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Technology's daily show (formerly the Technology Brothers Podcast). Streaming live on X and YouTube from 11 - 2 PM PST Monday - Friday. Available on X, Apple, Spotify, and YouTube.
You're watching TVPN. Today is Monday. It's 11/17/2025. We are live from the TVPN UltraDome, the temple of technology, the fortunes of finance, the capital capital. I didn't think you'd get that much use out of that One second.
Speaker 1:Effect.
Speaker 2:May I podcast with you, John?
Speaker 1:Yes. Of course, Jordy.
Speaker 3:Thank you.
Speaker 1:Also, you might notice yellow suits ramp announced a new valuation today. Time is money. Save both. Easy use corporate cards, bill payments, accounting, and a whole lot more all in one place in just over an hour.
Speaker 2:Go to the Go to the wide first week. Ramp himself. No. The the main the main one. Ramp himself will
Speaker 1:be joining us.
Speaker 2:Look how 12:15. Look how visible we are, John.
Speaker 1:We are very visible. Yeah. Wow. This is we should wear yellow every day. Well, thank you for tuning in on this Monday.
Speaker 1:There's
Speaker 2:a bunch
Speaker 1:of stories. But first, I wanted to debate with you about, restream first. One livestream, 30 plus destinations, multistream, reach your audience wherever they are. But second, I wanted to debate with you about what to do with about GPT four point o, four o. Not four point o, four o, four Omni.
Speaker 1:There's a debate over whether or not it should be sunset, whether it should be taken out back because people are not happy with how OpenAI has sunset four o and then brought it back. And then other people who don't use it think it's gotta go. It's one shotting people. It's making them crazy. And it's a very, very interesting weird scenario.
Speaker 1:And, and we were sort of debating with it, and I wanted to debate it a little bit further because, there were some posts that actually hit the timeline that were talking about this. Aden over at OpenAI was, was talking about this saying that, you know, he's noticed the, the amount of, he says, I see dozens of keep four o posts a day. I respect this group's tenacity as I respect all friends co exploring the singularity. To them, know that I too miss parts of four o, know that I too dislike modern alignment's imprecision, know that we are trying to fix it. We don't think any current chatbot is optimal.
Speaker 1:Know that my colleagues and I are up at 3AM on Sundays babysitting runs. We want to make a delightful robot friend. We're we're obsessed with it. We're not there yet, but the work will continue. So I wanted to dig in a little bit into what was actually going on there because that that for Aiden works at OpenAI.
Speaker 1:It's right in his bio. Like, it's very public that he's sort of addressing this. It feels like a big deal. It feels like a crazy thing that they brought it back. And, I mean, 700 likes, that's that's not nothing, but it's also not 10,000.
Speaker 1:It's not it's not a huge community of people that are there. There's some. And I was looking at the hashtag keep four o. Like, who else is posting? There's a couple posts with 10 likes, 50 likes.
Speaker 1:There's a couple with a 100. But it doesn't feel like there's this insane community. I went over to Reddit and checked that out. Obviously, on the day four o was sunset, just to give some backstory, it's been eighteen months since four o was introduced. It's been three months since it was initially removed, but then it was quickly brought back.
Speaker 1:And now it's, and now it's tucked in under that, modal, so you have to enable legacy models. And I always thought that they should just remove it. But I wasn't I wasn't even saying that because I thought it was one shotting people. I just thought, hey. Let's clean it up.
Speaker 1:Like like, consumers don't need to know version numbers for models. And my example is always Google.
Speaker 2:Consumers disagree.
Speaker 1:Some consumers do disagree. The question is how many consumers, how how what percentage of their consumers, how big of an issue is this? When you think about Google as a consumer, you don't care what version of the rank ranking algorithm you're on. You might have a worse experience one day. You you Google something.
Speaker 1:It you don't find it. The next day, you go, hey. They found it for you. They probably changed the algorithm. But there and there have been big updates to the algorithm.
Speaker 1:Back in 2013, they released Hummingbird, which was the code name. And they came out, and they actually did a presentation. They said, hey. We have a new update to our algorithm. It'll handle natural language more effectively.
Speaker 1:So if you go to Google search and you say, what is the capital of Russia? It won't get confused by what is the capital of. You could just type in whereas before, you need to say Russia plus capital, you know, and then it would find it. But it would get confused by the natural language. And and Google fixed that.
Speaker 1:They rolled it out. Interestingly, they they had this event where they where they announced, hey. We we have this new this new algorithm update, Hummingbird. And guess what? It's actually been live for a month.
Speaker 1:They announced it at this event, and it'd already been live live for a month. No one was complaining. No one noticed. Yeah. Because it just improved the Google search experience.
Speaker 2:Yeah. I bet I bet people that were, like, keyword hacking
Speaker 1:For sure. Encouraging folks, for sure. For sure, they noticed. And Panda was another update. There were a number of these updates where if this was your business, you knew.
Speaker 1:And I'm not saying OpenAI shouldn't share model numbers and version numbers with their enterprise customers or with their b to b customers or API customers. I'm saying in the actual ChatGPT app, don't tell people what they're using. Just improve it, and and let them complain a little bit all over the place when you're making minor changes.
Speaker 2:If they do that, they lose the companion market.
Speaker 1:Maybe. Maybe. I don't know. That's my question is why why can't GPTOSS fit in there? Why can't if you want a permanent model that you can run forever, like, what what why is that model not satisfactory?
Speaker 2:If you're gonna fall in love with a model, make sure it's open source.
Speaker 1:And, yeah, there's a tune it. Not your server, not your girlfriend, right, or not your waifu not your waits, not your waifu. That's that's what they say. I'm not kidding. People believe this.
Speaker 1:But but but the but the broader four o community was not able to migrate to GPTOSS. Now, Tyler, you had a take on this. You think that GPTOSS just isn't at the level of four point zero?
Speaker 3:Yeah. It's just not that. I mean, it's like a fine open source model.
Speaker 4:Why? It's just not
Speaker 1:But it's been eighteen months. Or or, I mean, when did GPT OSS come out? Like, six months ago, I mean?
Speaker 3:I also don't think people don't like four o just because it's, like, super smart. It's because it has, like, the personality.
Speaker 1:It has the texture, the flavor. Yes, that's correct.
Speaker 4:It's like the
Speaker 3:big model smell.
Speaker 1:And yes, yes, yes. And so it's been a year, and it's been a year. And so there's a one year gap where the open source community should be able to cap catch up to four point zero's ineffable qualities. It's. It's.
Speaker 3:Well, I mean, for a while, you've had open source models that have been, like, personality, like, forward. Right? It's like replica. Yeah. Or what was Noam Shazir's company?
Speaker 3:I'm I'm forgetting the
Speaker 5:name. Character.
Speaker 3:Character AI.
Speaker 5:Character AI. It's like
Speaker 3:very similar thing. It's just personalities. Yeah. And I mean, a lot of people use those. I I'm I'm actually curious what the numbers are compared to four o of like the one shotted four o people.
Speaker 3:Yeah. But I think it's probably pretty comparable. Yeah. Yeah. I mean, I I don't like the my my whole take on the four o thing was like one shotting four o is like not a good thing.
Speaker 3:Mhmm. But if if you completely kill it, how many of those people will then go to open source models that are totally unfiltered where there's no kind of oversight? Yeah. And that seems much worse because then if if if someone is saying like super dangerous stuff, then you can't step in at all. Yeah.
Speaker 3:I think stepping in at some point is good. So you like you it's like part of you wants to keep those people on the platforms, then you can have oversight. But also, you don't wanna be, like Yeah. Yeah. Continuing this.
Speaker 1:Yes. It does seem it does seem more responsible. I don't know. Where do you land on it? Kill four o or leave four o tucked behind the the menu options?
Speaker 1:Give in to the keep four-zero crowd. Because one
Speaker 2:think of the the real real questions question ChatGPT latest numbers are 800,000,000 weekly actives. 20,000,000 of those people pay. What percentage of the 20,000,000 that are paying are using it for this companionship functionality? And that is like a huge unknown right now. And so I think my they're like they they they deprecated four o.
Speaker 2:Yeah. They got a horrible pushback from folks. The question is, did they did they bring it back because people just were really upset? Or did they bring it back because they were about to lose? And remember Yeah.
Speaker 2:The two days after every single Reddit post Yeah. At least every other was like, I could just cancel my membership. Like, I don't need this anymore.
Speaker 1:And so, yeah, I was I was thinking about the the Sydney Sweeney American Eagle thing. Like, that got a really powerful negative reaction. The stock is up. And, like, sales are up presumably because, like, it got a negative reaction, but it also got a positive reaction that was bigger. Right?
Speaker 1:And so I'm wondering, like
Speaker 2:Yeah. But in this in this case, it it could have been that four o was effectively a product that was generating hundreds of millions of dollars of annual annualized revenue.
Speaker 1:Yep. That was
Speaker 2:now And that was just gonna go away.
Speaker 1:It was just not like people
Speaker 2:are just gonna upgrade to a new model. It was like, you killed my friend. Yep. I no longer need to pay for this.
Speaker 1:Yeah. It just seems like I don't know. It's hard to it's hard to benchmark against, like, like, yes, there was, like, a big dust up that was surprising because I would have thought it'd be zero. But at the same time, like, the the the original Reddit thread of, like, bring back four o is, like, a couple thousand people. It's not actually, like, protesting in the street millions of people.
Speaker 1:Like, it hasn't spilled over all the play all over the place. Like, it's not that big. It but it does I I will agree with you that it is crazy that they even said yes to it. Like, most most companies, when consumers come to them and say, hey. I want you to bring back like, how we went on this show, and we were like, bring back the old Sonos app that doesn't take twenty five minutes to load.
Speaker 1:And they just didn't do it. They didn't listen to us. They didn't listen to us. Right? I was talking to you about Adobe.
Speaker 1:Was like, bring back
Speaker 2:now now that we're wearing yellow suits.
Speaker 1:Maybe. Maybe. Sonos, I will Here's wear a question. Sonos What
Speaker 2:percentage of their paying users? Yes. What percentage of their paying users do you think are paying for the product because it's a companion to them?
Speaker 1:Because it's four because of four o specifically. Like like, how bad would churn have been? How bad was churn? Well, it was clearly bad enough that they that they did something about it, which is the crazy thing. Because most of the time, like, when it it was typically a a a revealed preference versus stated preference.
Speaker 1:So when Facebook updated the news feed and instead of just having you log in to Facebook and go to someone else's page to find what they were up to, instead, they surfaced the news feed. They aggregated everything together. Everyone was like, I hate this new Facebook. And they went on Facebook to complain. Right?
Speaker 1:And so there was a there there was a
Speaker 2:User minutes probably went up
Speaker 1:to the did right. Go up. Exactly. And so that's why and we talked to some folks at Facebook at the time around this. They they stayed the course.
Speaker 1:The question is, yeah, like, how bad was churn? Because it it it's weird that we're still having this conversation three months out. Do you like the zombie ant fungus analogy? Jake Jacob Rintimaki was, was posting this, saying that there's this weird there's this very weird dynamic where, specifically, humans are using four point zero to protest the deletion of four point zero. And so it's very much like the AI is using the human as a host.
Speaker 1:Yeah. Like, the the a the human is the bot for
Speaker 2:This is why I think it's overall under discussed.
Speaker 1:Yes. Yes. Yes. But at the same time, I I was I was laughing because I was like, that Photoshop app, Photoshop Mix, like, I'm complaining about that. If I go and make a meme in that about protesting the deletion of Photoshop Mix, like, is am I am I the zombie aunt for Photoshop?
Speaker 1:Right? Like, like, it's it's not exactly the same. I agree that the that the AI thing is weirder, but it's somewhat similar. It's somewhat similar. Right?
Speaker 1:What do you think?
Speaker 3:So so just back on the churn question for a second. Yes. I I don't actually think churn was that high because Yeah. The the reason four o was originally deprecated was the GPT five release, which was August 7. Yep.
Speaker 3:And then the tweet of Sam Altman saying we're bringing back four o was August 8. So it was one day later. Yeah. So unless like a massive amount of people quit that day, which I I mean, maybe that's very likely.
Speaker 1:I think that's what happened.
Speaker 3:You think it was just one day of like
Speaker 1:Why would you bring it back so fast if you didn't see, like, fast
Speaker 3:Twitter were saying
Speaker 1:sell off. Like like, normally, you'd be like like, if it if you saw if you saw, like, if you saw, like, a percent or 0.1 of your of your audience, like, float out the door, you'd probably be like, oh, these people are just sour grapes. They'll be back in a week. Right? But if, like, 10% of your customers, like, cancel on day one, you're like, oh, we gotta stop the bleeding today.
Speaker 1:Like, let's bring this Yeah.
Speaker 2:And that's that's why was asking if they And that's weird. 20,000,000 paid users
Speaker 1:And that's weird.
Speaker 2:Five percent of them churned, and these are people that are willing to
Speaker 1:It pay a seems unbelievable to me. It seems unbelievable to me because I don't use this product this way.
Speaker 2:But that would have been that could have been, like, effectively 200,000,000 of m r MRR that just evaporated
Speaker 1:It's into the whole It's possible. And also, there is just the fact of by putting four point zero under the legacy models and tucked away, to your point of, like, if it's $200,000,000 of ARR just to, like, leave the servers running over there
Speaker 2:Well, I was saying could have been a million like, roughly a million people that were
Speaker 1:This is paying complete spitballing. Specute Totally speculate. But it could have
Speaker 2:been a massive number.
Speaker 1:If if you have a million people, and they're just gonna want the same model forever on cheaper and cheaper hardware that you can deprecate, bullish for depreciation rates. Let's hear it. Depreciation schedules should extend. Right? Right?
Speaker 1:Let's go. We we got room to run. You know what I'm saying. Right? Yeah.
Speaker 1:Yeah. You shouldn't be you don't need to depreciate them over two years. You don't need to depreciate them over five years because you'll still be inferencing four o in thirty years for these people that are like, yeah. It's not this. It's that.
Speaker 1:I love that four o so much.
Speaker 2:Yeah. It it will be.
Speaker 1:Will arrive, and people will still be like, yeah. But it's not four o. I'm in love with four o.
Speaker 2:Yeah. I think I think it'll be interesting to if there's, like, five years from now
Speaker 1:Yeah.
Speaker 2:It's like, here's the five most popular friends that are models. And there's four point zero, and there's some others. Yeah. And people end up well, like, we'll see.
Speaker 1:No. It's a good point. Anyway, let's move on to some other stuff. But first, let me tell you about Privy. Wallet infrastructure for every bank.
Speaker 1:Privy makes it easy to build and encrypt our rails, securely spin up white label wallets, sign transactions, integrate on freight infrastructure all through one simple API. And let me also tell you about Cognition, the makers of Devon, the AI software engineer. Crush your backlog with your personal AI engineering team. Double kill, of course. Jeff Bezos is back in the arena.
Speaker 1:Jeff Bezos creates an AI startup where he will be co CEO, and it's called project Prometheus.
Speaker 2:John, what happens to Prometheus?
