love brainstorming business ideas, but I don't spend time making predictions about the future and kind of claiming that I know what's gonna happen.
Speaker 3:Frankly, I just I maybe it's insecurity or humility, but putting out a request for startups where we say this is what's gonna succeed, that's not how we operate. We focus on is the other person smarter than me. We're obsessed with finding the top talent. In fact, I'm I'm dialing in from Stanford University. I don't know if you can see the background right now.
Speaker 3:Oh, wow. You know, like,
Speaker 1:yeah. I'm in a room
Speaker 2:In the field.
Speaker 3:In a room at the Huang Engineering Center.
Speaker 1:You. You. You. Drop out. Drop out.
Speaker 1:Not right now. Come over here. Come over here. Take my money.
Speaker 2:It's I bring a do you bring check?
Speaker 1:Do you bring handwritten Yeah. He's he's flipping a sign on the on campus, but it's just a big check. Just say, Yes. It was 55. Drop out.
Speaker 1:Drop out, please. Take my money.
Speaker 3:Joking aside, what we do actually is we come in and not just at Stanford, also at Waterloo, Harvard, Princeton, Yale, MIT. Myself and my team members will go in and provide an entire day of office hours. Mhmm. If anybody wants mentorship, book, you know, book twenty minutes or thirty minutes. And it could be on your career.
Speaker 3:It could be on job search. It could be on some startup idea you're thinking of. We almost never try to encourage anyone to drop out. We're here to lead with mentorship and helping young people. And by the way, I don't even define, Neo as being a VC firm.
Speaker 3:If you look at our website, we call ourselves first and foremost a mentorship community. Our north stars are about mentorship and community, and our business model is investing. But I can tell you, it is so exciting to meet a college student who might be 19 or 20 and to realize I'm talking to somebody smarter than myself whose potential is to be bigger than myself. And, you know, that's what I felt when I met Michael Trull Yeah. Five years ago and started investing in him.
Speaker 3:And what I mean by investing means spending time inviting him to events, you know, inviting him, connecting him to my network. And we, introduced him to his first startup internship at a company called Octant. His, MIT friend, Aman Sanger, we connected to his first startup internship at a company called You.com. And when the two of them, two and a half years later, their senior years said they're thinking of doing a start up, I started booking time to mentor them every few weeks to help brainstorm ideas. When they decided finally that they're ready to fully pursue it, and they weren't dropping out, they graduated, we were, like, no question, first to to invest in them.
Speaker 3:And and
Speaker 2:That's amazing.
Speaker 3:At the time, it was just two guys and an idea, And they even changed the idea. Yeah. So we were just investing in the two guys.
Speaker 1:Do you
Speaker 2:end up I'm curious. Do how many times a year do you end up having one of these founders, you know, saying like, hey. Can you can talk to my parents? Like, they wanna know if, you know The story of Michael Jordan.
Speaker 1:Yeah. Yeah. When they're pretty went to the family.
Speaker 2:You know, hey. Like, you want, like, total alignment between, you know, the entrepreneur and the family. Like, ideally, it's not necessary, but I'm curious. I'm sure you've had some of those conversations being like, no. I Absolutely.
Speaker 2:I'm going to I'm going to give your son a million dollars. And, you know, they're not gonna have a degree, but, like, you know, they they have a real you you know, I think not not every parent understands that, just getting across the line and raising venture capital is a signal to the market that that that's similar quality in many ways to a college degree.
Speaker 3:I what I love about this question is that you recognize the human part of what's going on. This is not just like, oh, how much money or so on. It's not just about startups. These are we're talking about human beings who have the same hopes and fears and parents as as you and I do. And, and it's I love that you are in, like, twenty minutes thinking of the things that it's taken us a few years to think of.
Speaker 3:But, yes, I speak to parents every year, a few a few one on one type Zooms. But this year, we actually created a an event called parents weekend where we flew out the parents of the Neo Scholars
Speaker 2:That's awesome.
Speaker 3:All for, like, a weekend long of, like, talks by Scott Wu from Cognition and, other, you know, other people who ends up whether they dropped out or started a company a couple years after college, leaders that the parents could look to and see, oh my gosh. Yeah. I guess my daughter or son could end up being like this person, and this is legit. And it's, you know, it's not riskier or less prestigious than getting a job at, you know, OpenAI or or Ramp or whatever big big company.
Speaker 1:Can you talk a little bit about the business model right now? I mean, if you take a a scholar who is gonna do something entrepreneurial for the summer, is that like, we're setting up a c corp for you, we're taking 7% or something like that, and then if it winds down at the end of the summer, you go back to school, that's fine. But we're set up for the corporate journey and just putting you on Sand Hill Road and raising a mango seed? Or is it more like, you know, Thiel Fellowship's a nonprofit, but then, obviously, once you do the Thiel Fellowship, you go out and raise, and, you know, plenty of people aligned with the Thiel Fellowship have, access to those deals, etcetera. But, how do you think about just mechanically going through, a partnership with you?
Speaker 3:Yeah. So, in some ways, I would say we are the signal of finding the great undergraduate talent that the Thiel Fellowship once was. You know, if you talk to anyone at top universities, they now what they'll tell you is you apply to become a Thiel Fellow after you've dropped out and after you've raised 3 to $5,000,000 in funding, then become a Till fellow. And the majority of the Till fellows followed that path. They they became a Till fellow long after raising money, long after dropping out of college.
Speaker 3:We identify people years before they might start a company. And the main thing we offer them is not cash. It's the network and the mentorship and the real care and attention to helping them figure out what whatever path is best for them. That might be graduate school. It might be getting a job at OpenAI.
Speaker 3:Last year, OpenAI hired all of their new grad hires through Neo. And, it might be a job at a startup. If they wanna do, though, like you said, do their own thing, the way we are currently structuring it is a gap semester grant. So it's not a summer. It's a gap semester because we want that person to do to show a little sacrifice.
Speaker 3:If it's a summer program, it'll attract, you know, fun entrepreneurs who are just kinda looking for a summer camp and, oh, this will look good on my resume instead of interning at Google. You know, there there might be other programs that do that. But our view is if we're gonna give them a grant, we'll make them take a we'll offer them a chance to take a semester off with other students doing the same thing in a shared workspace. So we provide shared space
Speaker 1:Mhmm.
Speaker 3:Community, so you're not alone, and $20,000 equity free, just grant.
Speaker 4:Grant.
Speaker 3:And and and mentorship on a week to week basis. I'll spend time with them. We have other mentors who spend time with them. But this aspect of being in a shared space and having the other students who are doing the same thing is very different than programs like the Till Fellowship.
Speaker 1:So of the $3.50 that you just raised, some of that's going to some of that's going to grants, and then some of that's going to probably, like, participation in seed rounds once the c corp's set up. And then but then, like, are you trying to do pro rata? Are you trying to concentrate into the best companies as they grow, or will you set up a separate growth vehicle, or is that just not in the cards?
Speaker 3:We're not planning on doing a growth vehicle, and it's, this has been it's a very conscious decision because Yeah. It sounds like you're quite familiar with how VC works. The standard path if you're a VC and you're ambitious and you wanna be number one, the standard path is to raise more and more and more capital, which means invest in later and later rounds and become over time an asset collector. It's, you know
Speaker 1:Well, you gotta go public. Called That's the new hot thing in 2025. If you're not taking your firm public this year, what are you doing?
Speaker 3:Exactly. But, yeah, the the the industry term for it is AUM bloat, assets under management bloat. And we consciously thought about this and said that's just not us. That's not what we want for our future. We would rather bet on our own returns.
Speaker 3:We would rather grow in quality than quantity. We'd rather stay small. So the program I mentioned for college students only accepts 20 to 30 NEO scholars a year. We also have an accelerator, which we haven't talked a lot about, but it is aiming to be the most selective program for young technical founders there is, and it offers 600 k, you know, standard deal to participants. That's only funding 20 companies a year.
Speaker 3:We wanna stay selective rather than ballooning and growing based on volume. And that said, we're also very ambitious. So we were thinking about how what's our path for growth? What's our plan for world domination? And it's betting more on our own returns.
Speaker 3:And what that means is this fund, even though it's barely larger than our last fund, our partner's investment, meaning, you know, my own money from my pocket into this fund
Speaker 2:Mhmm.