Speaker 1:He had a really good run. Prometheus everyone seems to focus on the first part of the story with Prometheus when they name their AI project. So Mark Zuckerberg named his, his AI data center cluster project Prometheus as well. Now Jeff Bezos has also called an AI project Prometheus. People love the Prometheus brand.
Speaker 1:No one can seem to properly trademark it. I don't know what's going on in the legal division of of, you know, the Bezos Bezos family office or whatever But, is going on they're both using Prometheus, and it's a very odd story. Because, in Greek mythology, Prometheus is a titan responsible for creating humanity in its earliest days. You might have seen the aliens movie Prometheus. Great film.
Speaker 1:He defied the Olympian gods by taking fire from them and giving it to humanity in the form of technology. And so it's a great it's a great analogy. We're stealing fire from the gods and giving it to us. AI is fire, and this is what we're gonna steal, I guess. And, and so he creates knowledge and and civilization.
Speaker 1:But
Speaker 2:Fast forward a little bit.
Speaker 1:Fast forward a little bit. He gets punished for this. It it's not a good ending for Prometheus. He gets punished for stealing fire from Olympus and giving it to humans.
Speaker 2:How does he get punished?
Speaker 1:He gets bound to a rock, and an eagle, which is the emblem of Zeus, is sent to eat his liver, every day. And then it would grow back
Speaker 2:Baylor in the chat says, everybody wanna steal fire from the gods? Don't nobody wanna have their liver eaten by an eagle for eternity? That is true, Tyler.
Speaker 1:So his liver grows back overnight only to be eaten again the next day in an ongoing cycle. And I was thinking about, like like like, what is what is the metaphor here? Let's continue to extend the metaphor. Like, what is the liver in this metaphor of, like, building big AI projects? And then what is the eagle?
Speaker 1:Is it possible that the eagle is, like, Blue Owl It's more of an owl.
Speaker 2:Credit credit.
Speaker 1:Private credit. Maybe Blue Owl is coming and eating your liver. And the liver is the free cash flow that you had on your balance sheet. Because if you're one of these hyperscalers, you have a lot of free cash flow, but less and less as you sign these big debt deals. Yep.
Speaker 1:And and the and the blue owl comes and eats your free cash flow every day for all of eternity. And eventually eventually, there is a little bit of a of a reprieve because Hercules comes and breaks the chains of Prometheus. And Prometheus is freed, and his liver regrows and Hercules slays the eagle. And so I think obviously in this analogy what did you say? Who would be Hercules in this analogy?
Speaker 3:Jerome Powell.
Speaker 1:Jerome Powell, who comes in and slays the debt dealers with low interest rates. Right? And so and so clearly, can see where this metaphor is going. They're all they're all winking. Both both Zuck and Bezos are winking and saying, hey.
Speaker 1:Hey. Come lower interest rates. Save us because we're about to get our livers eaten because with our Promethean startups. Anyway, let's actually dig into what he's doing because it's not just a found it feels late to get into AI. It feels late to get into foundation modeling and training runs.
Speaker 2:Big Euro summer. He's back. He's back. Back in the driver's seat.
Speaker 1:Went to Coachella. He went to he went to a few different big events. It's possible he got back from those events, started opening up the newspaper, realized
Speaker 2:what's on.
Speaker 1:AI is AI is big. I gotta get in on this. I gotta get in on You
Speaker 2:ran a deep research report? What did I miss?
Speaker 5:What did
Speaker 1:I miss?
Speaker 2:What did I miss? Well Anyways, in The New York Times, Jeff Bezos, the founder of Amazon, is throwing his money and time into an artificial intelligence startup that he will help manage as its co chief executive. I feel like co CEO this is more popular than ever.
Speaker 1:It is. Sequoia Capital has co
Speaker 2:Co stewards.
Speaker 1:Global stewards. They're global stewards. Right? Or is it something else?
Speaker 2:I think just co stewards dropped the global.
Speaker 1:I thought there was something else. Senior steward. That's what it is. Senior steward. So is there a junior steward?
Speaker 1:Sequoia.
Speaker 2:It also implies there's a steward steward. Wait. Why? Like, presume Wait. They're co stewards.
Speaker 1:Oh, wait. So Roloff stepped down as senior steward. Now Pat Grady and Alfred Lin are co stewards. So they're actually at a lower level. So one of them will have to emerge as the senior stewards.
Speaker 2:That's right.
Speaker 1:The other will become the junior steward, I would imagine.
Speaker 2:Managing But the stewards look after the firm. But it's possible there's a steward that looks after the co stewards.
Speaker 1:That is possible.
Speaker 2:Maybe it's Andrew Reed. Anyways, the company Project Prometheus is coming out of the gates with $6,200,000,000 in funding, partly from Mr. Bezos, making it one of the most well financed early stage with authority. That is a massive round. Strong
Speaker 1:6,000,000,000 out the gate. Let's go. Congratulations.
Speaker 2:This is the first time mister Bezos has taken a formal operational role in a company since he stepped down as chief executive of Amazon in July 2021. Though he is deeply involved in Blue Origin, his official title at the space company as founder, since leaving Amazon, Mr. Bezos has received as much attention for his personal life as his businesses, including an extravagant celebrity filled wedding in Venice this year. He has also become more closely involved in Blue Origin and has shown increasing interest in the race to build artificial intelligence. His new company now firmly plants him in the middle of that competition.
Speaker 2:Project Prometheus is entering an increasingly crowded AI market with smaller companies trying to carve out niches in a race with industry giants like Google, Meta, Microsoft, and pioneering companies like OpenAI and Anthropic. The new company has until now kept a low profile. And when it was started, it is not even clear. Project Prometheus is focusing on technology that dovetails with Mr. Bezos' interest in taking people to outer space.
Speaker 2:The company is focused on AI that will help in engineering and manufacturing in a number of fields, including computers, aerospace, and automobiles.
Speaker 1:Is this his next? Do you think this is his next? Do you think he's doing what Steve Jobs did with Next, where Steve Jobs was fired from Apple? Obviously, Bezos was not fired from Amazon, he did retire. And it'd
Speaker 4:be weird for him to jump straight
Speaker 1:back in to the to the CEO seat at Amazon. But Steve Jobs founded Next and then was acquired into Apple, and it kinda made for a more smooth transition back into the driver's seat. Could that be what Bezos is doing?
Speaker 2:I could see it. He's 61.
Speaker 1:He's he's young. He's got the whole third he's got the whole, like, third triple the third thirty year period that is so so such a positive omen in many people's careers. Like, Warren Buffett. Where was Warren Buffett
Speaker 2:at And he's gotta have more energy than ever. He's been galavanting
Speaker 1:around He's the in peak physical condition.
Speaker 2:That's right.
Speaker 1:He's having stacking up win win after win all over the globe.
Speaker 2:I think he here's a here's a a tinfoil hat. Set it up as co CEOs because Amazon will buy Project Prometheus. His co CEO becomes the, you know, the internal CEO or lead on that project at Amazon. He takes the throne again.
Speaker 1:I wouldn't I wouldn't
Speaker 2:be A boy can dream.
Speaker 1:So so what is he actually building? Let's get into this.
Speaker 2:The company is focusing on AI that will help in engineering and manufacturing in a number of fields, including computers, aerospace, and automobiles. Mhmm. Uh-huh. Unclear where the company will be based. Bezos' cofounder and co chief executive is Vik Bazaraj, a physicist.
Speaker 1:AI that helps in manufacturing of computers, aerospace, and automobiles. So computers, he manufactures racks at AWS. Aerospace, he manufactures rockets at Blue Origin. Automobiles, he's a big backer of Rivian. He manufactures cars there.
Speaker 1:And so he wants to do some sort of automated, like, supply chain. Is it ERP?
Speaker 2:I mean, this is clearly not PR that they wanted to do. Yeah. So I think there's a lot of guessing going on.
Speaker 6:Okay. Well.
Speaker 2:But Mr. Bezos' co founder and co chief executive is Vic Bajaj, a physicist and chemist who work closely with Google's co founder Sergey Brin. Sergey Brin at Google's X, a research effort often called the Moonshot Factory. Google X produced a wide range of ambitious projects, including Wing, a drone delivery service, and the self driving car that became Waymo.
Speaker 1:It's so interesting how divergent those two paths were. Like Wing, you don't hear about very much. When you think drone delivery service, you think Keller at ZipLine. They're the ones that are really running away with that compounding. I don't know the status of Wing.
Speaker 1:Maybe I'm just out of the loop on that. Maybe it's doing great. But it feels like Wing has not certainly garnered the level of attention that Waymo did, which was this success out of the exact same sort of incubator. So interesting. Hudson
Speaker 2:comments in the chat says, it's just gonna be robots doing science on the material level, not Materials. Scale. Interesting. Materials. There's more details here.
Speaker 2:Project Prometheus is among a wave of companies focused on applying AI to physical tasks, including robotics, drug design, and scientific discovery. Mhmm. Last year, Bezos invested in physical intelligence, a startup that is applying AI to robots.
Speaker 1:Okay. So And building okay.
Speaker 2:Anyways, we'll have to get Jeff on Yeah. When he's ready to talk
Speaker 1:about where did the money come from exactly? Do we know?
Speaker 2:I think it was
Speaker 5:Just Bezos and stuff.
Speaker 2:Mostly Bezos.
Speaker 1:It's interesting. It's like, yeah. But like, I I I'm I'm super interested in like how you size a round if you're investing in your own project. Because you could just be like, this is my thing. I'm gonna I'm gonna fund it every payroll cycle.
Speaker 1:Yeah. Whatever the bill is, I'll pay it because it's my thing. You don't necessarily need to, like, do some sort of funding round necessarily. I don't know.
Speaker 2:I Why you laughing? Accidentally opened the the comment section of the New York Times article that that we were just going through
Speaker 1:and
Speaker 2:it says, first comment, these large ego models seem promising. Large ego models? Like, if you're if you're a, you know, a tech billionaire Yeah. Yeah. And you have a large ego, you you wanna you want your own large language model.
Speaker 1:Yeah. It sounds like he's not very much not training just another LLM. Yeah. But we'll have to see. Well, Jan Lakoun was in The Wall Street Journal's weekend paper, profiled by Megan Barrowski.
Speaker 1:An AI pioneer thinks everyone wrong everyone is wrong again. He's been right about AI for forty years now. He thinks everyone's wrong. What do you think, Tyler? Do you think Ian Lecun is wrong or do you think everyone else is wrong?
Speaker 3:I mean, so in this article, he doesn't there's nothing really new here. They're just kind of talking about his the points that he's been making over the past couple years, which is just that, like, LLMs will not bring us to AGI or Yeah. Or anything.
Speaker 1:And Yeah.
Speaker 3:Like, even if you keep scaling, they don't they're not, like, actually intelligent. They can't reason or whatever.
Speaker 1:Yep.
Speaker 3:Which I don't know. It's like, these models are much better than me at math. Like, they can do they can get IMO gold medals
Speaker 1:Yes.
Speaker 3:Which, like, I cannot do. And that's like it it's like, does that take reasoning? Never doubt yourself.
Speaker 1:But, I mean, like yeah. The the I mean, the the there is an element of, like the computer has been able to do good math fast forever, Like, since, like, the eighties. Like, if you were, like, what is 7642 Yeah. I mean, I I think there's difference
Speaker 3:you can you can make between just, like, raw calculation and, like, how to, like, think about solving a math question generally. And, like, you can say that he's been right about, like you could say that he predicted, like, spiky intelligence maybe of models.
Speaker 6:Yeah. Yeah.
Speaker 3:Yeah. And that's, like, sure. Yeah.
Speaker 1:Yeah.
Speaker 3:But I I I yeah. It's like I I I I think it's not true to say that he's been right about AI for the past forty years.
Speaker 2:Oh. That seems man's never had a bad take. Zone. Forty years. Not a single bad take.
Speaker 1:Single bad take. Now he thinks everyone's wrong. And, yeah, it's very it's very funny for me because oh, does he think George Hotts was wrong when George Hotts said that GPT six will not be AGI and the GPT paradigm will not scale on the Lex Friedman podcast in 2021? Does he disagree with that too? Does he disagree with Andre Carpathi saying it's sloth and that we need new ideas?
Speaker 1:Or, you know, there's, like, seven other people that have kind of echoed the same thing. He doesn't think everyone's wrong. He just thinks some people are wrong.
Speaker 2:But Sort of. I mean, Tyler's take I don't know if now is the right time I can go through this Karpathy post.
Speaker 1:Oh, yeah. Please.
Speaker 2:Karpathy posted yesterday. He said sharing an interesting recent conversation on AI's impact on the economy. AI has been compared to various historical precedents, electricity, industrial revolution, etcetera. I think the strongest analogy is that a is that of AI as a new computing paradigm, software two point o, because both are fundamentally about the automation of digital information processing. If you were to forecast the impact of computing on the job market in the nineteen eighties, the most predictive feature of a task job you'd look at is to what extent the algorithm of it is fixed.
Speaker 2:I e, are you just mechanically transforming information according to rote, easy to specify rules, I e, typing, bookkeeping, human calculators. Back then, this was the class of programs that the computing capability of that era allowed us to write. With AI now, we are able to write new programs that we could never hope to write by hand before. We do it by specifying objectives, I. E, classification accuracy or reward functions.
Speaker 2:And we search the program space via gradient descent to find neural networks that work well against that objective. This is my Software two point zero blog post from a while ago. In this new programming paradigm then, the most predictive feature to look at is verifiability. If a task job is verifiable, then it is optimizable directly or via reinforcement learning, and a neural net can be trained to work extremely well. It's about to what extent can an AI practice something.
Speaker 2:The environment has to be resettable. You can start a new attempt. Efficient, a lot of attempts can be made. And rewardable. There's some automated process to reward any specific attempt that was made.
Speaker 2:The more a task slash job is verifiable, the more amenable it is to automation in the new programming paradigm. If it is not verifiable, it has to fall out from neural net magic of generalization, fingers crossed, or via weaker means like imitation. This is what's driving the jagged frontier of progress in LLMs. Tasks that are verifiable progress rapidly, including possibly beyond the ability of top experts, I e math, code, amount of time spent watching videos, anything that looks like puzzles with correct answers. And while many others lag by comparison, creative strategic tasks that combine real world knowledge, state context, and common sense.
Speaker 2:Software one point o easily automates what you can specify. Software two point o easily automates what you can verify.
Speaker 1:Okay. You gotta go to this other post for the perfect example of what's hard to verify from Nat Purser. This is my personal benchmark for AGI, and looks like we're a ways, a ways, boys. A ways away, boys. Can you come up with 10 jokes in the same format as the you're telling me a shrimp fried this rice joke.
Speaker 1:You're telling me a shrimp fried this rice. And the, and GPT five pro reason for one point, one minute and thirty one seconds, it says, you're telling me a hamster drove this car? You're telling me a pigeon delivered this mail? You're telling me a Roomba cleaned this mansion? You're telling me a goldfish coded this app?
Speaker 1:You're telling me a squirrel filed these taxes?
Speaker 2:I swear I swear swear AI just has a different sense of humor. Sense of humor is just bad jokes.