Speaker 3:Is far more than any of our previous funds. In fact, it's about the same as all the previous funds combined. And so we are gonna be betting a larger and larger share of our own money into the into our funds over time and essentially betting on our own ability to to identify, killer talent and killers.
Speaker 1:Love betting. We love betting on yourself, your own fund. Pauline. Congratulations on the fund. Been fantastic talking to you.
Speaker 1:Thanks so much for
Speaker 2:coming out shop. See the new, scholars and and companies coming out of NEO.
Speaker 1:Yeah. Then snipe them and do the rounds before Ali can get to them.
Speaker 2:Yeah. Just kidding. Good luck. Yeah. Be wary be wary of, you
Speaker 1:know You don't want to publicize these guys too much.
Speaker 2:If you get if you get some spies in NEO, they're gonna start front running.
Speaker 1:Front running.
Speaker 2:So you gotta get your cyber security up. Yep. You know?
Speaker 3:Yeah. I I am I'm not worried about that because we have such good relation. I could tell you right now, who are the college students right now that are gonna be future tech leaders. I love And, there are other VCs who look
Speaker 1:to
Speaker 3:see who NIO scholars are. In fact, the Forbes feature we had this morning Yep. Christina Shen, who is an absolute superstar, formerly from a sixteen z, now she has her own firm. She said NIO is the number one signal that she looks to more than any other program or accelerator for where future founders are. And, yeah.
Speaker 3:And so it is hard when we do this and identify someone so young because then there'll be actually competition for who gets to invest in them. But our view is that we wanna be their most supportive, advocate and mentor and earn the privilege to invest in the tech leaders of tomorrow.
Speaker 2:Well, your work ethic is is inspiring. And, the only thing I would ask from you is put as you leave that room, put TBPN on on the TV on the TV behind you. Just let it play.
Speaker 1:Let it play. And I'm
Speaker 3:gonna I'm gonna put it on the whiteboard here right now.
Speaker 2:Fantastic. There we go. Alright. Thank you, Ollie.
Speaker 1:Thank you so much. There we go. I love it. Alright.
Speaker 2:There we go. There we go. There you so much.
Speaker 1:You. Have a great rest of your day. Cheers.
Speaker 3:Bye bye.
Speaker 1:Next up, we have we're going we're pivoting back to China. There's a new IFP report from the Institute of Progress all about NVIDIA and the h 20 problem inference supercomputers and US export control gaps. We have Tim coming on the show to talk about it. Editor's note at the top of this thing. Shortly after this piece was published, NVIDIA disclosed that the US government had informed it that the export of h 20 chips violates supercomputer end use restrictions as we claim in the peace.
Speaker 1:We applaud the Bureau of Industry and Security for its quick action. So Should they read the Yeah. Probably read this. There's probably a preprint going around, but it's a very, very detailed report all about chipcom competition and everything that we just talked about in the opener and and in the deep dive. So I'm excited to get him to break some of this down.
Speaker 1:I'll read from the summary while we're waiting to get set up with him. The United States is on the verge of repeating a critical strategic error despite having the legal authority and technical tools to constrain China's access to advanced AI chips. The US government is failing to enforce existing export controls or adapt them to new threats. As a result, Chinese firms are exploiting loopholes to acquire powerful US hardware undermining America's lead in frontier AI. The most immediate risk is the pending export of over 1,300,000 NVIDIA h 20 chips worth more than 16,000,000,000.
Speaker 1:When we talked to Jordan yesterday from China talk, he he was saying, it's $2,000,000,000. Like, that's a lot. We were remember I was saying, that's not that much. Like, Stargate's five hundred billion. Well, it turns out that the proposed number was actually more like 16,000,000,000.
Speaker 1:Jordan very thoughtfully posted and mentioned me to flag this, but it is a it is a much bigger number than people thought. Of course, the chips are worth 16,000,000,000. The the the economic impact to NVIDIA is 5,500,000,000.0, and these chips were gonna go to Chinese tech giants, including ByteDance, Alibaba, Tencent, etcetera. They're optimized for AI inference. Odd.
Speaker 1:One second. We're getting some errors. The the the team will email you. Email you.
Speaker 2:While we're getting errors, I'll just put this up
Speaker 1:Put this up.
Speaker 2:The
Speaker 1:screen. Yeah. I mean, it's a great time to do some some ramp ads, some ads of all types. What else do we got in here? We've done numeral.
Speaker 1:We've done Eight Sleep, but we haven't done wander. Find your happy place.
Speaker 2:Find your happy place.
Speaker 1:Book a wander with inspiring views, hotel grade amenities, dreamy beds, top tier cleaning, and twenty four seven concierge service. It's a vacation home, but better folks. And we can go back to the IFP. So these chips are optimized for AI inference as we discussed, and they're likely to be used in Chinese supercomputers, which violates US export controls. At least one of the buyers, Tencent, has already installed h twenties in a facility used to train a large model, very likely in breach of existing controls, restricting the usage of trip chips to in supercomputers exceeding certain thresholds.
Speaker 1:DeepSeq's supercomputer used to train their v three model is also likely in breach of the same restrictions. Can you should I just call him? Let me see. What would be the best? Give him
Speaker 2:He's having a Zoom issue?
Speaker 1:Yeah. He's getting an error on his end. Let me see. Let me find
Speaker 2:You could try on his phone too?
Speaker 1:Maybe. Let me see.
Speaker 2:Alright. I'm going keep reading. The failure is part of a broader problem problem, broader pattern. Huawei stockpiled restricted chip components including chip dies and high bandwidth memory before controls took effect. We talked about this earlier, just stockpiling that happened over the last few years.
Speaker 2:TSMC has facilitated production of over 3,000,000 cutting edge chip dies directly for Chinese firms for Chinese AI efforts, sometimes in violation of US chip rules. DeepSeek, a Chinese lab trained state of the art models using American chips sold legally due to delayed restrictions. The rationale behind export controls remain sound. AI models trained and deployed on the most advanced chips pose national security risks, but the administration of export controls is failing to keep pace with new developments in the fields. Inference, once seen as secondary, has become central to training, fine tuning, and increasing the capabilities of deployed models.
Speaker 2:The h 20, a chip specialized in inference, is already 20% faster than the h 100 for inference tasks. That's very significant.
Speaker 1:And so this is where they get to like straight up policy recommendations. The US must act now. We recommend that BIS should immediately block the h 20 chip shipments using its existing authority. And so a lot of times these laws are written, and people just don't really know how they can be interpreted. Obviously, different companies are arguing for different interpretations.
Speaker 1:It lands in the courts. But IFP is arguing that there's an existing, rule here, 15 CFR seven four four dot two three, that will allow them to block h twenties, I think is what happened. NVIDIA must investigate and halt transactions that raise legal red flags under its know your customer obligations. BIS should update export controls to cover inference chips, which is what's happening. And the White House should empower a technical team, ideally within the AI Safety Institute, AISI, at NIST to forecast AI threats and proactively shape control policy.
Speaker 1:And five, BIS should track chips once exported to high risk locations by incentivizing industry adoption of chip geolocation features. Interesting.
Speaker 2:Yeah. We've sort of referenced this before, but it'd be interesting to kind of get a sense of what the black market chip market looks like. Yeah. Just because you can imagine chips flowing to various countries, you know, to presumably an end customer that then get resold and moved across borders, things like that. So very fascinating.
Speaker 1:X is saying that Zoom is down.
Speaker 2:Oh, really?
Speaker 1:It seems like there might be actually like an attack like
Speaker 2:I think there is a massive Spotify
Speaker 1:and Apple are having trouble today. But you know what? The haters of X. X seems to be working.
Speaker 2:We're live.
Speaker 1:We thought
Speaker 2:We're live on X
Speaker 1:and porting
Speaker 2:down and just across the rest of the Internet.
Speaker 1:Yeah. And everyone was saying, oh, X is gonna be the first one to go down. He can't possibly keep the servers on. That Elon guy knows nothing about software engineering, but the X server stays live. And and I think we're still live on YouTube, which is great.
Speaker 1:I can see it. Anyway, maybe we should do some timeline while we get that set up, settle into this debate all about Katy Perry, Birds Space, that's all.
Speaker 2:Yeah. We should. When I heard that Apple Podcast and Spotify were down, you know what I thought about? Big radio. Big radio.
Speaker 2:Big radio.
Speaker 1:We really need to You don't hear about big radio. Deal. You know the satellites are still cranking out
Speaker 2:content. You
Speaker 1:just turn on the radio when the Internet's down in your car. Turn it up. Know, you get free when you buy a new car. And TVPN should have its own channel on there for
Speaker 2:We should do a deep dive on SiriusXM.
Speaker 1:Interesting business. Yeah. Yeah. I wanna do more of those, like, weird niche deep dives that aren't covered that much. I was reading about Jim Cramer's career yesterday.
Speaker 1:That was a really interesting one. Even the Johnny Carson show and how that that that, like, whole industry developed. Like, have you followed any of the have you followed any of the the late night wars? Are you familiar with this? No.
Speaker 1:So Johnny Carson started the late late late night or The Tonight Show. It's called The Tonight Show with Johnny Carson. He started that, eventually became like the highest paid celebrity in all of Hollywood.
Speaker 3:Wow.
Speaker 1:And then when he retired, Jay Leno took over. I believe I'm getting this right. I'm kind of doing it off the top of my head. But Jay Leno took over. Jay Leno had like another historic run and The Tonight Show was like more popular than ever.
Speaker 1:So Jay Leno buys some McLaren f one. He builds like this massive garage of like hundreds of cars. Has, like he's fabulously wealthy. Then there's this weird there's this weird wrinkle where he's going to retire, and I think NBC owns the whole thing. They say, hey, Jay.
Speaker 1:It's time for you to step down. You're under contract. We're gonna maybe put you on something else. You're gonna go to an earlier slot, I believe. Mhmm.
Speaker 1:Different show, but which I think would be, like, not a big deal at all. It didn't go well at all. So Conan comes in, takes The Tonight Show.
Speaker 2:Wow.
Speaker 1:And and that's, I think, kind of working, but there's always an adjustment because the audience is slightly different. The lead in is slightly different. It's like because if you think about it, if you're just the the average TV viewer is, like, watching prime time. So they're watching CSI or they're watching Law and Order or they're watching, I don't know, like, whatever is on prime time. I don't watch TV, but, you know, these normal shows.
Speaker 2:Yeah. Prime time. You know prime time.
Speaker 1:Prime time. Yeah. What what what's what's Modern Family? That's like a prime time show. Right?
Speaker 1:Those types of things. So you're watching that and then it flip or The Simpsons. Right? The it come probably comes on seven or whatever. Then that flips over to late night, and you're getting the news, but in this, like, funny comedy variety way with interviews with celebrities and stuff.
Speaker 1:But then the second there's there's actually several blocks. So there's, the 10AM late night show, then there's eleven a 11PM 10:10PM, eleven PM, midnight, etcetera. And it kinda moves through. And so if you're the second show, you can't just repeat all the same things that are on the first show because then the person might be, but why am I getting repeated information? And so you kind of have to retool the show.
Speaker 1:Anyway, Conan comes in. Jay Leno doesn't like it and gets like he's like, hey. I wanna come out of retirement. I actually want my show back. And so he comes back, and that kind of kicks Conan out of his whole flow because he had a show.
Speaker 1:And so then he goes off to, like, TBS and does his own show, starts a podcast. He winds up becoming very successful, but it's like this big drama about, like, you know, how that happened. And then I think the final Tonight Show landed with Jimmy Fallon, I believe, one of those guys. There's so many of these late night shows show hosts at this point. But anyway, we we we should dig into
Speaker 2:How about Blue Blue Origin.
Speaker 1:Yes.
Speaker 2:Maria posted yesterday on x at Jordy Hayes at John Coogan. Please discuss Katy Perry and Blue Origin on the pod tomorrow. Here we are discussing it. Do you wanna give some context, John?
Speaker 1:Yes. So when I first saw this
Speaker 2:First of all, Monday morning on every single mainstream television, every mainstream television outlet was reporting this live or relatively live.
Speaker 1:Yes. We were the gym. We were in the gym and it was By every TV, it was it was, as they say, wall to wall.
Speaker 2:It was wall to
Speaker 1:wall. It was wall to wall. But it was very interesting watching because so Gail King was one of the crew members. Right? And she is an American TV personality on CBS Mornings.
Speaker 1:She co hosts CBS Mornings. And so CBS was like, this is our girl. Like, we gotta cover this for an hour. And then you'd flip over to what NBC was doing, and NBC was like, this is important, but it's not our girl that's there. So, like, we're gonna cover it for twenty minutes.
Speaker 1:And then even CNBC and Fox Business would cover it for, like, a few minutes just to be like, hey. This thing just happened. It's live. So just, like, tune in for a little bit. The rocket launch,
Speaker 2:like Yeah.
Speaker 1:Give you a little update. But they're not, like, lingering on it. But, anyway, I thought the take that people wanted to hear was just, like, space travel is cool or like space
Speaker 2:tourism is cool. First of all, space tourism is cool. Yeah. It's cool to see these big celebrities going up Yep. And it not just being another, you know, guy who sold some company in the nineties and wants to go to space.
Speaker 2:Yeah. Right?
Speaker 1:You mean Jeff Bezos. Literally was on the first trip.
Speaker 2:Jeff Bezos did
Speaker 1:a He did a whole thing.
Speaker 2:But history of space tourism is usually Yeah. A a technology brother Yes. Who just really wants to go to space, figures out a way to get it done. Yes. Is not as high profile.
Speaker 1:I mean, that's the story of the new NASA administrator. The new NASA administrator did the first civilian spacewalk on SpaceX. Like, he went to real space. So Blue Origin takes you past the Karman Line Yeah. Which is like 300 nautical miles, I think, something like that.
Speaker 1:And so you you go to space, but, like, just barely technically, and you're not it's not nearly as risky or aggressive as being, like, on the International Space Station, like, way way up there.
Speaker 2:And so what was Do guys first of all, one, space is awesome. Yep. I thought they they handled themselves very well.
Speaker 1:Yeah.
Speaker 2:Just a really cool story. Yeah. Bezos was looking diced. Yes. Did fall right next
Speaker 1:to the capsule which was unfortunate. Overall, picked himself right up. He's clearly in the gym. He doesn't skip leg day because he'd pop
Speaker 2:right out.
Speaker 1:Maybe he
Speaker 2:just wanted an opportunity to kind of push up
Speaker 1:For sure. For sure.
Speaker 2:Show off the triceps. But what was the controversy surrounding it?
Speaker 1:So A
Speaker 2:lot of people came out and said it was faked or certain aspects of it were faked. Yeah. Not gonna put on the tinfoil hat No. Because I don't
Speaker 1:Well, I think that I think that, there's an alleged conspiracy that they'd never even left Earth, I guess, which is very funny. But I do think that there is a conspiracy here that we should get into. So this is a viral post that got 44,000 likes and 11,000,000 views. Here's definitive proof that the Blue Origin mission was faked. And it all centers around the fact that, when they landed, the door opened, and Bezos is there with, like, one of the hosts or someone, and they kinda say, like, hey, close that door.
Speaker 1:And then they wait, and then they open the door and everyone comes out. And so there's this question about, like, how did they open the pressurized door without, like, knowing. Right? And so but the interesting thing oh, you just wanna put the thing in here? Okay.
Speaker 1:Cool. Just up here? Yep. Hey, Tim. How are you doing?
Speaker 4:Not bad. How are you?
Speaker 1:I'm good.
Speaker 2:Are we in the midst of a major cyber attack? Yeah. What's going Spotify was down this morning. Apple was down. Zoom's down now.
Speaker 2:Remote workers are in shambles.
Speaker 1:Yeah. It's a disaster. I mean, I guess everyone else just taking the day off.
Speaker 4:I appreciate you guys have a backup plan. This is great.
Speaker 2:Yeah. That's great.
Speaker 1:Well, can you give me the high level on the report? It seems like you published right before there were some changes. Give me the high level and how things are And
Speaker 2:in all half joking, half serious, but do you deserve some credit for Yeah. The shift here?
Speaker 4:Yeah. It seems on the credit side, I don't think we can take much. It looks like there was a lot of things happening behind the scenes. I will say that fix that we have now is just a short term thing, and there's a lot of long term stuff that needs to happen. But to, I guess, back up as to what's actually going on here.