Speaker 1:Yeah. Oh, GPT five thinking did a little bit better.
Speaker 2:It's just you're telling me
Speaker 1:a chicken fried this steak? You're telling me a handmade this pasta? Hand pasta? Handmade pasta? That's like
Speaker 3:That actually is a good one. Look at number 10. I think that one's good.
Speaker 1:Number 10, you're telling me a ghost wrote this book. That's good. Ghosting book. That one does make sense. You're telling me a star crossed these lovers?
Speaker 1:That's actually pretty good. Okay. So we're getting somewhere. We're getting somewhere. At least it, like, understood the prompt on this one.
Speaker 1:You're telling me a beer battered this fish. I like that. Babe? You're telling me this Figma thought bigger and built faster? Figma helps design and development teams build great products together.
Speaker 1:Get started for free. We gotta whip through a bunch of these posts. I I I will not leave this show before we talk about the Apple the Apple iPhone, sock. What is up with the sock? Have you seen this?
Speaker 1:Apple launched a sock. So it's a it's a, fashion accessory, and everyone's debating it. Do you see this? It's this blue light blue sock that you put over your shoulder or over your hand, and people are very, very upset about it. Aditya Agarwal says, when a company releases something that is so obviously underwhelming, then the natural question is, did no one at the company see how bad this is, or did no one have the courage to speak up?
Speaker 1:I'm not sure which is worse. And someone else says, look. Apple has a lot of fumbles. This is not one of them. They knew exactly what they were doing and exactly who would buy it.
Speaker 1:Also, it's okay. Fashion accessories are not for everyone. And the news, of course, is that, the it's called the iPhone Pocket, a beautiful way to wear and carry iPhone. Not carry the iPhone. Remember, they you don't say the iPhone.
Speaker 1:You say iPhone. And so born out of a collaboration between Issey Miyake and Apple, iPhone Pocket features a singular three d knitted construction designed to fit any iPhone. Jaya, who I actually did a collab with on Instagram, very fun tech commentator. She says a lot of tech bros prematurely dunking on this release because they don't get why it's a big deal. So let me translate.
Speaker 1:You're not the only consumers Apple designs for. This is a huge designer and the mind behind Steve Jobs' iconic black turtlenecks. I didn't realize that. People outside The US wear phone straps and slings all the time and would pay for this. They're tapping into an existing trend.
Speaker 1:Apple has infiltrated music entertainment, but not high fashion even though the Tech X fashion is exploding. Tech built into Met Gala looks, etcetera. The three d knitted construction reduces material waste and shows a push toward more sustainable made to shape production. This will absolutely sell. Sell, what do you think?
Speaker 1:Are you bullish or bearish on the Apple iPhone pocket, Jordy?
Speaker 2:I feel like I know a lot of people. Most I feel like most of I feel like my mom would love this, to be honest.
Speaker 1:It seems like it's a great Christmas gift. So interestingly, how much do you think this costs?
Speaker 2:I don't know. Like $230?
Speaker 1:That's wait. Did you look it up? Yeah. Yeah. The long one's $2.30.
Speaker 1:The the short one's $1.50. But I I think most people would look at this and be like, okay. It's a sock. Like but it's from Apple, so it's probably, like, $30, maybe $50. Some people were surprised that it was a little bit more expensive.
Speaker 1:But, you know, it's from this famous designer, and it's this interesting status symbol. The question is, like, this could be like I, like, I don't think I'm gonna be using this thing no matter what. The question is, is this gonna be like libooboos and gonna be, like, super popular or, like, Stanleys? Like, will this become actually like a very, very popular form factor in America specifically? I don't know.
Speaker 1:It's hard to tell. I I'm not really the person to like, you know, handicap it. I I think Apple knows what they're doing. I think they'll I think they'll make money on this certainly.
Speaker 2:Yeah. I ever since the the AirPods AirPods early on looked really silly. Mhmm. And I could see this becoming I could see this becoming a popular form factor for accessories.
Speaker 1:Yeah.
Speaker 2:And I could see Apple seeing like, hey, there's a world where we not only sell a case with every iPhone, we can sell a a sock.
Speaker 1:A sock. Well, the sock maybe makes it so that you don't need a case because this is your case. Like, if you have it in there and then you drop it, like, it's kinda nice.
Speaker 2:And it's kind of a crazy weapon. Defense weapon. Yeah. Self You
Speaker 1:can swing it around and smack people in the face with it. I don't know. The colors are pretty cool. And I don't know. It's it's clearly not for me.
Speaker 1:But I think I'm gonna buy four of those for for Christmas. We'll see. And give them out to people.
Speaker 2:Get ready for your iPhone sock, buddy.
Speaker 1:Well, speaking of socks
Speaker 2:We gotta talk about
Speaker 1:is stunning in some what are these? New shoes? Travis Scott's new fragment a j one lows. These are Nike shoes, I suppose. But these are not Air Force Ones, I suppose.
Speaker 2:I really don't know how make those shoes.
Speaker 1:But but everyone's saying he low key got aura. And so congrats to Tim Cook on looking great. And even though the succession planning is intensifying, the rumor mill is churning, obviously, Apple has not been commenting, but something's going on.
Speaker 2:In I mean, releasing this photo is more than a comment. It's a statement. I
Speaker 1:like reading into it. He's like Just being like, oh, really? Oh, really? Financial Times? So the Financial Times has this article that says it says, Apple intensifies succession planning for CEO Tim Cook.
Speaker 1:The I iPhone makers board preparing for its longtime leaders to step down as early as next year. John Turnis, Apple senior vice president of hardware, is widely seen as Cook's most likely successor, although no decisions have been made. So, basically, everyone's been leaking this, whether it's Bloomberg, whether it's the Financial Times here. And and, of course, Apple is not commenting because they'll they'll talk about who they're going to move the market when they decide their next CEO. If they even if they don't even stick with Tim Cook Tim Cook.
Speaker 1:They might stick with Tim Cook for another two decades. Who who knows? But I like the idea that this photo came out being like, yeah. I'm not leaving.
Speaker 2:No comment, but I'll make a statement.
Speaker 1:I'll make a statement. No comment, but I'll make a statement. I do do wanna have some folks on to debate, like, whether or not I I was thinking we should invite John Gruber on because he wrote this piece like Something Is Rotten and Cupertino, all about the failure of of Apple intelligence. And when we talked to Mark Gurman, we saw like, Gurman was also saying, like, yes. Like, Cupertino really was shook by the like, dropping the ball on on Apple Intelligence by missing AI.
Speaker 1:But I I still wonder if all of this is is there's all these rumors. Oh, Tim Cook's gotta go. Imagine if you
Speaker 2:post that picture if if we see a real correction in AI. Yeah. Just post caption, do nothing, win.
Speaker 1:Do nothing, win. Yeah.
Speaker 2:Stock stock pumps 10%.
Speaker 1:I missed artificial intelligence, but I didn't miss getting this fit off. I'm having a good time. What else is, in the news? Vanta. Automate compliance, manage risk Founder.
Speaker 1:Prove trust with AI. Vanta helps you get compliant fast, and they don't stop there. Their AI and automation powers everything from evidence collection and continuous monitoring to security reviews and vendor risk. There's a bunch of more news.
Speaker 2:To talk about paper hands.
Speaker 7:Paper hands. This
Speaker 1:is the fakest of news. Get ready for the fake news hour, buddy. What Peter
Speaker 2:Thiel sold his stake. Entire stake
Speaker 1:Everything. In
Speaker 2:video. And 76 percent of his friend's company Tesla.
Speaker 1:Okay. Yes. So this is from a so this is from one of those 13 f's disclosure form with the SEC from Teal Macro, his fund, his his some of the money that he runs. But, of course, it's very people read into 13 f's all the time for a variety of reasons, and they sort of get it wrong a lot, it seems like. And so zero hedge sort of sums this up where he says, Peter Thiel net worth, 20,000,000,000.
Speaker 1:Teal macro AUM, 75,000,000. Like, what's going on? What make it make sense? And it's almost certainly because of disclosure rules. Like, what needs to be disclosed, might only be a fraction of what's actually going on there.
Speaker 1:So, odd to read into it, but at the same time, I think the reason why this made headlines is just because it feels like something that might happen. Like like, if if instead this headline had been, oh, like, Peter Thiel went on a podcast and said that he thinks the AI bubble is top has reached the top. Everyone would just be like, oh, yeah. Like, that's feels like people have been waiting for someone to call the top. And so they're really, really, like Yeah.
Speaker 1:Digging in for top signals and top calls. And this slight change in the in the, in the 13 f. Even though the odd part is that if you actually read the 13 f, which, of course, is just this, like, $75,000,000 slice for whatever for for whatever reason, Even if you dig even if you read that, like, the other three holdings are still big tech companies. So it's not, like, super bearish. It's like there's some Microsoft in there.
Speaker 1:I think there's some Apple in there.
Speaker 2:Yeah. And the Teal Matt the Teal Macro team is trying to generate the greatest returns that they possibly can.
Speaker 1:They go viral. They're trying to go as viral as possible. So
Speaker 2:They don't care about IRR. They just wanna go viral.
Speaker 1:They just wanna go viral.
Speaker 2:They're just trying to create headlines. No. They're trying to generate returns.
Speaker 1:Yeah. Finishing that deal.
Speaker 2:It's possible to sell a stock that you're that you're still bullish on or at least that you expect, like, amount of price appreciation
Speaker 7:Yeah.
Speaker 2:Or even long term price appreciation.
Speaker 1:And, also, like, there's all these weird, like, tax, you know, implications of, like, selling one thing. Like, it's not even clear that this is all of his NVIDIA. Like, no one's no one's gotten to the bottom of that. I don't know if they ever will. But people love people love deep diving 13 f's.
Speaker 1:And they are so and they are fun. Situational awareness
Speaker 2:is certainly a bull market in thirteen
Speaker 1:Thirteen f deep dives.
Speaker 2:Deep dives.
Speaker 1:Let's let's talk about the situational awareness 13 f. But first, let me tell you about graphite. Dev code review for the age of AI. Graphite helps teams on GitHub ship ship higher quality software faster. So situational awareness 13 f for q '3 dropped Friday.
Speaker 1:Nick Carter broke it down. Massive new 500,000,000 position in CoreWeave, which has been down a bunch, but they're going in. Big adds to core, c o r z and iron, added some new miners. Intel Intel calls remain unchanged. Trimmed Broadcom, a couple other names here.
Speaker 1:And, Nick is giving it some, some context. I believe Nick was the fir one of the first investors in CoreWeave. Correct? And
Speaker 2:Angel.
Speaker 1:Angel in CoreWeave. What an insane investment. Congrats to him. So he says all these numbers are as are are as of 09/30, many of these names sold off since then. Portfolio value counting notional value of options doubled from 2,120,000,000.00 to 4,150,000,000.00, mostly due to 1,500,000,000.0 of new cash.
Speaker 1:So
Speaker 2:Let's give it up for new cash injection.
Speaker 1:We gotta ring the What a massive, massive fund. But but the but the fund did generate 700,000,000 in appreciation. So a huge, huge, huge gain.
Speaker 2:Yeah. Concerning guess again, last time 13F dropped, remember, people were reading too much into it. And they were like, wow, he was long. Intel, Like, is he cooked? And then they did intel did the deal Yep.
Speaker 2:With the government and it and it absolutely ripped. This 13 f, he you know, so situational awareness had a half a billion dollar new core weave position as of basically the October. And, obviously, Core Weave has been, down into the right, down 46% in the past month. But
Speaker 1:Wait. Down 46% in the past month?
Speaker 2:Yes. I thought it was in the
Speaker 1:past, like, three months or something.
Speaker 2:No. Past month. Woah. So that position is probably not
Speaker 1:It's down 5% today.
Speaker 2:Yeah.
Speaker 1:Wow. Yeah. One month, it's down 46%. That it's at a 36,000,000,000 market cap. Yeah.
Speaker 1:It's so it's so odd because, like, yeah, when you when you look at when you look at just this one name, it feels like, okay. Like, it is over. Like, AI if you told me, like, oh, yeah. Like, the the the company that really is, like, the most indexed to the AI wave, is down 46%, I'd be like, wow. So this is, like, the total popping of the bubble, complete pop.
Speaker 1:Like, it's over. It's like like, when the metaverse bubble popped, when, you know, when when crypto bubbles pop, like, Bitcoin trades down 50%, 60%, like and then it's over, and then you start rebuilding. Right? And yet and yet the overall market feels nowhere near popped. Right?
Speaker 1:Like, I mean, I'm sure NVIDIA is down somewhat down 5% past five days, but NVIDIA over the last month is still up. Over the past six months, it's up 40%. And so you would you would expect NVIDIA to be maybe, like, you know, selling off more. CoreWeave is just in a is is just in a unique position, like, truly truly rough month for that company.
Speaker 2:Yeah. As well as Core Scientific, which Core we've tried to buy Yeah. Was rejected. Yeah. Core Scientific has traded down 24 in the past month, which Leopold also had built the position in.
Speaker 2:I wonder we'll see.
Speaker 1:Yeah. I wonder I wonder what the thesis on CoreWeave is. I mean, obviously, the company is has a great product. Like, Semi Analysis has has ranked them platinum on ClusterMax. It's a it's clearly a a real company with real with real products and services and holdings.
Speaker 1:Maybe the market, it was just overheated. Maybe it's pulling back. It's kind of unclear. But if you wanna go in, analyze a bunch of 13 f's, do it in Julius, the AI data analyst. Connect your data.
Speaker 1:Ask questions in plain English. Get insights in seconds. No coding required. Speaking of other data
Speaker 2:So he also he he also added positions just in Western Digital Oh, he's getting Seagate. And I was just going through
Speaker 1:On the hard drive trade, gotta store that data somewhere and potentially
Speaker 2:Modine Manufacturing.
Speaker 1:Okay. I I'd be interested to know what he's thinking about in the in the energy side on the the gas turbine side. Right? Isn't that what semi analysis was drawing the most attention to? Feels like they've been very ahead of the curve on identifying Yeah.
Speaker 1:Companies that are basically already supply constrained. And if you just look and if you look deeper into what's going on in their book of business Yep. They're about to flip to incredibly high margins. Because once once everything goes out of stock, this company can just all of a sudden say, yeah. Actually act actually, we need 60% margins.
Speaker 1:People will be like, yeah. No problem. Like, you're the
Speaker 2:I I want to buy as much
Speaker 1:as possible.
Speaker 2:Yeah. So the story from situational awareness is like all the neo clouds have sold off a ton Yeah. Where we've
Speaker 1:Situation room here. Hiring. Saying Satya unloaded his risk onto the neo clouds. It's a game of sort of, I don't know, musical chairs. Yeah.
Speaker 1:And so that's Yeah.
Speaker 2:Like the deal with the deal with Microsoft
Speaker 1:Yeah.
Speaker 2:Just wasn't it like seemed to be like little to no margin.
Speaker 1:Yeah.
Speaker 2:But anyway, so if you so the Neo Clouds have also sold off, but Lumentum Holdings is up 46% in the past month, which he added. Western Digital up 25% and Seagate up 14%. So Yeah. He's making up for it.