Speaker 4:So, yeah, it's been a pretty well wind 24 for, the AI chip export controls. So you guys might know in, early twenty twenty four, NVIDIA launched this new, AI chip, this AI GPU called the h 20. It was specifically designed for the Chinese market, so it was designed to stick within the, computational limits that were defined, through export controls. But it turns out that the h 20 actually had great performance for doing inference, so running AI models as opposed to training it. And this resulted in a situation where actually it was really good at inference and even better than some chips that are already banned.
Speaker 4:And this all happened during this sort of 2024 trend of inference for AI models becoming way more important for capability growth through, you know, models like o one and deep seq using test time compute as well as other techniques like synthetic data generation RL. So, basically, a bunch of these, like, sold like crazy. Over a million were shipped in 2024. And so this is, like, a really big deal. We had inference compute flowing freely from The US to China during this period where inference compute was becoming the key strategic input to AI development.
Speaker 4:And people like myself were going, wow. Washington should, really be reacting to this, but they are really slow to react. And it became sort of a couple of things that we learned last week. One, there was a meeting between, Trump and, Jensen, the NVIDIA CEO at Mar A Lago, which is apparently a $1,000,000 ahead dinner. And after that dinner, the White House reportedly reversed course on any plans to, control the h 20 chip.
Speaker 4:And then last week, we also learned that Chinese companies had placed massive new orders for these h 20, so over 1,300,000.0, so far this year. And this is, like, recently over just the last week prompted this, a lot of calls including from us to stop these orders going through. And yesterday, yeah, it became clear that BAS is actually BAS is the Bureau of Industry and Security who does export controls, have taken action on this. I just throw a lot of info at you, but that's just sort of where we're at now. Could talk more about sort of what we think should happen next, but, yeah, it's a pretty crazy situation at the moment.
Speaker 2:I'm curious. What what what's your broad stance on an on on NVIDIA at the moment? Jensen has obviously been in a tough space of, you know, being being an American yet at the same time needing to represent the interests of NVIDIA and its shareholders. China is a massive market. And, you know, do you do you imagine that everybody just needs to move on from from China and and focus on servicing demand in The US and and our and our allies?
Speaker 2:Or or how do you think it should be approached at this point?
Speaker 4:Yeah. It's a tough situation for NVIDIA. I think the line that they use is, you know, if you set the limit at 60 and we're going at 55, that should be fine. Right? Like, we're just trying to stick by the parameters that you set in these export controls and sell chips that are compliant.
Speaker 4:And then you have the government sort of, you know, making these big changes to sort of, after NVIDIA has designed these chips and is, like, ready to start selling to the market, making these big changes that, like, prevent their market access overall. So, you know, if I'm a big NVIDIA shareholder, I'm, like, pretty annoyed about this. Right? I'm like, okay. Let's, let's have, like, better proactive policy making around this stuff.
Speaker 4:Like, I'm pretty sympathetic with that perspective. But, yeah, I think realistically, you know, NVIDIA is a publicly traded company that is taxed as their revenue. They wanna sell chips into China. They're not sort of seeing the same national security concerns that a lot of people in Washington are seeing. And to be frank, a lot of people in the AI industry directly as well.
Speaker 4:Whether yeah. I think there's some some question marks around whether they have been fully responsible with sort of doing their due diligence for shipments that are going into China and ensuring that, like, control chips aren't being smuggled and that they're sort of complying with the letter of the law. Yeah. What But, yeah, overall, I think we just need clearer policy making ahead of time so it's easier for them to make these decisions.
Speaker 2:Do you have a sense of what the black market for GPUs looks like? I imagine, you know, you guys made a recommendation to add sort of like geolocation to these high performance chips. And I'm curious if you have any insight into how chips are are flowing around the world, in a way that that may not be aligned to
Speaker 4:your Yes.
Speaker 1:But we actually
Speaker 4:we've checking this for the past couple of years. So we put out a report in late twenty twenty three that sort of looked at this question of, okay. We've got these chip export controls now. What sort of scale of smuggling should we expect? And at the time, based on sort of news reports, mainly the sort of cases that were being surfaced were just sort of single digit number of GPUs at the time.
Speaker 4:So it might sort of, like, you know, a single server, like eight GPUs being smuggled at once. And now, sort of, like, a bunch of reports came out last year that this is now just a huge industry. Some estimates is there's sort of around a hundred thousand GPUs went into China. Last year, controlled GPUs. Some people think it's much more of those individual cases that have been uncovered where there's, over 20,000 GPUs being smuggled at once.
Speaker 4:So this is some pretty serious shipment sizes, like, going to the hundreds of millions to billions of dollars. And there's likely a lot we just don't know, especially for these large orders, which is sort of happening through professional operations behind the scenes. And in in as much as that is happening, this, you know, shouldn't be a surprise. You know, China has a long history of smuggling controlled goods despite sanctions and export controls, and, you know, it's proven that they were instrumental in helping to smuggle ships to Russia over the last two years to support the war in Ukraine despite sort of US sanctions. So this would be, like, pretty on brand with the China playbook for this kind of thing.
Speaker 2:How far behind do you think that China's domestic chip chips really are? Right? You know, we we just did a entire backstory on on SMIC and Huawei and things like that for for our audience. But and we had Aaron get on the show yesterday talking about how the gap the gap in capabilities is maybe not as significant as companies like NVIDIA or TSMC would would have people believe. But I I I'd love to get a sense from you of how how wide the gap the capability gap is.
Speaker 4:Yeah. So I think there's two dimensions to this. First is the quality of the chips themselves. So if we look at that, you know, how how many flops you have the thing per second ships that are coming out now is sort of three to four years behind the best stuff that's available from NVIDIA. But, you know, that has been a move towards catching up over time.
Speaker 4:I think export controls are the one thing that could reverse that trend as these have only really just become effective over the last year or so. The other and this is sort of, like, a really important factor is not just how good each chip is, but how many they're able to produce. So, you know, in in AI especially, it's a it's a not so much a, matter of quality of chips that that is important. It's also very much quantity, like how many you're able to produce. And there, it's where they're really constrained.
Speaker 4:So being able to produce, you know, high end chips by the sort of millions like TSMC is able to do is a very serious manufacturing operation, and China doesn't have that level of scalability. And because we have export controls across the stack with tooling and fabs as well, that is one of their key bottlenecks.
Speaker 2:What do you think Chinese state investment into semiconductors looks like today? It's obviously they've had 14 separate five year plans, I believe, around Yeah. Around the industry. So at this, you know, at this point, don't know how many hundreds of billions or, you know, who who knows even dollars have gone into the industry, but I imagine this is, you know, one of the you know, will just continue to be more and more important every single year.
Speaker 4:Yeah. So the wages have been just Hello? To revitalize the American domestic semiconductor manufacturing industry. Over time. China is doing this this sort of equivalent amount of funding roughly every year, to support its own domestic industry.
Speaker 2:Tim, we we keep we keep losing you, by the way. You're kinda cutting in and out. I maybe there maybe the cyber attack has shifted onto your personal mobile device. They really don't they really don't want Tim talking right now because he's dropping dropping bombs. But could you repeat?
Speaker 2:I think we have you now. Could you repeat what what you said your potential estimate was?
Speaker 4:Act in The States, this big landmark piece of legislation to revitalize the semiconductor industry here. That was about 52,000,000,000 as sort of a once off package that's being distributed over a few years. Best sources I've had say China is distributing, like, this equivalent amount of money roughly every year their own semiconductor industry.
Speaker 2:How do you think Huawei is, you know, reacting to the tariffs? They're a private company. So I feel like we have a lot less just information on on on a lot of things. But are they, you know, approaching some of these other company or, you know, nations that are facing tariffs specifically with kind of, like, new op you know, basically trying to take advantage of the situation?
Speaker 4:Yeah. I didn't use it. Didn't I'll be doing in this situation. So similar to how Huawei managed to outmaneuver The United States with five g installing base stations all over the world and sort of surpassing The US in that technology. A similar play that they could be executing now is trying to do the same thing on data centers, especially if US equivalents are becoming much more expensive.
Speaker 4:But now they don't have comparable technologies on the AI chip side, but they certainly do on the lower end stuff. You know, Alibaba Cloud, like Huawei, they all have their own data center offerings that they're sort of pretty aggressively courting the global market with.