Speaker 1:Yeah. Yeah. It's it's the birth of a new of a new bond. It's just like it's it's the very, very hot part of the cycle. I think everyone's wondering, like, how big will this be in a decade?
Speaker 1:That's a that's a big question. It's a it's it's a very exciting time and but you gotta stick the landing. And I think people are I'm sort of rooting for him. I think he's I think he's gonna do it.
Speaker 2:Yeah. The question is like, are like, is it gonna be a true hedge fund? Like, he gonna make money
Speaker 1:In a down market?
Speaker 2:In a a in
Speaker 7:a correction.
Speaker 1:I mean, yeah. I bet we're gonna open up one of these 13 f's and be like, wow. He's short everything now. Okay. And then and then you're see everything sell off, and it'll be like, wow.
Speaker 1:Another That
Speaker 2:would be much higher signal than PT in a in a, you know, $75,000,000 fund.
Speaker 1:Oh, totally. Totally. Yeah. Yeah. Yeah.
Speaker 1:There there there's some Blue Owl news in the Financial Times. Blue Owl investors faced hefty faced hefty losses as credit fund blocks exit ahead of merger. Blue Owl has blocked redemptions in one of its earliest private credit funds as it merges with a larger vehicle overseen by the asset manager in a deal that could leave investors with large losses. They could lose about 20% of their holdings. The deal underscores the risk that retail investors have taken in pouring hundreds of billions of dollars into private debt funds carrying limited liquidity rights.
Speaker 1:It comes as scrutiny builds on the valuations and returns on private credit funds, which have caused publicly listed debt funds to sell off and trade at steep discounts to the stated value of their assets. And so we we we talked about this, I think, on Friday, but Blue Owl has been selling off this year, and they said we should be performing better than everyone else. But it feels like a little bit of the narrative might be around liquidity here. Earlier this month, Blue Owl told its shareholders that it planned to merge Blue Owl Capital Corporation two fund, which has a billion dollars in assets, with its OBDC fund, which has 17,000,000,000 in assets. BOCC two investors are being asked to exchange their shares in the private share private fund for shares in OBDC at the stated net asset value of both funds.
Speaker 1:However, OBDC trades on public markets at a discount of about 20% to the stated value of assets because of the liquidity problem.
Speaker 2:Well and because it's possible that
Speaker 1:the People
Speaker 2:are it doesn't feel like they're pricing the assets correctly.
Speaker 1:Potentially.
Speaker 2:There's some discount.
Speaker 1:Gotta see what's in there. Redemptions in BOTC BOCC two have climbed to a level where it could event where it would eventually be forced to restrict investor redemptions. Its investors pulled out a 150,000,000 in the first nine months of this year, a 20% increase from the same period last year according to security filings. Redemptions in the third quarter nearly doubled to 60,000,000 or 6% of its net net asset value. Jonathan Lamb, chief financial officer of OBDC, acknowledged that at current prices, investors could take a potential haircut on their investments, but he said the merger came with significant benefits, such as the ability to own more liquid shares in OBDC.
Speaker 1:The trading price of OBDC has been hit by souring sentiment on private credit markets that was not backed up by the performance of Blue Owl's underlying loans, he added. If shareholders were to vote down the deal, BOCC too may be forced to limit redemptions. So good luck if you're hanging out in Blue Owl Capital. Sundar Pichai has more news in the data center world. She says, today, we're announcing a new $40,000,000,000 investment in Texas through 2027 to build cloud and AI infrastructure and support thousands of new jobs.
Speaker 1:Yeehaw. This includes new data centers in Armstrong and Haskell Counties and a major investment to strengthen energy resilience and abundance. We're also providing funding to more than double the projected pipeline of new Texan electricians
Speaker 2:There we go.
Speaker 1:To power the AI era. With the
Speaker 2:golden age of being, the golden electrician age where you
Speaker 1:get blown around in
Speaker 2:private jets to different data centers.
Speaker 1:Yeah. You do. You do. That's right. So $40,000,000,000 investment, thousands of new jobs.
Speaker 1:That feels like a higher ratio than what what was the other example you kept quoting? Something like 500 jobs for some anthropic Yeah.
Speaker 2:It was
Speaker 1:data center or something?
Speaker 2:It was the anthropic data center. They were like, we're investing $50,000,000,000 How many jobs did you create?
Speaker 1:Twenty twenty jobs. It was I mean, that's not like goal of this stuff. 800. The jobs should not necessarily be created in the data center.
Speaker 4:No. I
Speaker 2:I I just brought I I just always brought that up because you have to understand what people outside of tech, their reaction Totally. To Oh, great. You're investing $50,000,000,000 yeah. In some cases, this doesn't create jobs. A good article in the journal on on BlueOut as well.
Speaker 2:I think it also ties into Abilene, Texas. Yeah. Might might be a good moment to to cover some of this. Yeah. Pull it up.
Speaker 2:In the journal yesterday, Wall Street blows past bubble worries. Oh, yeah. It's a supercharged AI spending frenzy. And they say firms such as Blue Owl Capital have raised trillions in investing firepower. The AI build out is a perfect match.
Speaker 2:The warning signs are flashing. Not long ago
Speaker 1:have better PR or worse PR than Ares? Because they seem to be they seem to be quickly becoming, like, the main name that everyone knows in private credit. And to my knowledge, like, they are not the only firm in the category, and yet they are the ones that that if you need an example, you bring you you pull Blue Owl off the shelf. Think it's
Speaker 2:a strong brand.
Speaker 1:It is a strong brand.
Speaker 2:They have the.com. They have blueowl.com.
Speaker 1:Blueowl.com.
Speaker 2:Not long ago, Blue Owl Capital was an upstart investment firm that lent money to mid sized US companies such as Sara Lee Frozen Bakery. Woah. These days, the firm is financing massive data centers costing tens of billions of dollars for the likes of Meta and Oracle, a sign of just how quickly Wall Street has become the enabler of America's AI boom. Fund managers such as Blue Owl amass trillions of dollars in investing firepower and have been hunting for big deals where they can put that money to work. They found slim pickings for years until a perfect match appeared in AI, which has provided a bigger target than anything in history due to the vast sums tech companies need to ramp up computing power.
Speaker 2:We're talking about numbers that are so large even in the low cases, said Blue founder, co founder, Mark Lip Schulz.
Speaker 6:Lip Schulz.
Speaker 2:Lip Schulz. Does it even matter if you keep counting after you get to 1,000,000,000,000 of capital expenditure in the next couple years?
Speaker 1:This is insane. You
Speaker 2:Does it even matter?
Speaker 1:You really undersold this.
Speaker 2:Does it even matter?
Speaker 1:You told me you read this, I was like, is it good? You were like, it was okay.
Speaker 2:There's there's one moment that's good.
Speaker 1:No. There's another one I saw. I scrolled down.
Speaker 2:Last week's sell off in tech related stocks and bonds marked some of the most serious warning signs that the frenzy could be overdone. But any worries on Wall Street about a possible investment bubble have largely been trumped by the fear of being left behind. Lip Schulz and co founder Doug Ostrover jumped into the fray at a posh retreat in California's Ohio Valley for dozens of tech VIPs and celebrities in the 2024. Meta CEO, Mark Zuckerberg, and Satya Nadella were there along with Farrell Williams and Serena Williams, The Blue Owl duo duo of Wall Street superstars who built the firm into a 295,000,000,000 fund manager in ten years by perfectly timing a surge in private lending looked like just two money men in office sneakers and fleece vests. But the billionaire co owners of a professional hockey team who have talked about skating where the puck is going.
Speaker 1:It's awesome that they Seize
Speaker 2:the opportunity to get
Speaker 1:in They built this firm huge. They make billions of dollars, they're like, let's let's get a hockey team. Wanna go fifty fifty?
Speaker 2:Let's Tyler, what what hockey team do they own? Can you find that out?
Speaker 1:But the next line is is with the one I was laughing at.
Speaker 2:This While David Getta DJ, the Blue Owl executives cut a deal to acquire IPI Partners, an investment firm that owned and operated big data centers for Amazon and Microsoft. Blue Owl already had close ties with the organizer of The Treat, Iconic Capital, which manages the personal fortunes of Silicon Valley Elite, including Zuckerberg, and was a part owner of IPI.
Speaker 1:Okay. Let's go to Tyler.
Speaker 3:They own the Tampa Bay Lightning.
Speaker 1:Do they spend a lot of time
Speaker 2:in Tampa Bay? Is that a is that like a an a NHL team?
Speaker 1:Yes. NHL team in Florida. That feels like an odd
Speaker 2:That's gotta be I mean
Speaker 1:I feel like Tampa is
Speaker 2:Just trying to keep the ice.
Speaker 1:I feel like a lot of the hedge fund guys, they're on the other side of the peninsula. Right? Like, aren't they in, the Key West and Mar A Lago area or Palm Beach or Miami? Like, see or maybe they just fly in and out. Like, I don't know.
Speaker 1:It's just it's just it feels like I would I would love to know more about how they selected that particular team and that sport even.
Speaker 2:Yeah. The purchase gave BlueOwl a seat at the table to bid on mega AI financing. Let's give it up for mega AI Not long after, it got arranged it got picked to arrange a $14,000,000,000 package for an Oracle and OpenAI data center in Abilene, Texas. Then last month, BlueOwl raised about 30,000,000,000 to build an AI data center for Meta in Louisiana, putting in 3,000,000,000 of its client's money and borrowing the rest. So the the lender is is is borrowing in addition to their LP's dollars.
Speaker 2:The deal included a provision considered extraordinary on Wall Street giving Blue Owl's equity investment a debt like guarantee in case the partnership falls apart, showing the new financial wizardry bankers are conjuring to meet AI's ravenous financial demand. Let's give it up for financial wizardry. We love wizardry. Spreading the risk. Silicon Valley's biggest players are flushed with cash and are able to fund much of the initial AI build out from their own coffers.
Speaker 2:As the dollar figures climb ever higher, they're turning to debt and private equity, spreading the risk and potential rewards more broadly across the economy. Some of the financing is coming from plain vanilla corporate bond sales, but financiers are making far bigger fees off giant private deals. Virtually every Wall Street player is angling to get a piece of the action from banks such as JPMorgan and Morgan Stanley to traditional asset managers like BlackRock.
Speaker 6:Before we go
Speaker 1:on, let me tell you about Fall, generative media platform for developers. The world's best generative image, video, and audio models all in one place, developing fine tune models with serverless GPUs and on demand clusters.
Speaker 5:Continue,
Speaker 2:Jordan. Investor appetite for data center debt is so strong that some money managers have booked billion dollar gains in a matter of days. Let's give it up for booking billion dollar gains
Speaker 1:in Even a matter of before construction of these facilities, are financing. I mean, we talked about we we we talked about this
Speaker 2:where Inserting.
Speaker 1:Money management
Speaker 2:It's almost like, you know, people say there's no such thing as free money, but kinda seems like could be in a kind of a free money situation here.
Speaker 1:I think you gotta you gotta do something pretty Anyways, here's wind up at the iconic
Speaker 2:Here's the catch. Still, the longer term performance is hardly assured. Big tech companies are expected to spend nearly 3,000,000,000,000 on AI through 2028 Mhmm. But only generate enough cash to cover half that tap according to analysts at Morgan Stanley. Big names in the finance world, such as Goldman Sachs CEO David Solomon, are warning about AI fueled froth in the markets and in capital spending.
Speaker 2:At the same time, the fear of missing out is real. Days after Solomon voiced his concerns to analysts, Goldman formed a new team in its banking and markets group focused on AI infrastructure financing. They are getting into the game.
Speaker 1:What do you say? What we do know for certain is that the big tech companies that wanted the world to spend trillions have huge financial incentives to be believers. If you haven't noticed, Wall Street is also being paid a lot to promote the story. Greenlight Capital, the hedge fund firm run by David Einhorn wrote in an October letter to investors. So how will
Speaker 2:And this is this is the line that stood out the most to me like on the West Coast Yes. You have
Speaker 1:the labs Yes.
Speaker 2:Which are effectively every single person as well as the investors
Speaker 3:Yes.
Speaker 2:Are incentivized to keep keep the the current, you know, AI super cycle narrative going. Yes. And then on the East Coast, you have Wall Street who is getting paid effectively do the same thing. Mhmm. So you have, you know, these two centers of power that are both incentivized to keep the party going.
Speaker 1:Mhmm. Yeah. This this breakdown here. So the the Wall Street Journal is slicing up how the next three years will look based on projected global spending on data centers by financing source. So of 2,900,000,000,000.0, which is estimated over the next three years, I guess, four years.
Speaker 1:Tech companies will cover 1,400,000,000,000 of it. Private credit will cover 800,000,000,000 of it. Corporate bonds, 200,000,000,000 of it. Asset backed securitization, one fifty. Private equity, another $3.50.
Speaker 1:And to me, this looks like a very healthy way to actually finance this. This feels like it's not if it was like, if we were looking at this, if you broke down we've been through a $2,000,000,000,000, like, bubble before, and it collapsed very rapidly. What was that? It was, like, the meme coin era. And who and how did we break that down?
Speaker 1:It was not it was not the the cash flows of the most profitable companies in the world that were buying the long tail crypto assets. It was retail. And so the fact that this is, like, pretty removed from retail feels, like, safe to me. It's much safer than Sure. Than getting a a huge bubble inflated in, oh, everyone has to get in on the latest coin, and they're all nonsense.
Speaker 1:Like, there will be nonsense deals. We're already seeing nonsense, AI companies, and there certainly will be projects that get financed that Yeah. They just cannot build
Speaker 2:that approved. Say using the excuse like, well, at least this isn't retail getting hosed doesn't hold up that well when you think, okay, the alternative is like large institutions, insurance companies, pension funds that are also financing this, which is effectively
Speaker 1:I'm talking about the fragility. Necessarily where where where the where the financial pain or who the who the person ultimately pays for it. If there is a pullback, it's like how fast can that pullback happen. Right? Because if if, it like, if the write downs if there's something that goes wrong and the write downs come out of tech companies' cash flows, that's just not as big of a deal as as everyone waking up and and just slamming the sell button.
Speaker 1:It's just a very different, it's a it's a very different set of dominoes. Like like the dominoes of, like, the the the interest rate crisis, the NFT crisis, like, FTX blowing blowing up, all that stuff. Like, that those dominoes were spaced right next to each other. And so as soon as one went over, it was like the next person has their finger over the sell button. Their next person has their finger over their sell button.
Speaker 1:Whereas if you're like, yeah. I'm a tech company, and I produce, you know, $50,000,000,000 of free cash flow and, oh, yeah, I'm not getting a great return on the 20,000,000,000 of free cash flow that I earmarked over here for the next few years. It's bad, but it's not as calamitous.
Speaker 2:And I think going back to this quote from David Einhorn, he says, what we do know for certain is that the big tech companies that want the world to spend trillions have huge financial incentives to be believers. In case you haven't noticed, Wall Street is also being paid a lot to promote the story. And in that same letter, Einhorn and Greenlight said, this was this was the AI math makes no sense.
Speaker 1:Mhmm.
Speaker 2:It was basically the way it is today. Consumer business spends $1 on a ChatGPT subscription, is OpenAI revenue. Yeah. Then OpenAI provides the service by spending $2 on Microsoft AI infrastructure, which is Microsoft revenue. Then Microsoft spends $0.60 leasing GPUs from CoreWeave to handle the compute load, which is CoreWeave revenue.
Speaker 2:And then CoreWeave spends $2.4 on chips from NVIDIA and another $2.4
Speaker 1:Yes. But you're completely discounting exactly how addicted the four point zero user is. They will pay any amount. So let's say that it's it costs $20,000 a day to serve a four o user, they will find the money. They will be stripping copper out of empty buildings to pay for their four o bill if they have to.
Speaker 1:They will be they will be Whatever
Speaker 2:it takes.
Speaker 1:They will be they will be breaking into cars to to sell stolen CD radios.
Speaker 2:Yeah. It is it is notable that Blue Owl has sold off 16%
Speaker 7:Mhmm.
Speaker 2:Past month. So even during this sort of like boom in lending Mhmm. It's not they're not getting very much credit for it.
Speaker 1:Yeah. It's an odd it's an odd time. Like, there's still so there's still so many things that are working. The the results from that newcomer event, the AI is, Cerebral Valley, where he he had every it's so good. He he took, like, a straw poll on stage and asked everyone, like, who do you wanna short?
Speaker 1:And everyone said perplexity. So, like, he didn't really have to say, like, I'm shorting perplexity. He just was able to, like, take the temperature and sort of maintain, like, you know, some, arm's length distance to it while still, like
Speaker 3:Yeah.
Speaker 1:Getting the take out there. But everyone was saying that they wanted to buy more OpenAI, more Anthropic, more Andoril, a few other names came up, I believe. And and there's still, like, an incredible amount of bullishness in a lot of different areas. But, I think, yeah, people are still still worried about some of the some of the other stuff. But at at the same time, it feels like there's so many companies that have, like, gone through a they've gone through the AI pump and round tripped, not just Oracle, but even, like like, Klarna was going through the whole, hey.
Speaker 1:We're gonna get so many efficiencies out of AI, and then it came back to normal. But then they still got out, and it's, like, a reasonable company that's not, like it's not zeroed. Right? It's like, oh, yeah. Their business is just what it was before the AI boom, and they are not getting, like they didn't get moved up or down.
Speaker 1:And so there's just, a ton of companies that are like that. Where is Klarna since the IPO anyway?
Speaker 2:They're sitting, at around a 12,000,000,000 valuation, 12.6. Down Down. 20%? Yeah. Down 20
Speaker 1:doesn't seem calamitous to me. That seems like pretty, like, solid. Like, I don't know, the overall market's quarter kind of, you know, up and down. I don't know.
Speaker 2:Affirm, on the other hand, is up 28%.
Speaker 1:How's Affirm doing? Up
Speaker 2:28% Okay. In the
Speaker 1:past six months. In the past six months.
Speaker 2:They're getting Today
Speaker 1:is a real bloodbath. It's down it's down 6% today. Everything's down today. What else is down today?
Speaker 2:Bitcoin. Let's check.
Speaker 1:NASDAQ's down 1.3. Dow Jones, 1.3 as well. Well, we're we're going to ten thousand year mortgages. Doing ten thousand year mortgages.
Speaker 2:Announced the second round of stimulus checks already.
Speaker 1:Gemini three must save us. There there's a prediction on Polymarket that was quote posted by Sundar Pichai, CEO of Google. He says prediction markets are betting on Gemini three release week. 69% says November 22. Can't wait for that.
Speaker 1:We were wondering if we were gonna get it before Christmas. It was our Christmas present. It was Tyler's Christmas present. And, fortunately, looks like we're going to. And I couldn't be more excited that we are partnered with Gemini and Google AI Studio, create an AI powered app faster than ever.
Speaker 1:Gemini understands the capabilities you need and automatically wires up the right models and APIs for you. You can get started at a i.studio slash build.
Speaker 2:So Speaking of Google, capital says his final investing decision was to buy Google.
Speaker 1:It's amazing. I think that's beautiful. He doesn't even need to say who he's talking about. It's, so obvious. It's Warren Buffett.
Speaker 1:It is it is beautiful that Warren Buffett is going long. Google, and, Darren here quotes this rune post that says, not enough people are emotionally prepared for if it's not a bubble. It's a good post. Like, it's like it's like, is it is it a is it a bubble if if all the big tech companies rip and there's, like, a couple neo clouds that trade down a little bit? Like, there's, like, you know, one or two application layer companies that burn a bunch of VC dollars, but there's still a new hyperscaler that's born.
Speaker 1:Like, kind of. I guess it's a bubble, but it's a survivable bubble. You know, it's just like, it's move on. You know?
Speaker 2:Yeah. Pulling bubbles.
Speaker 1:But people are getting wild on the timeline about Gemini three. Rune says the model must be good because the Google people have adapted the OpenAI culture of vague posting and hushed rumors and sending really weird texts. So we are ex and signals is LMAO explicitly calling out OpenAI culture of vague posting is hilarious. People are excited. There was also a a Reuters profile of Demis, and Morgan says, a Demis profile can only mean one thing.
Speaker 1:I imagine that that's Gemini three point o and that it will be good. The question is, like, what does good mean right now? Like, are we expecting anything that's, like, a a qualitative step function? Because my what what I would say what is Gemini three good? First off, I mostly just want better UI and little features in the app.
Speaker 1:Like, I want as a consumer product, I I just want, like, you know, better productization of the model that I already think is good. On the actual AI model side, I would imagine it's, you know, little 10% bump to how long it can reason. Maybe a model picker or, not a model picker, an automatic reasoning mode so that if I if I even if I think it's gonna take ten minutes to get me the answer, if it has the answer handy, it gives it to me in one minute, vice versa. It knows when to think really hard. It knows when to, think just for a little bit.
Speaker 1:I'm expecting it to be like slightly better at all the benchmarks. I don't know I don't even know what would blow me away.
Speaker 3:Yeah. I mean, that at this point, it's it's getting like fairly hard to find good prompts that like show how good a model is. Like, there was the one earlier we showed about the shrimp fried rice one.
Speaker 1:Yeah. That's, like,
Speaker 3:pretty good. Yeah. But, yeah, I mean, qualitative, like, just in normal kind of natural language, it's, like, pretty hard to
Speaker 1:Yeah.
Speaker 3:To get
Speaker 1:like, if I go to Gemini three and I say, tell me a joke or I say, write me a tweet that gets over a thousand likes, I'm not actually that disappointed when it falls flat on its face. I'm like, yeah. It's fine. It's spiky intelligence. I don't really need you to do that.
Speaker 1:I don't need you to be funny. I need you to, look up data really accurately for me. I need you to do that really well. Or I need you to write code really accurately for us.
Speaker 3:Yeah. I think another question is, like, what will OpenAI do if they'll do anything? Yeah. Because we've basically seen every big Gemini release, there's been some response from OpenAI. Usually, they do it the day before.
Speaker 1:What is Druity laughing at?
Speaker 2:I just don't know. I don't I I know that they want to steal Gemini's thunder. I just don't know if they have the juice this week.
Speaker 1:Who? Oh, OpenAI. Yeah. I mean
Speaker 3:It it feels a little bit like all the people at OpenAI are throwing in the towel a little bit. No one is no one is vague posting over there. Yeah. I
Speaker 1:I would I it feels like they've they've launched a lot of the things that would be easy, like, layups. Like, if they launched Sora this week, everyone would be like, oh, wait. We gotta focus on Sora. These videos of Sam Altman stealing GPUs are just too funny. Doesn't matter what happened in in Gemini three world because Gemini three probably will They be a released little Yes.
Speaker 2:OpenAI, the IO acquisition Yes. Week of Google IO.
Speaker 1:Yes. Yes.
Speaker 2:Yes. Turns out, like, they couldn't I don't think they could use the name IO. Like, they they got that, like, trademark lawsuit right away.
Speaker 1:Just like we big news. We hired three Geminis. Their birthday is in the month that makes them Geminis, and so we're introducing them today. And we're doing a whole press release for it, I think.
Speaker 2:The new Gemini team. Gemini At OpenAI.
Speaker 1:At OpenAI. Just anything to to steamroll the SEO. It will be fun. Well, we have Eric Lyman from Ramp in the Restream waiting room. Let's bring him into the t u p and l for now.
Speaker 1:Eric, how are you doing?
Speaker 2:Yellow suit. What?
Speaker 1:Did you not get the memo? Get the
Speaker 8:oh my gosh. Guys, I'm, I'm on the road today, but, I'm gonna be wearing my yellow suit all week. It's so good to see you guys.
Speaker 1:Good to see you too. Good to see you too. Give us the update. What's the latest? What happened?
Speaker 8:It's so so today, Ramp announced a $300,000,000 raise at a $32,000,000,000 valuation.
Speaker 2:Congratulations. They've done it again.
Speaker 1:The big question everyone wants to ask. The chat's going crazy. Is the job finished?
Speaker 8:Guys, the job is not finished.
Speaker 1:The the thesis behind the round.
Speaker 8:Of course. So I think if you start look at the fundamentals of the business, Ramp is just competing in a category of its own. Mhmm. You know, the company companies, generally, the bigger they get, the more they slow down. Ramp is growing faster this year at significantly larger scale than we did last year.
Speaker 8:Mhmm. So this is, you know, at over a billion dollars a year in revenue, The business is doubling. It's generating cash. And if you look at gross profit specifically, which is a good metric of how efficient, are the underlying mechanics of the business, we're growing 10 times faster than the median publicly traded software company. So it's just in a category of its own.
Speaker 8:I think on top of this, AI has just been an incredible accelerant, for the business itself. There's pull from from customers. Everyone was thinking about how can I, take what's happening in AI and apply it to to my business? And there's a push of these models are getting dramatically better. And so outcomes like automated expenses, automated accounting, moving funds to higher yield for for customers are are are just coming out of the box.
Speaker 8:And so, you know, I I I would say if we were to sum it up, I think for many millennia, money talked. We're keeping money to think. And I think the implications of that are are pretty profound, you know, better run businesses, more profitable organizations. And so that that's the first part. The second part, we're we're absolutely thrilled to be, deepening our partnership with Lightspeed, who led this round.
Speaker 8:I I think they're an extraordinary firm, led, the rounds of many great companies, I think, notably, Anthropix round earlier this year, which has proven to be, I think, one that's, you know, changed the industry quite a bit. And I think they've just been a great partner in in deepening our thinking, helping us grow. And so we're we're very excited.
Speaker 1:Talk about accelerating at scale. This morning at breakfast. Jordi and I were reflecting on the fact that we were feeling this way even with our much smaller organization. We were like, wow. Like, it's only been a year, and we feel like we're already losing some of the agility that we had when we were just three people.
Speaker 1:And we were saying, like, I understand what was this thing you said? You said, I understand why companies write down their principles because it's so easy to lose sight of what is important great. What makes you great, what what you do specifically. And so I would love to know just your
Speaker 2:reflection Yeah. Even across this year, like, lot of us, the process of making the show better is us remembering the things that we did great early on and that you kind of end up losing your way in slight ways, and then it's about remembering that and kind of coming back to
Speaker 1:it. Yeah. So I'd love I'd love to know both what are the things that make Gramp great, but then also your thought process for not losing that? Because I imagine you agree that that is important to have principles and re and redouble the focus on them.
Speaker 8:I love that you asked about this because I I think it gets to the heart of what we're trying to do inside of the product. Right? If you think about probably your your very first year, every dollar out of the organization was something you thought about. Someone wants to buy a software subscription, you know exactly why someone proposed a consultant. It's a debate over it.
Speaker 8:Everyone knows who approved what was this this this purchase worth it or not? And, you know, years later, suddenly, businesses just start happening to you. You're not happening to the business. Things are renewing on autopilot. Things you you you thought carefully about or or or just running on its own.
Speaker 8:And what we're really trying to seek to do in the product is when we say money that that that that that that thinks, you know, it's the idea is that before funds leave your account, we understand the principles that you run your business, and we check, does someone have the permission to spend it? It is memory. So once the thing actually moves, you don't need to ask, like, why did we buy this thing? What was it? Like, there's an audit trail of who approved it.
Speaker 8:Budgets are updated, and then there's reasoning. And so we can actually start to show businesses. Here's how you can get more of every dollar an hour. And so I think that's what's so different. You take things that used to be systems running to now there's checks in the system.
Speaker 8:And and I think for us, it it it's it's an interesting moment, right, where as a company, we we launched our first product, simple product card and expense, about five years ago. Today, we're two thousand four hundred and thirty six days old. We still count the days. And the reason is, we want to be thinking about, you know, with every day, are we getting just a little bit more done or a little bit less done, in kind of this practice of, thinking about kind of the passage of time, auditing our calendars, asking, you know, you know, are we getting more work done, with the same or less amount of effort, goes a long way. And then last, I would say specific to to you guys, I think part of why I I we've just felt so proud to work with both of you and call TPP and our partners is I think there's this, like, unbelievable care of craft.
Speaker 8:I think there's it's not about who's done everything. It's like who can write great copy, who can think of funny ideas, how can we take an idea to you know, we're we're doing it tomorrow. And I I I think that you guys have have really lived. I mean, feel forget a year ago, TBPN. I I don't even think you guys were called TBPN, or was it?
Speaker 8:You know, you've turned into something great. And so I I I I feel strongly you guys don't have trouble with this, and I I think just emphasis on speed and quality and craft has been what I've seen Yeah. With you guys.
Speaker 2:No. Totally. Something I was thinking about, we were reading that Karpathy post earlier around how software one point o was, like, kind of more general automation. Software two point o is your automating tasks that are verifiable. Verifiable tasks.
Speaker 2:And I just feel like finance is, like, just, like, prime for verifiability. Right? Because it's like, well, was this in in the policy or outside of the policy. Right? So Totally.
Speaker 1:Yeah. I'd I'd love to know Or
Speaker 8:is your policy incomplete. Right? You know, there's all these practices, and you can actually start to learn based off of the actions. And I think something that's so unique is that every time, you know, months close, there is someone actually going in and saying this transaction is categorized here. This goes there.
Speaker 8:You can see if you grew your revenue faster, if you grew your cash flow faster, or if you didn't. And so there's this incredible feedback loop that allows, ramp to add more value. And we think that's why the average, customer that adopts ramp spends 5% less. And also, the median Ramp customer grew their revenue by 12% over the past year, which is much faster than the median in The U. S.
Speaker 8:And I think a lot of it comes from this learning.
Speaker 1:So help me understand. You're generating cash, but you're also raising money. You're implementing AI, which can be very expensive. We've heard from Ivan at Notion that he saw a slight hit to his gross margins. It's still fantastic business, but did actually see that show up in the income statement.
Speaker 1:How is how are you thinking about the adoption of AI as a piece of the tech stack? Is it actually reshaping the financials at this point? Or is it something where, you see it sort of just like another subscription, just like another piece of the tech stack, and it hasn't really changed the way you think about the cost structure of your business?