Speaker 2:Makes a ton of sense. What what else what else are you thinking about right now in terms of, you know, now now that the news came out that the order's being stalled, what do you think the the admin should be focused on, you know, over the next weeks and and months?
Speaker 4:Yeah. So I think the one big lesson from all of this is that we keep making the same mistakes in the sense we keep acting too late to really be effective. The thing with export controls is you want to act early because there's always the risk of things like stockpiling. Like, if there's a room that Xbox controls are coming and they don't happen for another six months, it just gives a huge opportunity for companies to take preventative action, then you can completely ruin the effectiveness of what you're trying to do. This has already happened with HPN memory, so, like, high end memory that's really crucial in AI chips.
Speaker 4:The rumor was leaked that, controls for this stuff was coming, and Huawei reportedly stockpiled around 2,000,000 chips worth of this, before the new rules came into place. We've also been caught blindsided, you know, by DeepSeek, finding out that they trained their models with, US chips that were sold before the restrictions and policymakers being like, wait. What's going on here? They're sort of smick when they came out with their seven nanometer breakthrough in 2023. It turns out they were using secondhand DUV machines, which we have since controlled, but they already got their hands on them.
Speaker 4:There's been a bunch of cases like this. And, really, yeah, we're just being much way more reactive than we need to be. I think if you just had a team within government who is technically competent and who actually see and then what's really important gonna be really important for AI technology in six months, you could actually be doing much better proactive policy making. So one thing we're advocating for is just setting up this kind of situational situational awareness capacity within government so we can get it get it right next time.
Speaker 2:Yep. That makes a ton of sense. Well, we should have you back on when we
Speaker 1:question. This just This is interesting. Apparently, Google Meet is down as well. I don't know exactly what's going on, but story is still developing. But I mean, thank you so much for taking the time.
Speaker 1:We really I really do wanna have you come back for a much deeper dive into all of this because it's it's fascinating. Yeah. Let's get
Speaker 2:on the calendar today.
Speaker 1:Absolutely.
Speaker 2:Can do this properly. But thank you for making it work, Tim. And thank you for, you know, following the situation so closely and trying to get us on the right path here.
Speaker 4:No worries, guys. Catch you later.
Speaker 1:Cheers. Talk to you later. Bye. Awesome. This is Chris.
Speaker 2:Everything is down.
Speaker 1:Everything is down. Down detector is showing that not only is Zoom down, but Google Meet is down as well. I thought we could shift over, but we will have to figure it out. Let me message the rest of our guests. Zoom down BTW, Google Hangouts to working on a fix.
Speaker 1:Pretty pretty crazy time. I I don't I don't know if there's anyone actually reporting on what's going on. All I'm seeing is that apparently
Speaker 2:Well, I have some reporting. OpenAI is buying talks to buy Windsor.
Speaker 1:Was saying, should just talk about that. Maybe we just do the timeline. And we and we and we get the we get the guests to come back tomorrow and just do a stacked meeting because it seems like we are absolutely under attack. Yeah. And hopefully hopefully it resolves tomorrow.
Speaker 1:But we had we had two interesting companies coming on. Captions is launching some stuff today. That's the app that actually, Ev Randall over at Kleiner invested.
Speaker 2:Absolute dog.
Speaker 1:And I use that app all the time. Anytime you see me post a video that has some captions on the bottom, always Captions app. I love Captions. And then Deck announced a big fundraise today, something like $12,000,000. We were excited
Speaker 2:to talk to them.
Speaker 1:Instead, we might just talk about the timeline because Let's
Speaker 2:talk about the timeline.
Speaker 1:Something's working. So, yes, this is a scoop from Bloomberg. OpenAI is in talks to buy coding app Windsurf, formerly known as Codium, for around $3,000,000,000 per sources familiar. It would be OpenAI's largest acquisition to date. They haven't been super acquisitive, but it makes sense.
Speaker 1:It's like if they need a wrapper in every single space, maybe they should just go and acquire them. We've been hearing rumblings about like a code first model, something that's really, really trained. It seems like opening eye on the API side has become at least this is the vibe on X is like, oh, if you're gonna use cursor, you're gonna use clot. Right? And Yeah.
Speaker 1:And for most consumers, there's still, yeah, ChatGPT app, I use four o or whatever. But for the developers who really care about the the quality of the code, that little extra push is what's valuable. And so having both a model that's trained by OpenAI to be specifically good at programming and then also having something that's popular, like, you know, the wrapper built on top of it, all the integrations that you get from Windsurf makes a ton of sense. So Zach DeWitt over at Wing VC, I believe. Yeah.
Speaker 1:Partner at Wing VC. I clocked it. Good memory. And he says, incredible outcome in four years. They did a seed 3,000,000 on '26 post by Green Oaks.
Speaker 2:Green Oaks is early. Billion dollars for Green Oaks.
Speaker 1:Another billion dollars for Green Oaks.
Speaker 2:Yeah. Quick plug for
Speaker 1:Patrick O'Shaughnessy.
Speaker 2:Our latest episode with Neil Mehta Yep. Over at Green Oaks. You can go find the episode Finding Future S and P 500 companies on Invest Like The Best. Go check it out.
Speaker 1:Yeah. Then they did a series a, 25,000,000 on two fifteen post, again by Green Oaks doubling down. Then Kleiner comes in for the series b, 65 on five ten million post. And then a hundred and $50,000,000 series c at 1.25 post by general catalyst. So founders and the team likely own 55%.
Speaker 1:So that's over a billion dollars in liquidity to the founders and the and the team. And at 20% of 3,000,000,000, Green Oaks will be just shy of that billion. So Yeah. So, you know, a small size Gong
Speaker 2:for Wait. I actually would I would assume they own
Speaker 1:do you think Oh, maybe they use, like, pro rata and stuff in
Speaker 2:the No. But I just assume they they bought, you know, they continue to buy up. So
Speaker 1:I don't know. I mean, point two five of thirty what what was it? 3,000,000,000. Right? It's 750,000,000.
Speaker 1:So something around there. Not bad. Not bad. Not bad. For An honest day a $28,000,000 investment
Speaker 2:Yeah.
Speaker 1:To go from 28,000,000 in to 750. Yeah.
Speaker 2:It's interesting because you often see Green Oaks doing some these later stage rounds.
Speaker 1:Yep. They're known for like growth and being very analytical.
Speaker 2:But But doing this one from seed
Speaker 1:They got them to seed and the series a.
Speaker 2:You loved seed. Very impressive.
Speaker 1:Your jacket is going viral right now. People love it.
Speaker 2:Yeah. We should just since our video is still up and all the other platforms
Speaker 1:Yeah. Just do some let's just do more ad reads for the rest of the hour.
Speaker 2:Look the back.
Speaker 1:Yeah. The back is great. Love Lucy and Ramp. We put we put our sponsors on here. We also just put companies we're affiliated with.
Speaker 2:We still have a
Speaker 1:We still have space.
Speaker 2:This is gonna be gonna have
Speaker 1:to That's Legacy. So that's yeah. That so, yeah. I mean, if you're in the audience and you got some dough, maybe you wanna get on the jacket, now's the time to email Jordy. Out get out
Speaker 2:Pretty much out of inventory.
Speaker 1:Get out your ramp card and sponsor us. We are 100% corporate backed, by the way. Just so you know,
Speaker 2:we will
Speaker 1:never ask our audience for a dollar. We're not audience captured. We do what's in the interest of the corporations that sponsor us. Independent media is dead. Corporate media, as I call it, is the future.
Speaker 2:That's right. Free media for all.
Speaker 1:Anyway, speaking of corporate media, the media around Blue Origin, we should go back to this because we didn't get to finish the conspiracy theory.
Speaker 2:Can we play the video?
Speaker 1:Yeah. We can probably play the video if it's up. We'll have the we'll have the team try and pull that up. But, so the door opens to the Blue Origin capsule as it descends. Then they say, hey.
Speaker 1:Don't open the door. Close it. And then finally, they open it up and everyone comes out. And so this was seen as proof that the mission was faked, and there is a conspiracy theory here. But my conspiracy is a little bit more anodyne.
Speaker 1:It's that they wanted all the cameras to be turned on before they did the big reveal of, like, getting out of the spaceship. And so they opened the door. Yeah. You can see they opened the door, and then they closed the door. And not yet because, you know, NBC is here, but CBS hasn't arrived yet with the truck.