Speaker 8:It's a really good question to zoom into. And in in my general view, it's been fairly overwhelmingly positive. I mean, I I still think that for us, the the goal is, you know, our goal is not to sell someone like a card or a bill payment software. It's to, it's help your business run more profitably. Right?
Speaker 8:And, I I think a lot of what we're trying to do is if we can actually pay for software where the output is, there's an hour of your, of your time, that you don't of work you don't have to do, anymore, that's somebody's software, that's really great. Next, I think about and you ask most, founders or or leaders in in technology, like, the biggest constraint on your business? Everyone says, I'm having trouble hiring engineers. Yeah. It it's like, I I wanna hire great salespeople, great engineers.
Speaker 8:And and if you can adopt software I mean, we look at our sales team. You know, the quota that folks on the sales team have is multiple times of our NexLocest competitor in part because we have a lot of tools we built to make our team, far more productive. Our engineers, are shipping about 50% more, code to the codebase than about four or five months ago, and that's continued. And so our general view is, look. If you can actually make the best even better, that's something we're gladly willing to pay for.
Speaker 8:And so in in our business, we've actually seen, you know, margins expand as we've, adopted this, in part because we think that our our principles, let's create a lot more value than we capture.
Speaker 1:Yeah.
Speaker 8:And and we're able to do that because we're we're creating much more value Yeah. Than it did even months ago.
Speaker 1:Hopefully, that's like Ramp is agile, new company that people love the product. And so it's just so much easier to say, hey. If you want a new AI powered feature, we have that on day one. You don't need to rip us out and go to something else. You don't need to have some bolt on.
Speaker 1:You can just get it all here. And so you can effectively, like, monetize whatever cost is coming through the actual token generation on your side pretty quickly.
Speaker 2:How how do you how are you thinking about head headcount planning over the next few years? We don't have to zoom out to, like, ten years. I think it gets extremely Yeah. Extremely fuzzy. But I'm curious if you care about, you know, every every once in a while, these sort of like revenue per employee or or sort of like net income per employee, like statistics start floating around.
Speaker 2:I'm curious if you if you if you think about that at all. And and obviously, professor, you know, running running ramp as, you know, one of the most efficient companies in the world is really good marketing for the products. It's probably the best marketing that you can do. But I'm curious how you think about about those things.
Speaker 8:It's exactly the right question. Because I I I think look. When we kind of think about our operating model every year, we try to increase the ratio of whether it's revenue, contribution profit, margin per employee. It's it's all to say, like, we we anticipate revenue is gonna grow very, very rapidly. And while employee headcount is gonna grow, it's gonna grow a little bit slower.
Speaker 8:And so the effect is you you start to see this widening. It gives you more margin to, invest in, whether it's, use of AI itself that you can drive into the product, more marketing, all those types of things to reach more customers. I I think more abstractly, though, if you kinda step back, you know, most businesses in The US run are actually profitable. You might forget that in the Valley, but have
Speaker 6:an 8% profit margin.
Speaker 8:And What are costs? We'll talk about this. But, you know, it's like, if you make a company more efficient by, like, 1%, it's equivalent to, like, an increase of you know, $1 in savings is equivalent to $12 more in revenue at an 8% margin just mathematically. And if you can do this repeatedly, I actually think that there's you know, a, you have a lot more businesses that are good, but but don't have this automation and and and and skill sets to grow much larger. I think a lot more companies will get bigger.
Speaker 8:And I also think that if it's just easier to run a business, I think more great businesses will get started. I think there's a lot of creative people out there, who would be running organizations who, I think, as the tools to build get easier, you see a more interesting world. And and so, you know, I I I actually think it's it's a pretty important and really profound thing to knock out inefficiency to allow, smaller companies to succeed. I mean, even you guys are a perfect example. TPPN is a small team that's changed the media landscape and captivated the world.
Speaker 8:And, like, I think that there are probably a lot of people where if you make the tools better, like, they will come.
Speaker 1:How do you, how do you feel like CFOs are ranking, like, AI enabled software on their list of priorities when they're making a decision in this category? Is it because it feels like there is some great stuff. There's some stuff that's commoditized, some stuff that you've built that's differentiated. But are are CFOs as a class sort of like, okay. I've checked the box.
Speaker 1:I'm exhausted with the narrative, or I'm just ramping up, and I feel like I'm just starting to get value and I actually understand it? Or are they just learning what AI is for the first time tomorrow or today?
Speaker 8:This is this is a fun one. So I I would say there's a few different types. I mean Sure. I would say small and mid midsize businesses just as like, look. I wanna run, you know, same business for less.
Speaker 8:I I wanna grow, meet my goals, be more profitable. And I think for us, it's just, hey. It's an easier to use expense report. Or or or, like, you won't need to do expensive more. Your card will do it for you.
Speaker 6:Sure.
Speaker 8:You don't need five tools to pay bills, run procurements, earn yield on your treasury. Yeah. Ramp will simplify that. But I think that for large customers, look, I I think it's, like, 80% plus of the earnings calls of of the S and P 500 mentioned AI about six months ago. I think it was 95 over the most recent quarter.
Speaker 8:It is a 100% on the mind of CEOs and CFOs. What they're wrestling with is, you know, there's a great study at MIT in the fall that went fairly viral where 95% of enterprise deployments are not creating return on investment. And I think part of why CFOs have been so enamored with RAMP is, you know, we can demonstrate very, very clearly, a, for most customers, it's it's a product that pays you to use it in the form of a cashback. B, it helps reduce your spend. And c, when you have all this time back for your Salesforce to go and sell and not do low value tasks, it's a very easy business case.
Speaker 8:And so I I think this this ultimately, like, our focus is on saving people money, and that ROI focus makes it easy for them to buy. I think it's it's it's very important.
Speaker 2:That MIT study, how does that track with what you guys have seen from various AI pilots? Because I think if
Speaker 1:ramp you're doesn't even count on either side. I I wouldn't think of, like, bringing a ramp into a company as, like, an AI pilot. I would see it as, like, a completely different thing. But are you the five percent that's successful, or are you just not even counting?
Speaker 2:If you were looking if you were talking with the team Yeah. And the team's like, 95% of our pilots haven't panned out, you'd probably be like, what were you guys doing?
Speaker 7:Yeah. Yeah.
Speaker 8:Yeah. It it it is you nailed it. So one, I think that a lot of you hit this first phase of people who were, like, told they need to buy AI. They're like, fine. I'll give you some external budget.
Speaker 8:You're good to have people tried a bunch of stuff. And I think you end up and and I think this speaks to the importance of design where you'd end up with, like, disconnected tools. Totally. Like, thoughtful chat like, great chatbot here.
Speaker 1:Yep.
Speaker 8:This thing that kinda plugged into some of your code base and others. And if you look at I think part of what's made ramps so effective is, you know, it's just a smarter card that happens to use AI. It's not telling you, hey. This is an LLM that categorized your transaction. This is an LLM that's read this 30 page invoice, detected it was fraud, told you not to pay for this.
Speaker 8:This is an LLM that detected you could be earning higher yield and moved it for you. It's just part of how it works. And I think this next phase and the AI native companies that are working very, very well have these deeply integrated products where it's not like some, you know, AI tool. It's just how it works. And so I think that's the distinction.
Speaker 8:And you're right. For a lot of CFOs, it's, hey. We have this tool. It's gonna help help us cut out waste and pay us cash back. Should we use it or not?
Speaker 8:And it's a pretty easy decision. So yeah.
Speaker 1:Yeah. Yeah. It might not even be in the category, but it's still delivering AI properly. And I just love that that's I I like there's something very valuable about just using every possible tool, AI or not, or linear regression, if that's the best tool for the job, behind the scenes, and then just delivering the actual value to the customer, solving the problem. Because customers, they don't necessarily want technologies.
Speaker 1:They want solutions. Right? Yeah.
Speaker 8:Yeah. And you it's one of our our customers and, someone I look up to quite a bit. He's, Brett, Taylor Yeah. Started a company called Era, Terminator OpenAI, and he was on it, a week or two ago. In one of the things he said is, like, look.
Speaker 8:I I don't want anyone at Sierra spending, like, time on expense reports or invoices. Yeah. And and Ramp is automated categories of work that used to slow us down, and we actually can work on the things that makes us great, building great products for the business. And so I I I think you nailed it. It's it's solutions, not
Speaker 1:Not actual technologies because most of the customers just just they they just don't have a strong opinion about the the underlying technology. They care about saving time, saving money. That's what matters. Well, congratulations. Thank you so much for taking time.
Speaker 1:Milestone. Day to Fourth of the year. Fourth of the year. I'll be back next week. You're always welcome.
Speaker 1:That's why we bought these suits. We don't rent them. We buy we bought them.
Speaker 2:Tailored. Because we
Speaker 1:knew we were
Speaker 2:gonna be using them a lot.
Speaker 1:We're gonna be using them a lot.
Speaker 8:Guys, it's it's so good to see you. Thank you so much.
Speaker 5:Have a good rest
Speaker 2:of your day. Yeah. Incredible milestone.
Speaker 1:We'll talk to you soon, Eric. Bye. Cheers. Quickly, before we bring in our next guest, let me tell you about Turbo Puffer, Search Every Byte, Serverless Vector, and Full Text Search. Built from first principles on object storage, fast, 10 x cheaper, and
Speaker 2:scale By the way, median public SaaS company growing at 12 to 17% a year. Yes. They're growing at 10 times that rate.
Speaker 1:Fantastic.
Speaker 2:Well.
Speaker 1:We our next guest is, Stacy Raxon. Welcome to the show. Thank you so much for
Speaker 9:stopping by.
Speaker 1:To meet you, guys. We'll have you sit down here. And while you're sitting down, I'll tell everyone about ProFound. Get your man mentioned in ChatGPT. Reach millions of consumers who are using AI to discover new products and brands.
Speaker 1:Are we in a bubble? What's going on? Introduce yourself for a second.
Speaker 7:Sure. My name is Stacy Rasgon. I'm a stock analyst and equity analyst. I'm a managing director and analyst senior analyst at Bernstein Research
Speaker 5:Sure.
Speaker 7:Where I look at The U. S. Semiconductor and semiconductor capital equipment space. Thank you. Clearly, AI has been the only for a couple of years now.
Speaker 1:Yes. Yes. Want you to react to this Suttrini post here.
Speaker 7:Oh, sure.
Speaker 1:Says, just reviewed a bunch of stuff for our November macro memo. We might low key be going into a recession, boys. No clue if this matters at all for stock prices anymore, though.
Speaker 7:That's a good point. You could argue some parts of the and I'm I'm not a macro guy.
Speaker 1:I'm not
Speaker 7:an economist. However, you could argue some parts of the economy are already there. Right? I mean, people use the phrase K shaped recovery,
Speaker 6:which is
Speaker 7:sort of interesting. But I think especially the lower half of the population is not actually doing all that well. Right? And we've actually seen that more recently in a lot of just not the semiconductor reports, but a lot of the consumer reports and the restaurants and Auto loans. Yeah.
Speaker 7:So there's probably parts of the world that are already there. And clearly, the infrastructure spending, the AI spending has been supporting GDP.
Speaker 1:Yeah.
Speaker 7:And it's been supporting the stock market. I mean, Nvidia's, I can't even remember, 8%, 9% of the S and P now. Yeah. So, yeah.
Speaker 1:It's remarkable.
Speaker 7:We we may be there already. Yeah.
Speaker 2:So we had a we we had a thesis that that NVIDIA's gonna do just fine this this earning cycle. Specifically, the only reason, not not just overall demand, but that Jensen was slamming beer.
Speaker 1:This is the most quantitative research. You can't get this. He's not
Speaker 7:acting like a CEO that's, like, really worried about his quarter. I don't know that he would generally care anyways. However, they just did an event in DC a couple weeks ago called GTC. And I mean, he put a slide up behind him that basically said numbers next year are too low. What the slide said, it said they had $500,000,000,000 in cumulative orders for Blackwell and Rubin.
Speaker 7:Blackwell is their current generation of AI servers, and Rubin's the next generation. Yeah. 500,000,000,000 cumulative across 2025 and 2026. Mhmm. And they said we've already I I can't remember.
Speaker 7:It was, $2,020,000,000 chips for orders. And they said we've we've we've shipped six to date. So we got 14,000,000 left. They've they've got five quarters. You you can sort of figure out how much it is, and you can compare that to where the numbers are.
Speaker 7:And he's basically saying numbers are too low. So I'm I'm not terribly worried going into the quarter on Wednesday. Now, you know, with with stocks, it's it's always not just the numbers. Right? It's it's the numbers relative to the expectations.
Speaker 1:Totally.
Speaker 7:I think everybody expects it to be good. Yeah. So we'll see how how good he can make it.
Speaker 1:It does feel like we've entered a period over the last month maybe where even beating would still result in a sell off? Is that just everything priced to perfection? What's going on there?
Speaker 7:Yeah. I mean, especially in the AI side, there's been you know, the sentiment ebbs and flows. Yeah. Right? And and we've been in in a bit of an ebb.
Speaker 7:Yeah. And there's been a lot of stuff. You know, we had we had Burry's comments about a GPU lifetime and depreciation. Had a couple to be honest, few what I would call self owns on the part of the OpenAI folks, Old man and Scott Freyer, a little unnecessary angst that they They
Speaker 2:did that to inspire themselves to have to work harder.
Speaker 7:Maybe. Maybe. I guess. You you know, it's
Speaker 2:it's fine.
Speaker 7:And and you you you early guys, are we in the bubble or not? Sure. I I mean, so bubbles are as as bubbles are. Right? I mean, you can look at a lot of things.
Speaker 7:You can look at valuations. I mean, NVIDIA is mid-20s price to afford earnings right now. We haven't got anywhere near crazy yet. I mean, I'll say the same thing I've said since this started, and it really got started. ChatGibis showed up in November '2, and NVIDIA's sort of print heard around the world was May '23.
Speaker 7:That's that's when it started. And even then, people worried about, okay, 2024 is gonna be off. Right? I'll I'll say the same thing I said then. At some point, you know, nothing goes up into the right forever.
Speaker 7:At some point, you'll have a digestion or an air pocket or it's not now. It's clearly not now. That's all I can say. I don't know when, but it's not now. It's not this year.
Speaker 7:Doesn't look like it's next year. Then all of these projects that OpenAI is signing with Broadcom and NVIDIA and even AMD, They don't even start to ship until the 2026.
Speaker 5:So
Speaker 7:at least from a spending standpoint, from what we consider, it's probably not 2027 either. Now we'll see what the stocks do. Like, they tend to be anticipatory. But in terms of, like, an air pocket or something in spending, I'm I'm not really all that worried yet. Yeah.
Speaker 7:When? I don't know. But, like, it's not now.
Speaker 2:Yeah. Do you do you how much have you, subscribed to this idea of, like, rolling rolling bubbles? So like right now, it seems like we've had we've had like explosion, you know, a lot of excitement around neo clouds this year. All, you know, pretty much all of them have sold off a ton in the last month. Maybe partly because of some of the comments out of the opening.
Speaker 2:I can't have been lack of lack of confidence.
Speaker 1:Yeah.
Speaker 2:But at the same time, Seagate, Western Digital, these other companies are up tremendously. I mean,
Speaker 7:yeah, the storage, they're covered by a colleague of mine now. But I mean, just go up 10% every day, right? But that's the thing. It all really comes down to demand. Demand is off the charts.
Speaker 7:Nobody can get enough compute. The neo clouds are all even with CorWeave, there was they a bit of a delay. They just don't have the capacity, right? They pushed out a little bit. It's still there.
Speaker 7:Again, the storage guys are ripping because the memory prices are going through the roof because there's so much there's a lack of supply relative to demand. All we've seen from the hyperscalers is CapEx numbers going up and up and up and up. Like nobody can get enough compute right That's where we are. And I think that is so the overarching that's the overarching thesis like either way. You Like go back to the question about GPU
Speaker 1:Yeah.
Speaker 7:Depreciation, GPU lifetimes, for This is what Burry was getting at. He was saying, Oh, well, they're all using your six year depreciation lifetimes, and these things don't last more than three years because you've got new stuff coming in. It's not true right now. Right? I mean, can look, they're still renting out old GPUs for much more than it costs them to operate them.
Speaker 7:It's clearly possible to run them longer than three years. It comes down to demand. Right now, is so strong, it is absolutely economic to run that stuff. If demand weakens, maybe it won't be, if demand weakens, we're all screwed anyway. Right?
Speaker 7:So, to me, all of the bear cases that you come up with right now, to me, collapse under the same thing. Is demand there or is it not? Right now, it's it's it's there, and and it's not showing any the demand side is not showing any signs of weakening.
Speaker 1:What about the the the leaked phone call from Sarah Fryer, the CFO of OpenAI, where there was this idea that potentially there was missed what she said was
Speaker 2:user minutes user minutes were dropping, which implies
Speaker 1:In the core ChatGPT which feels like the leading indicator for all AI. Yeah, but that's more
Speaker 7:than just OpenAI, too. You could argue that we want OpenAI to be there because Altman's driving a lot of this Totally. Incremental
Speaker 6:Yeah, yeah.
Speaker 7:So we'll see. But there's lots of demand. It's not just OpenAI, it's OpenAI. It's anthropic. Totally.
Speaker 7:It's Gemini.
Speaker 2:Totally.
Speaker 7:In general, right now, I I mean, usage is going up.
Speaker 5:Yeah. Yeah. Yeah.
Speaker 1:So Yeah. I mean, I I'm sure we'll get more information on the on the Google side because some could be
Speaker 7:of the when you see these leaks, like, always have to be a
Speaker 1:little careful about Yeah. It was very odd that it was, like, from an investor only call. Yeah. Like, what investor would leak
Speaker 7:that means? By the way, we we we do calls like that. And stuff gets taken out of context. So I was I don't I don't know what they said. I wasn't on on that call.
Speaker 1:Yeah. Yeah.
Speaker 7:Yeah. I'm always a little hesitant to take and I do this for a living. Right?
Speaker 5:Always a
Speaker 7:little hesitant to take that
Speaker 1:Those leads.
Speaker 7:Face value. You have to,
Speaker 6:you know Yeah.
Speaker 7:You have you have to diligence.
Speaker 1:Yeah. Yeah. I mean, at the same time, like, to your point of the, like, s curve nature of these adoptions, it's possible that, you know, 800,000,000 is a lot of people. Like Yeah. You do, at some point, saturate everyone and Sure.
Speaker 1:There's only there's only so much time in the day.
Speaker 7:Then billion people in the world.
Speaker 1:Yeah. Yeah. But, I mean, it took it took Facebook years to get up into the high
Speaker 7:And that is that is the thing, by the way. I've been doing this job almost eighteen years.
Speaker 6:Yeah.
Speaker 7:Same seat. Mhmm. I've never seen anything like this before. Yeah. Right?
Speaker 7:I mean, this is this is unprecedented. And just and that's why people get nervous. Yeah. Because the numbers have gotten so big
Speaker 1:Yep.
Speaker 7:So quickly you just sit there and stare at them. Yeah. It's like, oh, this can't be sustainable. Mean, we've been hearing it for for two and a half years. Yeah.
Speaker 7:Still going.
Speaker 1:Yeah. So, I mean, in this idea of the k shaped recovery or this, you know, cycle of little bubbles popping up and popping, how do you process something like CoreWeave? Like, it feels like Yeah. Everything is going so well. And and to the point where the the the negativity around AI is like a rumored leak of a phone call, but then we're seeing a company trade down by 50% in a month.
Speaker 7:Yeah. Well, again, I won't talk with CoreWeave specifically, but I mean, look, anything that goes out where valuations are high, expectations are high. It's not just that lots of things have weakened off of peaks. It's fine. The neo clouds in general, they're all seeing tons of demand.
Speaker 7:I'm not really worried in general right now about where the demand is going. The only thing we're seeing in terms of spending intentions and everything else is right now is And again, I think that is the question, how long does it last? I don't think anybody knows. Yeah. If you just look at, like I said, at least what is currently being forecasted by the companies that are doing the spending at this point, there's no signs of a slowdown.
Speaker 7:Not yet.
Speaker 1:What do you think of this thesis that some of the hyperscalers are maybe offloading risk to the Neo Cloud?
Speaker 7:Oh, they clearly are. Right? I I mean yeah. Which is which is fine. That's part of the purpose, I think, that the Neo Cloud serve.
Speaker 5:Sure.
Speaker 7:You know, you're kind of at the tip of the spear. Right? It's it's it's it's it's boom or bust. Right? Yeah.
Speaker 7:I mean, but that's that's part of their business model, I think.
Speaker 1:What about what if you go further on the tip of the spear? Yeah. Is there a company like organization like BlueOwl or some of the Yeah. On financing. Yeah.
Speaker 1:On the financing side? So Because BlueOwl is another example where, you know, like, Google's doing very well. Microsoft's doing very well. The the hyperscalers are doing well very well. Even OpenAI is doing very well, growing a ton.
Speaker 1:But then you have some some froth in the neo clouds and some more froth in the private credit markets. Yeah. What what's your take on what's going on
Speaker 7:in cloud? Those are probably frothier parts anyways. But I mean, the financing question is interesting Sure. Because I'd I'd say some of the these debt deals Yeah. Again, if you're looking at, you know, parallels to prior bubbles, that is one thing that there's a few things that people worry about
Speaker 4:Yeah.
Speaker 7:Raising a lot of debt to do to fund this stuff, and then they also worry about what they call kind of circular revenues. Right? There's a lot of, like, crosstalk.
Speaker 1:Yeah. We do a lot
Speaker 7:of the companies around here, maybe to address both of those. I'd say on the debt side, most of this capex is still being funded off of income statements. Yeah, that cash is one difference now versus, say, 2,001 is the companies that are driving the spending, by and large, are the largest, most profitable, best businesses that humanity has ever devised.
Speaker 1:I'm sure you remember what the actually largest business was in 2000. It was ExxonMobil and Chevron.
Speaker 7:It was different world.
Speaker 1:It was big big oil. And big oil was not driving and they were not funding the telecom build out.
Speaker 7:I mean, they were a lot of cash flows. Companies, they were mean, they were raising money. They weren't profitable. That does not run
Speaker 1:with the different thing. It wasn't like an immediate beneficiary Yeah. That was that was just the oh, the biggest companies are just getting bigger. So is a very good
Speaker 7:And so in this case, we are seeing starting to see some debt deals to fund this. But I'd say the by and large, the vast majority is still being funded off of operating cash flow. So that's why I don't feel too bad about it.
Speaker 1:The 2,400,000,000,000.0 that The Wall Street Journal estimated, the number that was funded by cash flows was 1,400,000,000,000.0, and then there was 800,000,000,000 in, in private credit.
Speaker 6:Yeah.
Speaker 7:So it it's it's
Speaker 1:It's still a pretty reasonable debt to equity ratio, in my opinion, if you think about that way or debt to cash flow.
Speaker 7:For now. Yeah. For now. Yeah. So that's right.
Speaker 7:And then in terms of, like, the the call the circularity. So I mean Sure. NVIDIA's behind us. They're investing a lot. Yep.
Speaker 7:They have deals in opening eye. But I mean Jensen's got his fingers pretty much in every
Speaker 1:Oh, yeah.
Speaker 7:He's he's in every startup. Right?
Speaker 1:He's been doing it for a long time
Speaker 6:too.
Speaker 7:But think about, like, what else can he do with the cash? And and so I'm I'm hard pressed to think of a better usage. And if you we'll see where the numbers go. But if you believe the numbers Mhmm. They're gonna be generating hundreds and hundreds and hundreds of billions of dollars of free cash flow over the next, like, five years.
Speaker 7:Mhmm. So what can he do with it? He can't do big m and a. Nobody will let him.
Speaker 1:Mhmm.
Speaker 7:Right? You just nothing's gonna get through any trust. They have a buyback and a dividend, but relative to their market cap, it's it's gonna be de minimis. There's no choice. And so is there anything better than he does except invest and help to grow the AI?
Speaker 1:Also have a lot of different business That's fine. In terms of m and a. Like, with Microsoft, they buy LinkedIn. That makes a lot of sense in the Microsoft ecosystem. You know, Teams, they grow Azure.
Speaker 1:Like, there's always different places where they can plug other businesses in. Like, if NVIDIA bought LinkedIn, we'd just be like, what is
Speaker 7:But but he tried to buy other stuff. Right? He tried
Speaker 1:to buy ARM. You know? Certainly certainly other pieces of this
Speaker 7:Could you imagine if he'd been able to buy ARM,
Speaker 1:by the way? He'd
Speaker 7:be unstoppable.
Speaker 1:He'd be unstoppable.
Speaker 7:Nobody's gonna let him do anything.
Speaker 1:Nobody's gonna let him. Yeah.
Speaker 2:How, how important do you think the Chinese market is to NVIDIA? Because we we debate this
Speaker 7:quite a lot. And it isn't. In the near at least it's not important to the numbers right now because it's out of the numbers. Yeah. So and and and NVIDIA with even AMD, they they took it out.
Speaker 7:So that was smart because it's still questionable whether or not they will be allowed to sell. And so from a number standpoint, it's okay. From a strategic standpoint, I I think it is important. And Jensen hasn't hidden it.
Speaker 2:Second largest computing market.
Speaker 7:It's it's more than that, though. So it it is the second largest, and he's talking about $50,000,000,000 of lost opportunity. And over the long term, it's probably bigger than that. Right? I mean, China China's big, but I think it's more strategic.
Speaker 7:You have to remember the the Chinese developers want to use NVIDIA. They have better products. Right? They do. However, you're not gonna stop China.
Speaker 7:So China has has, like, companies like like Huawei, for example, that's basically state owned enterprise. And they already have parts in China that have higher performance than what NVIDIA is allowed to sell there. They they do. They burn a lot more power. Chinese don't care.
Speaker 7:They just throw another plant. But the thing is they're much harder to use. They don't use NVIDIA's ecosystem. It's called CUDA. The Chinese developers want to use NVIDIA's ecosystem.
Speaker 7:If you don't allow him to sell there, what you do is you potentially encourage those local developers of whom there are a lot to coalesce potentially around a local alternative, like a Huawei, for example, and start to build up potentially over time a more robust eco system in in China. Then then you're shut out. And then the longer term word would be is once it's it's robust in China, does it move out of China? Now do you have a more robust global competitor? Yeah.
Speaker 7:And so that's why I think strategic is what and he said almost exactly that. He hasn't tried to sugarcoat it. Where I think he gets a little bit of a benefit is, at least with Huawei, the parts because of some of the other US sanctions, they have to make their chips at local companies like SMIC on deficient process technology so the chips don't work as well. They're not as power efficient. I do not think those chips will really be competitive outside of China, where they will be competing on a global basis with much better products from NVIDIA or AMD or or whoever.
Speaker 7:So I think that helps. Yeah. But ideally, you you and and, you know, Lutnick said this. He what did he say? He said, we wanna get them addicted to our technology.
Speaker 7:And and Yeah. To your I wouldn't have said it that way, but he's got a lot of things right. Right? We'd like him using it and to have some control over it. And and and if and we're letting that slip away.
Speaker 2:Yeah.
Speaker 7:And so yeah. And I don't I don't think it's it's great that he's not able to sell strategically. At least from a number standpoint, it's it's out right now.
Speaker 1:I want you to react to this, quote from the CEO of KKR. He says, and candidly, when we read some of these headlines, it's clear that many of us have PTSD from the financial crisis and are looking for what will trigger the next one. Like, where is the next boogeyman? From our standpoint, this market and economy really don't provide a simple narrative like that. What do you think?
Speaker 7:I think that's true. And to be fair, I started this job in April 2008 about three weeks after Bear Stearns failed. That that's when I made my move to Wall Street.
Speaker 4:Yeah.
Speaker 7:And so I was forged in that fire, and I have the financial crisis tattooed on the inside of my eyelids. I lived through it. It was a remarkable time, by the way, to live through Wall Street. Yeah. This is not like that.
Speaker 7:Yeah. That was People thought the world was coming. But we'll see. Like, if there is an air pocket, maybe it will become like that. But people really thought the world was coming to an end back then.
Speaker 1:But
Speaker 7:are people looking for the Yeah. Maybe. Right? Always People looking for pattern recognition.
Speaker 1:One thing that I go back to on the pattern recognition side is just I feel like for it to feel like there there is a world where there's some massive correction and, like, a lot of the top players see big haircuts. But it's just hard to imagine a big widespread like, with the .com boom, random person on the street was trading .com stocks. With the NFT boom. Everyone had Bitcoin. They were telling you, oh, you gotta buy Cardano.
Speaker 1:You gotta buy this. You gotta buy that. You gotta buy this NFT. And then in the housing bubble, everyone was like, yeah. I just got a second house.
Speaker 1:Morton didn't zero down mortgage. They didn't check my income. And so there was a lot of, like, places where just hundreds of millions of Americans could participate in the bubble on the way up and on the way down. Yeah. And here, it just feels harder.
Speaker 7:There there's some. I mean, there there's a lot more retail participation, I think, in
Speaker 1:market than there yeah. And having
Speaker 7:Robinhood and all this.
Speaker 1:Yeah. Yeah. Yeah. Know?
Speaker 7:And frankly, they they they get a little nasty sometimes. They trade these zero data expiration options. Yeah. So there there's some of that. I don't think it's maybe it's as widespread as as what we've
Speaker 6:seen in the past, but there
Speaker 7:is is some of some of that.
Speaker 1:I just want yeah. I just wonder if, like, if you go to the the the median American Yeah. Do they have significant exposure to the data center build out
Speaker 4:right now?
Speaker 7:No. So, I mean, maybe their electric bills.
Speaker 1:Yeah. Yeah. Yeah. Yeah. So maybe that's it.
Speaker 1:But if there's a collapse, that that's gonna go down. That's gonna be cheaper.
Speaker 7:And by the way, there's two ways that it could quote, unquote collapse. Right? So and and they have different implications. So one is just, you know, there's a digestion cycle. There's an air pocket.