Speaker 1:Because these capsules, they come down. You can't just be right there. They don't even know exactly where they're gonna land in the desert. So if you watch the zoomed out feed at the very beginning, I think, at the very beginning of this, you'll see, all the trucks are driving. They're they're they're they're scrambling to get to the landing site.
Speaker 1:Bezos was clearly just the first one in the chase vehicle to be like, I'm gonna get there first. Make sure my wife's okay. You know? Check-in on the girls. The girls the girls chat, as they said.
Speaker 2:The girls group chat?
Speaker 1:Yeah. He sent the group chat to space.
Speaker 2:Sent the to
Speaker 1:Sent the group chat to space. But oh, Bezos falling down the hole. But he gets right back up. He gets right back up. That is crazy.
Speaker 2:Oh my gosh. That is
Speaker 1:a big drop. I hope he's okay. Big drop. I hope he's okay.
Speaker 2:Isn't that what Brian Johnson is deathly afraid of? Falling? Like a fall.
Speaker 1:Oh, really?
Speaker 2:I didn't
Speaker 1:know that.
Speaker 2:Yeah.
Speaker 1:I thought he does leg press.
Speaker 2:I think it's because
Speaker 1:He doesn't do that much leg press. So he's worried about it.
Speaker 2:So Andrew Cote Cote. Cote says, can any space nerds help me understand how the blue origin capsule came back down without any reentry burns? Was this a trajectory thing or some kind of superior material used? Falcon crew capsule for comparison. So Scott Manley jumps in.
Speaker 2:He says it only flew at Mach three fast enough to reach space for a moment.
Speaker 1:And to be clear, Andrew is trolling. He knows what's going on here. He's baiting the timeline to make it be like, oh, it's a conspiracy. But he he everyone's, like, laughing like this is, like, a s tier bait. Because, like like, he knows that when, like, this mission I mean, they've done these missions, like, all the time, and they never get burnt because they don't go that fast.
Speaker 1:And so that's what Scott's enumerating here. He's he's laying it out. Scott says it only flew at Mach three, fast enough to reach space for a moment, not fast enough to stay in space. For that, you need Mach 25. As you can imagine, there's a huge difference in the kinetic energy between those speeds.
Speaker 1:And so the real conspiracy theory here is that this was a, you know, a fun space tourism thing. But it's it's marketing for Blue Origin. They did a great job of puzzling together what is the crew that would probably go the most viral. So it's not just Lauren Sanchez because that's probably not newsworthy. You gotta put Gail King on there, so CBS has bought in.
Speaker 1:But then also throw in Katy Perry. Because throwing Katy Perry, you you create an even wider audience of you know, she's a global celebrity. Everyone needs to know about Katy Perry going to space. And it just seems like it's a lot of fun. So I would definitely go on one of these.
Speaker 1:I think this seems like a really fun trip. It's only a quarter million dollars. So I was thinking
Speaker 2:They're basically given space trips away
Speaker 1:They are. At some point. Are. I was thinking, like, there might be a trend of, like, send the girls chat, the group chat to do something extravagant like this. We might be seeing this with other tech people.
Speaker 1:Maybe you don't own a space company, but maybe you just Yeah.
Speaker 2:Guys out there, if you wanna have a boys weekend Yeah. Send
Speaker 1:your wife and her friends Yeah.
Speaker 2:To space.
Speaker 1:To space. But that'll then they're only up there for twelve minutes.
Speaker 2:Yeah. Twelve minutes. I mean, still.
Speaker 1:It needs to be like, how about, you know, cross the ocean on a sailboat? Then the boys can go do the Nurburgring
Speaker 2:for Get
Speaker 1:them a wander. I don't know.
Speaker 2:This was funny. Jeff Tang highlighted this. So this this icon, Kenneth Davidson on the phone before on the show. Yeah. He is a funny guy.
Speaker 2:He put out a competitor landing page with a comparison page and it was pretty hilarious as as every competitive sort of comparison page should have icon checks every single box including a % money back guarantee, script writing and creative briefs, audience research, video ads, static ads, creative storage, asset tagging and splitting, lip sync UGC videos, creative analytics, competitor ad spying, ad manager upload, tier one investors, tier one engineering team, seven day work week. And he did not give OpenAI credit for tier one investors or tier one
Speaker 1:engineering team. Which is brutal because they have the same investors.
Speaker 2:Well, and they're probably ICON's probably using various
Speaker 1:ChatGPZ products. For sure. And also, like yeah. It's like Founders Fund is in open is in OpenAI and ICON. And so it's just such bait be like, yeah.
Speaker 1:We're the only one with tier one investors. Like, no one else in the AI category has tier one investors.
Speaker 2:That whole AI thing?
Speaker 1:Like, this is true in other categories. Like, we talked about general matter.
Speaker 2:Like pull up the
Speaker 1:are a lot
Speaker 2:of Let's pull up the website too because I actually think it's
Speaker 1:Icon?
Speaker 2:I think the icon.me website is, like, fascinating in general.
Speaker 1:Yes. Yes.
Speaker 2:Pull pull it up real quick.
Speaker 1:So so the story here is that is that, obviously, Jeff Tang is very much, like, trolling trolling Kennen being like, this is a ridiculous comparison. I love comparison pages competitor comparison pages because this is hilarious. And then Kennen says, what a lame comparison chart. This seems to be the website. Website.
Speaker 1:And so he's he's, like, dunking on his own thing just to link to his own website because he just wants the traffic. He's, like, a total, like, just drive the bottom line. Doesn't matter if it's embarrassing. Just make the money. And Jeff Tang, courtly
Speaker 2:So look at this website.
Speaker 1:Oh my god.
Speaker 2:This is the most conversion optimized.
Speaker 1:This is hilarious.
Speaker 2:It's actually so it's actually so chaotic
Speaker 1:that I actually get to investors, tier one.
Speaker 2:Team, tier one engineers. I've never even heard the term tier one engineers Tier one. And but look how optimized this is.
Speaker 1:Wow. Us versus them. There it is. Hey. Hey.
Speaker 1:Changed it. They updated it. They updated it. They put OpenAI tier one investors. And Wow.
Speaker 1:They must have gotten some feedback on that.
Speaker 2:They're selling the product as you can become a founding adviser What? To Icon.
Speaker 1:What? It's like it's like almost like MLM coded. It's like a pyramid scheme now.
Speaker 2:I don't know. I don't know. But they also sell they they
Speaker 1:sell You can just sign up for this. Right?
Speaker 2:You can go an app, like, go on the go on the pricing page. Just click Okay. I'll I'll send it in the chat. Yeah. This is the most chaotic SaaS website I've ever seen.
Speaker 1:It's honestly so funny. This guy is wild. Well, he
Speaker 2:But look at the pricing page on here. They basically built it like a Okay. They basically built it like an e commerce.
Speaker 1:Yeah. It looks like checkout on e commerce. Wow.
Speaker 2:Limited off for only four spots left. Ends four eighteen.
Speaker 1:No. No. No. For a SaaS product?
Speaker 2:And scroll down. They sell a premium banana,
Speaker 1:which is Wow.
Speaker 2:I guess a banana you can just check out with Apple Pay.
Speaker 1:This is so hilarious. I mean, at this point, it seems like with him with him, like, retweeting these and engaging these, like, he's in on the joke. And so it's gotten way funnier. Like, if this was just, oh, he's really, really serious about all this stuff. Like, he really thinks that he has 200 investors and OpenAI doesn't.
Speaker 2:They got Saquon Barkley in here too.
Speaker 1:Did they? Who knows? That is the thing with, like, this comedy landing page. I don't know what's real anymore. Like,
Speaker 2:if Well, hopefully, the product is real.
Speaker 1:Hopefully, the product is real. We we I mean, we did talk to the Ridge guys. They said they were using it. It was pretty useful. I think, obviously, it's an early stage company.
Speaker 1:Kennen is trying to get some eyeballs, get some attention, and just kind of break through the incredibly crowded market of, like, AI tools. Right? And so you gotta make some noise to be able to just get get through. But we'll have to put that whole site in the truth zone, figure out if Saquon's really in Icons Icon dot To
Speaker 2:our knowledge, he's in Anderol and Ramp. That's what he's closed. Two company portfolio.
Speaker 1:Yeah. But he could be ripping checks all over the place, all over the valley. We'll have to figure it out. But speaking of Ramp, time is money saved both, easy to use corporate cards, bill payments, accounting, and a whole lot more all in one place. Go to ramp.com.
Speaker 1:Switch your business to ramp.com.
Speaker 2:Switch your business to ramp.
Speaker 1:And Ryan Peterson had a good post. He said, a 1% daily improvement compounds over a year to a 37 x improvement over the entire year. But I think he's thinking too small. So I asked ChatGPT, what does a 100% daily improvement compound to over a year? If you compound by a % every day, you're doubling each day.
Speaker 1:That's exponential growth, baby.
Speaker 2:That's right.
Speaker 1:So if you start with one as a base and double it every day for a year, by the end, you will be 1.52 times 10 to the one hundred and ninth power better than you were at the start of the year. That's one followed by a hundred and nine zeros or 1.52 novem decillion in the short scale. Doubling every year every day for a year gives you one point golden retriever mode. 1.52 novem zillion times your original value. This is absurdly huge.
Speaker 1:A classic example of why compounding growth explodes with even modest periods.
Speaker 2:You don't understand So
Speaker 1:if you're thinking about improving 1% daily, just do a % daily. And then you'll just be so much better off. So Risk off. Risk off. It's great.
Speaker 1:Sound board is not broken. They haven't cracked the sound board.
Speaker 2:Yeah. That's been our most chaotic show to date.
Speaker 1:It has.
Speaker 2:It has. We're cyber attacks. Yes. We have the new sound board. Yep.
Speaker 2:Zoom is down. Google Hangout is down. Not in a suit. I'm not in a suit.
Speaker 1:I think it's a more relaxed show. We're just having fun with it. It's okay. It's okay. The show must go on.
Speaker 1:That's the most important thing.
Speaker 2:Well, you know what service is not down, John?
Speaker 1:Get bezel.com.
Speaker 2:That's right.
Speaker 1:And Bezel Concierge. They're working overnight.
Speaker 2:Bezel app.
Speaker 1:They're working overtime. Your Bezel Concierge is available now to source any watch on the planet. Seriously, any watch. Pick up a you know, they're not gonna they're not gonna hack your GMT master, Batman. They're not gonna they're not gonna hack your Submariner.
Speaker 1:Yeah. They're not gonna hack your Paul Newman Daytona.
Speaker 2:I'd like to see him try.
Speaker 1:I'd like to see him try. It's gonna keep your your Patek Philippe, Cubitus, is still gonna tell time Yeah. After the AI overlords have destroyed all of the data center infrastructure in this country. We'll see.
Speaker 2:Should we pull up this post from Josh Kushner? Yeah. Sure. He says Sure. So we talked about this yesterday.
Speaker 1:Yes. Yes.
Speaker 2:Yes. Somebody asked, do VC funds invest in competitive companies? Kyle Harrison pulled up a chart that said evidence would point to yes showing how many of the big venture capital firms have invested in multiple or at least a couple foundation model companies. And Kushner over at Thrive Capital has I don't even think he's on the chart because he's only invested one. And he's invested in a very important one.
Speaker 2:And he likes, I think, staying off of the charts like this for the most part. I think Benchmark or sorry, Jeff Lewis and the team have also just gone all in on OpenAI. So there's still quite a few. But again, I I think that this is an evolution of venture capital and it is a a natural evolution Mhmm. That firms will invest in competitive companies.
Speaker 2:And I do think that firms generally do a great job of keeping firewalls up and not, you know, sharing information that would be, you know, damaging to any any of the individual companies.
Speaker 1:Yeah. It's interesting. I mean, I I I think that, obviously, there are secrets in these foundation labs, and there are algorithms and just even just, you know, the path down the r and d tech tree, like reasoning models. It came from Ilya Sutskever working on Q Star at OpenAI. When he leaves to start SSI, you know that there's gonna be a reasoning component, a reinforcement learning component on top of LLMs.
Speaker 1:There's gonna be self play. Like, this worked well at OpenAI. He takes that, and you can't patent that idea of, like, a reasoning model or applying reinforcement learning on top of LLMs. And so not only can you not control that or patent that or keep that out of the hands of Grok or Thinking Machines or Mistral or any of these other companies, but I don't think that the VCs are the vector for these types of leaks. I think it's like the AI happy hours and the Yeah.
Speaker 1:Parties in San Francisco where people are talking and they're like, oh, did you see this paper that someone just published? Yeah. Or somebody, you know, reimplemented the open source versus
Speaker 2:founders in the early part of their career. Well, I I've seen them be worried to pitch a firm because they were invested in something that was competitive or adjacent to what they're doing. Mhmm. And the reality is is your competitors are gonna find out about what you're doing generally.
Speaker 1:Yes. That's not necessarily your moat. It's rarely your moat. Like, the Coca Cola formula rarely applies. But at the same time, like, it is reasonable to say, if I'm if I'm really partnering with a firm and they're gonna take twenty, thirty, they're gonna build a big position, they're gonna be on my board, do I really want them to have this weird, like, Yeah.
Speaker 1:This weird conflict where they they they find a great VP of engineering, and they're like, well, I could send it to you or I could send it to your direct competitor that I'm also invested in. Yeah. Like, any sort of, like, value add does get does kind of get spread thin. But I guess it I guess it gets back to this idea of, like, how commoditized is the foundation model layer and how different will these companies look over over time? I mean, you know, Andreessen here is in OpenAI and XAI.
Speaker 1:Those two companies seem at each other's throats. Like like, OpenAI is launching a X clone. XAI bought X, and so they're, like, really direct competitors. But at the same time, like, oh, if OpenAI is is buying Windsurf and developing more consumer products and then SSI is saying, hey. We're staying out of that entirely.
Speaker 1:And then Mistral seems to be focused more on b b to b and government implementation, and Anthropic is very much on, like, the the API side, for example. You could imagine that the the foundation model just becomes like cloud. And at that point, like, you wouldn't be that upset about investing in, a Salesforce and a PagerDuty and a and a Twilio. Like, these are very different companies over time. Versus if we
Speaker 2:could cut It's clear the end state is not just 10 Yes. You know, chat apps
Speaker 1:Yeah. So so so it's like the foundation model layer may commoditize, but that doesn't mean that the companies are going to commoditize. Like, Lyft and Uber are true, true supplements to each other. Like, they are they are not complementary. And in any way, you're either spending money on Lyft or Uber.
Speaker 1:They're very similar experiences. Now, one not
Speaker 2:really better than the other. Businesses.
Speaker 1:For a long time, it's capital fight.
Speaker 2:Because people would open both apps
Speaker 1:and Exactly. Yeah. It capital which
Speaker 2:is faster, which is cheaper. Yep.
Speaker 1:Yep. Yep. But but if if OpenAI winds up looking completely different than Thinking Machines or SSI or Mistral in a few years, that, like, there could be winning companies that are very different, but just built on the same, you know, foundational technology.
Speaker 2:Yeah. And I and I assume that we'll see some of the foundation model companies merge I mean, I'm We're we're yet to see that because they're still extremely well funded.
Speaker 1:Yeah. Didn't was it Sequoia that did Intel and NVIDIA? I mean, they're like a decade apart. But in theory, they're both like chip companies. Right?
Speaker 1:But they operate in very different spaces, and they have very different models now, fabless versus integrated. But, you know, there are some funds that have stayed the course. Josh Kushner over at Thrive is a serial monogamist. Deleon also chimes in to say, sorry. Can someone explain to me why we're on this if we only have one arrow?
Speaker 1:Yeah. Josh, I Josh, we're not spraying
Speaker 2:the Manage to stay off the list. Founders Fund was not as lucky.
Speaker 1:Clocked on there. Yeah. But it is it is weird that, like, this is I mean, I guess it's just I I guess this original this original diagram was just to show, like, what funds are in what are are in what foundation model companies, but then very quickly became, you know, oh, they're investing in multiple. But then it makes less sense for for FF to be on there. Anyway, did you see Black Flag launched today?
Speaker 1:The founder sent me this. It's an incubator for hard tech companies, and they are split across a variety of Well different industries.
Speaker 2:John, I'm actually launching an incubator for incubators.
Speaker 1:Oh,
Speaker 2:yeah. So I'm gonna reach out to these guys and see if they wanna be a part of my incubator incubator.
Speaker 1:The meta incubator. I mean, I guess it's being called the LP, but Harpoon Ventures is the is the the main firm behind this, and they're in collaboration with ShieldCap VC, who we've talked to before. And In Q Tel is an investor, which is the CIA's venture fund. So that's pretty pretty fun and good news. I mean, I think that there's a lot of a lot of folks that you know, I I think you can say, like, YC is the incubator for defense tech, and YC has been open to this.
Speaker 1:But at the same time, like, there might be some benefits to having an incubator for, like, specific hard tech companies. So, you know, you maybe amortize the cost of some, like, CNC machine or some, like, you know, shared hard workspace or some CapEx stuff. But I don't know if they're planning to do that.
Speaker 2:No. I think it's awesome. I just wanna see Just more of
Speaker 1:this stuff is great. Competition. Yep. You know, companies are now going through multiple programs. I mean, we talked to Ali, and it seemed like some of those companies had done had done Neo and then also done Thiel Fellowships and then Also, Thiel Fellows.
Speaker 1:Velocity Fellows.
Speaker 3:And then
Speaker 1:they also raised YC. YC. Exactly. It's like yeah. There there there's an overlap of these.
Speaker 1:There's just like, at the end of the day, it's just like
Speaker 2:For for black flag, I don't know anything about it other than this graphic. But what's cool about specifically defense and aerospace and anything government related is that there's an entire they can provide a very clear benefit to founders that maybe don't have a defense aerospace background
Speaker 1:Yeah. Yeah.
Speaker 2:But can sort of they can really accelerate that knowledge and and networks and things like that and allow people that maybe we're building in SaaS to come in and and play in a new arena. So
Speaker 1:Yeah. Well, if you wind up with 20 k from one of these incubators and it's no strings attached money, why not throw it in public?
Speaker 2:That's only NEO, by the way. NEO is the one that
Speaker 1:I mean, we've heard stories about, Teal Fellows investing their their money if they're profitable.
Speaker 2:Yeah.
Speaker 1:Because it's
Speaker 2:a it's an it's kinda no strings attached recommending venture dollars. These are grant basically grants.
Speaker 1:But, I mean, why don't we have an accelerator for hedge funds? Like, go in
Speaker 2:They exist.
Speaker 1:They stake you. I know they exist. Yeah. But, like, you know, you just get the first, like, high frequency trading shop from YC, that's gonna be a banger company. Come in, it's like, your your demo day slide is just like, we started with 500 k from YC.
Speaker 1:AUM's five million now. We 10 x that.
Speaker 2:There we go.
Speaker 1:We got a couple more 10 x's. It's a billion dollar company. Get in now.
Speaker 2:There we go.
Speaker 1:Here's the LP agreement. We're not we're not doing safes.
Speaker 2:No safes here.
Speaker 1:That'd be funny. Anyway, you know about public.com investing for those who take it seriously. They got multi asset investing, industry leading yields, and they're trusted by millions, folks. Anyway, I think we've been through most of the timeline, most of the great shows.
Speaker 2:This was a chaotic show. I'm excited to figure out why all of our, you know, Internet services are We need
Speaker 1:a polymarket on this right now. We need a polymarket. Why did Zoom and Google Hangouts, Meet, video, whatever they're calling it these days, why did all the why did all those services go down? Was it a cyber attack? Was it not?
Speaker 1:I wanna know about it on Polymarket. That's our other sponsor. So go to Polymarket and check it out. We'll try and get them market up ASAP.
Speaker 2:And I just wanna say, I've I think I've gotten at least 30 individual messages about the TBPN jacket from people Really? Are wanting it. So
Speaker 1:That's amazing.
Speaker 2:We weren't even planning to release to sell these.
Speaker 1:Yeah. Should we should we tell them it's it's $9.99, but financing it will be available. You can buy now, pay later. It's it's 12 payments of $99 if you want one. So that's kind what the market will bear.
Speaker 2:Yeah. And we're gonna donate the profits to All In, which doesn't run
Speaker 1:No.
Speaker 2:No. No.
Speaker 1:We're gonna donate the profits to my next watch on Bezel.
Speaker 2:That's right. Okay.
Speaker 1:Get bezel.com, folks. They got Concierge's. They'll find you a great watch.
Speaker 2:John loves watches so much. He's running two Bezel ads on the same show. But thank you for tuning in, folks. I'm excited for tomorrow's show. Yeah.
Speaker 2:Do we wanna talk about who's coming on?
Speaker 1:We're coming back. We're gonna bring on tons of people. We're gonna stack it. Maybe we'll do a six hour stream to make up for the lost half hour. I feel like if you lose a half hour, you owe the fans four hours.
Speaker 2:That's right. Right? Every half hour, it's four hours.
Speaker 1:No. I mean, we we we got a great show tomorrow. We got Delian coming on. We got Shyam Sankar from Palantir.
Speaker 2:CTO of Palantir.
Speaker 1:CTO of Palantir. First Ford deployed engineer. He's been in company for, twenty years. It's incredible. I I was hanging out with him.
Speaker 1:He was a public company. And I was like, so what's next? Like, you're a public company. Like, what's your goal? And he was like, oh, we gotta get into the Fortune 500.
Speaker 1:And I was like, that's an insane goal. I've never heard anyone, like, frame it like that. And then, like, a couple months later, I had to send him a congrats message because it was like, they are now officially in the Fortune 500. I was like, that's sick. Congrats.
Speaker 1:And then we're also gonna have some robotics CEOs come on, work on a couple different robotics companies and talk about those. And of course, we'll we'll we'll be bringing you to the news, talk about whatever's top story. I think we covered the NVIDIA stuff pretty well, but I'm sure there'll be more developments.
Speaker 2:I didn't realize we completely missed a major story. What's the major story? Figma.
Speaker 1:Oh, yeah. The s one dropped.
Speaker 2:Did an s one.
Speaker 1:Congratulations to everyone who's been working on Figma.
Speaker 2:Amazing milestone.
Speaker 1:I mean, it it is one of those rare companies where it is an overnight success. It's been like, what, fourteen, fifteen years. But Overnight success. But congratulations to Dylan Field and all the folks over at Figma. What a roller coaster ride, years in stealth, back and forth with Adobe.
Speaker 1:Wasn't it like four years Basically.
Speaker 2:Before they shipped a product or
Speaker 1:Something like that, and they were still raising money. It was sheer force of will. Classic overnight success.
Speaker 2:Classic overnight And
Speaker 1:you love to see it. And We're gonna be diving in deeper to Figma. We should tell the whole story. We should do the whole a whole deep dive on the company. This is a fascinating story.
Speaker 1:And Tealville.
Speaker 2:Be at config.
Speaker 1:Yes. We will. We're gonna be doing post game interviews from config, interviewing some of the greatest designers in the world, some entrepreneurs, some investors, all sorts of folks in the design world. That should be fun. I'm I'm newer to the design world than you, not a not a Figma daily driver like you, but I'm excited to learn a lot about it.
Speaker 1:You're a creative athlete, though. Yeah. Creative athlete.
Speaker 2:Yeah. A little bit.
Speaker 1:I mean, there's creative stuff all over. Design is in everything in this world. That's right. Anyway, thank you for watching.
Speaker 2:Alright, folks.
Speaker 1:We will
Speaker 2:see you tomorrow. A fantastic afternoon. We are gonna call up Tim Cook.
Speaker 1:Yep.
Speaker 2:David Daniel Elk from Spotify Eck. Try to get these services back online.
Speaker 1:And Sundar, because Google went down. That's unacceptable. I think our SLA says no downtime.
Speaker 2:And who's the Zoom CEO again? It's Eric. Eric. You on?
Speaker 1:I just know him by Eric. When I text him, I just say, what the hell is going on? We'll
Speaker 2:on group chat, and we'll say, let's get it together, guys.
Speaker 1:Because Let's get it together. Let's step it up. Now is the time. You can't be slacking off. Yep.
Speaker 1:You can't be slacking off, guys.
Speaker 2:Every minute of productivity counts.
Speaker 1:It does.
Speaker 2:Alright. Have a great afternoon. We'll see you guys tomorrow. Bye.