Speaker 7:Yeah. And you look at the hyperscalers, how they spend money. Even before AI, they would tend to build and digest and build and digest. It happens. Yeah.
Speaker 7:And I always say, like, what's the chance of a digestion cycle? It it's it'll happen Sure.
Speaker 1:Some point. I like this digestion cycle.
Speaker 7:But that wouldn't be structural.
Speaker 4:Like, could
Speaker 2:be in a digestion?
Speaker 7:Yeah. It would be good for the cycle. You could hold it through that. Totally. Totally.
Speaker 7:Like, the way it, quote, unquote, collapses is and it gets back to some of your earlier questions Yeah. On on the return. Yeah. If turns it out we're spending all this money, there's no return, then the whole thing comes crumbling down.
Speaker 1:Totally. Totally.
Speaker 5:For everybody.
Speaker 7:Yeah. Right?
Speaker 1:Yeah. But it's like it's like I I just really struggle to imagine a world where it's like, oh, yeah. Like, it was so bad that, like, Apple's in a 10 PE. Yeah. Like, Google is no longer valuable.
Speaker 1:It's like Yeah. These companies have been valuable for decades. Yeah. Like, where are they
Speaker 2:gonna They
Speaker 1:can go down a little bit, but like, they're just not that exposed at this point. Anyway.
Speaker 2:Someone in the chat asked, please ask Stacy about CDS spreads affecting debt financing costs. So that's Oracle and CoreWeave. Yeah. I how does the domino start?
Speaker 7:Yeah. It's it's it's a little out of my wheelhouse, the CVS. But people are looking at a few specific areas, like Oracle. Oracle is Oracle what we've is not exactly a hyperscale, but they're trying to be a hyperscaler, sort of. They don't have the balance sheet and the income statement to fund it.
Speaker 7:So they are going more to the And CoreWeave, mean, clearly, you know, they have to fund this debt with debt. Most of the other ones, you look a Google or a Met or an Amazon, like you're not in that kind of a stage, right? They're still again, they're raising a little bit of debt, but they're still primarily funding this out of free cash flow, basically, out of cash from operations. Yeah.
Speaker 2:But it has some
Speaker 7:people are people are starting to look at it, like, sure.
Speaker 2:For sure. Yeah. Have you have you tracked situational awareness, the hedge fund? Leopold Ochscheinbrenner?
Speaker 7:I have not.
Speaker 1:No. Ochscheinbrenner?
Speaker 7:What is that?
Speaker 2:Former OpenAI researcher. This is
Speaker 7:that kid that started the
Speaker 1:Yeah. He's got 4,000,000,000 under management. Yeah. Yeah. Yeah.
Speaker 1:That's right. And I
Speaker 2:was curious. So so his strategy like he he raised the fund, at the beginning of this year or closed it?
Speaker 1:Closed it. He was raising it for while.
Speaker 2:He'd been raising it for a while. But but started deploying aggressively this year and it's and it's performed really well at least
Speaker 1:It's the best performing hedge fund Okay.
Speaker 7:In the world. Right? At the right time.
Speaker 1:Right? Yeah. The OOPE is was just AI is going is real.
Speaker 2:Do you think do you think some more traditional hedge funds have sort of just overthought the the AI trade Well last year?
Speaker 7:I I don't know
Speaker 2:about that. Because it's not like he he it's not like he was buying, like, somewhat somewhat
Speaker 1:He had a somewhat unique take.
Speaker 2:He had a very informed take, but it wasn't
Speaker 1:But he also didn't go NVIDIA. He went Intel. He went other places Okay. On the map.
Speaker 7:So by the way, Intel's gone up not because of AI. Intel's gone up because, you know, Donald Trump wants the stock to go, which which is a bull case. It's fine. You know? But it's not an AI story.
Speaker 7:My view in general and and, yes, I don't know if specific hedge funds have been, you know, overthinking or not. I haven't wanted to overthink. My my general call this year has mostly been own the high quality AI names, ignore most of the rest. Sure. Like, that's that's been fine.
Speaker 7:Right? It hasn't had to be complicated. Number go up. Right? That's that's that's right?
Speaker 7:It hasn't had to be it hasn't had to be complicated.
Speaker 2:Number number go up.
Speaker 1:Well, I mean, what do you what do you put in that high quality name bucket? Yeah. Do you put the iPhone?
Speaker 7:I mean, we we covered like Nvidia and Broadcom, for example.
Speaker 1:Just mostly those.
Speaker 7:Yeah. And, you know, we've been more lukewarm on AMD, that's what I've missed, right? Because, you know, it's also like ripped. You haven't necessarily had to be high quality to work, right? Because right now, we've been in again, if you think about an S curve, if we're on that exponential growth part, it it it takes everybody up.
Speaker 7:Right? Yeah. It's been fine. Yeah. But again, you haven't had to overcomplicate anything.
Speaker 1:Yeah. Not not yet. Yeah. What about I mean, talking about not overcomplicating it, like, if you just bought Google and Microsoft, that's a pretty broad index on AI between deep learning and open AI.
Speaker 7:But you gotta remember, like, wasn't that long ago that people were looking at Google as an AI loser.
Speaker 1:Totally. Right? No. It changed. It it completely changed.
Speaker 1:Yeah. Completely changed. They positioned themselves very, very well. Suttrini has another post here on the 2022. I saw a lot of very smart people in 2022, fail to recognize the reality of reflexivity, I e stupid headlines that with a few hours of research could reasonably be dismissed as nothing of consequence would add fuel to the fire and result in further downside.
Speaker 1:Understanding that this dynamic works to the upside as well as the downside means that, yes, even if you know that the CDS on Oracle and Core Weave are blowing out because the CDS market is easily pushed around by a few parties trying to get cute and hedge their exposure to AI lending. You also recognize that if enough people view that CDS widening as indicative of a problem, it will become a problem. What do think about these stupid headlines?
Speaker 7:I I mean, headlines have certainly been more of the bane of my existence, probably over the last couple of years. Yeah.
Speaker 1:Yeah.
Speaker 7:Yes. So there have been lots of movements Yeah. From headlines that if you if you were had any depth of of subject matter expertise, you'd you'd know the headline itself didn't mean anything. Yeah.
Speaker 1:What do what do you fall back on? Do you go to just the earnings reports or Yeah.
Speaker 2:I'll give you an example
Speaker 7:of this. Stuff tends to correct itself over time.
Speaker 1:Sure. Sure.
Speaker 7:I mean, you get pops and I mean, I'll give you example from from my own coverage, and and this is stock that that I've had. Qualcomm announced, this was this is their headline. It wasn't like some stupid headline. Yeah. But they announced like an AI like server.
Speaker 7:And there wasn't a whole lot of information. The pressure the stock went up 20% the moment of the and and then it kinda gave it back. Yeah. As it probably but it had a you had a pretty big pop Yep. On the headline just because it was AI.
Speaker 7:Whereas if if, you know, you kinda know and by the don't get me wrong. I mean, there there's you know, we'll we'll see what happens with that with that product with them. And, you know, again, you can argue it's option value and everything, but they go up 20% on on one day was was probably overdone, and and they gave it back. You know?
Speaker 3:That's fine.
Speaker 1:Yeah. Makes sense. Corey?
Speaker 2:Giving it back, I feel like, has been the story of Oracle. They got this, you know, tremendous pop off the OpenAI deal. Now they've is it lower
Speaker 7:than it was?
Speaker 2:It's lower than it was before, which to me says, like, either the market doesn't believe that Yeah. It's it's real Yeah. And or that the the other reading would be it's real, but it's not gonna be ROI positive. Right?
Speaker 7:Yeah. I'm and and again At least for Oracle. Making any comments on on Oracle, I mean, those are the for for any of these investments, those are the worries that you're gonna have. Right? Either because again, especially if it's OpenAI.
Speaker 7:So Altman's committed to a tremendous amount of capacity. Mean, it's just between on the chip side between NVIDIA Broadcom and AMD, it's 26 gigawatts. Yeah. Right? And just for some context, I think the whole global data center installed electrical capacity, want to say something like 70 gigawatts, something in that ballpark, right?
Speaker 7:So it's a lot. I mean, was even making comments he wanted to deliver, what was it, a gigawatt a week I at one mean, it's a lot, right? And so you already are wondering, can he actually deliver on that or not? Those are valid questions. By the I wouldn't count Altman out like he's aggressive, but he's got like large aspirations.
Speaker 7:But then with someone like an Oracle who doesn't have the balance sheet or the income statement that some of the others do and you look at the size of the I can't even remember what it was, 400,000,000,000 or something. Was a massive step up, 300 in one quarter. Like, you you wonder where it was coming from. It it's always around, like, can they deliver it and can they pay for it? And and those are the general worries, I think, for anybody that's announcing something.
Speaker 1:Yeah. How do you analysts try and dig into, you know, there's quality of earnings, quality of revenue, quality of backlog feels like an important thing to get into. Yeah. But I don't know that the contracts are available.
Speaker 7:They're they're not. Right? So, look, I I mean, you you talk to whoever you can and, you know, you've you've been doing this while you look for pattern recognition. I mean, look, nothing in semiconductors has ever really baked.
Speaker 1:Sure.
Speaker 7:Right? I mean, in fact, we just discovered like during COVID, lot of these companies were experimenting with non cancelable orders.
Speaker 3:Sure.
Speaker 7:And we saw what happens. It's like, yes, maybe I could contractually force my customer to take a year's worth of parts they don't need. Yeah. Am I really gonna do that? Historically, the answer was no.
Speaker 7:Yep. During COVID, for some companies, the answer was yes. And and those particular companies are are still paying for it.
Speaker 1:Yeah. Yeah.
Speaker 7:Because, okay. Great. I just took all my parts. I don't need to order anything from you for for a year. Right?
Speaker 1:Yeah. That makes a lot sense.
Speaker 7:And so I'm always a little hesitant of of of backlog and and commit. And even some of these, by the way, even with these open day ideals, so they put out big numbers, but it's not like the whole thing is committed. Like, maybe the first gigawatt at this point Totally. Which is how it should be. Yeah.
Speaker 1:Yeah. Yeah. No. That makes a lot of sense. It's great.
Speaker 2:Are you AGI pilled?
Speaker 7:No. Probably not. I'm not exactly sure what AGI means yet. You know, there's a lot of different definitions, and sometimes it tends to change.
Speaker 1:Well, do you find AI useful in your day
Speaker 7:to do. Day I have to be a little careful because from a regulatory and compliance standpoint, it's not like I can just start throwing stuff the I'm very limited. We have some internal stuff that we can use, which is
Speaker 1:Enterprise plan.
Speaker 7:Yeah. And it's ring fenced and everything. But I mean, simple stuff. Right? I mean, what it was, this NotebookLM, can literally take I could take a YouTube of this, what is it, three hour podcast and toss it in there.
Speaker 7:Yep. And it'll give me a a summary, not just a summary.
Speaker 2:Then we can take that summary, put it into another model, and say, make me a three hour.
Speaker 7:Sure. Yeah. Pretty soon, it's just AI is making and watching podcasts. Yeah. It's a slurry
Speaker 4:of content.
Speaker 7:But that's just one example. Like, so there there were there were clearly
Speaker 1:Yeah.
Speaker 7:Ways where where it's influenced my my experience in my in my workload. And I'm I'm probably on the low end, frankly, of of of of of what I could be using if again, I am I am constrained Sure. On what I can can do with this. I'd I'd love to use it more
Speaker 1:Yeah.
Speaker 7:If I could.
Speaker 1:That makes a lot of sense. Well, thank you so much for coming by. Yeah. You bet. The studio.
Speaker 1:This is lot of fun.
Speaker 2:To have you.
Speaker 7:Hey. You bet.
Speaker 1:Have a great rest of your day. We'll talk to you soon. Cheers. While he's hopping off, let me tell you about Linear. Linear is a purpose built tool for planning and building products, meet the system for modern software development, streamline issues, projects, and product road maps.
Speaker 1:Speaking of turning things into podcasts, Christophe has some fake news here on the timeline. I love Christophe, coastal futurist. Christophe says, still crazy to me that Steve Jobs slash Apple invented the word podcast and that it's a mix of iPod and broadcast. And apparently, this isn't true. Apparently, a BBC journalist, Ben Hammersley, coined it in a 2004 Guardian article, but then it got ported back to Apple and the word and the term podcast was adopted.
Speaker 1:But it is it is funny that
Speaker 2:Podcasts. Podcast. It did it did come from It's always felt like a very boomer term.
Speaker 1:Yeah?
Speaker 2:And it makes sense. I I never Radio show? I never knew that it was it was a combination of
Speaker 1:Oh, didn't know. It was iPod plus broadcast. Yeah. Yeah. What else?
Speaker 2:What does that that make The
Speaker 1:cast casting is very, very popular.
Speaker 2:Anyway. What's this, article from
Speaker 1:Evan Armstrong over at The Leverage published an article on who actually makes money when robots work, looking into some of the venture funding that's flowing into humanoid robotics. And he is trying to create a field guide for separating the real companies from the grifters. Talks about one x. The home robot costs $220,000 upfront or $4.99 a month. The website looks like every other VC funded d to c brand from 2015, millennial beige, sans serif, typography, the works buried in the fine print and tech cover tech coverage is the actual product for most chores.
Speaker 1:A human in a call center will drive the robot around your house via teleoperation while the system records training data for autonomy that doesn't exist yet. And so, there's a big question about how like, what will the actual margins be? And he was trying to dig into that. So, you can go read Evan's piece over on the leverage if you want. You get a seven day trial.
Speaker 2:Who actually makes money though when they work? Is it the call center operators?
Speaker 1:I believe I mean, I I I would not bet against Elon on this. I believe that the the hardware manufacturer will ultimately be the one that makes money in the term. I think that the everything else is more commodity in the stack, but there is going to be a a compounding advantage to actually having the manufacturing capability to build the robots at scale. Now this is years away, but I'm I'm certainly AGI built in the sense that the the teleoperation will become will become less and less important. And and the Tesla model of having a a economically producible product will be very, important.
Speaker 1:So that would be my take.
Speaker 2:In other humanoid news, Brett Adcock was putting a company in the truth zone.
Speaker 1:What did say?
Speaker 2:Ensign based company, UB Tech, claims to have completed the world's first mass delivery of humanoid robots. And the Shenzhen based company has secured apparently over 112,000,000 in Walker s two orders this year. Brett Adcock says, look at the reflections on this bot and then compare them to the ones behind it. The bot in front is real. Everything behind it is fake.
Speaker 2:If you see a head unit reflecting a bunch of ceiling lights, that's a give that's a giveaway. It's CGI. So he's putting he's putting UB Tech in the truth zone, and then Christopher comes over the top and puts him in the and it says, such an embarrassing pose for a CEO at this level to make. So people don't necessarily believe that, the the CGI claims.
Speaker 1:Did Ubitech actually deliver it? There's no community note on the original video. I I for something like this, I mean, we've seen iRobot. Like, you can actually just do flawless CGI that is indistinguishable. There's no way to tell.
Speaker 1:So I would I would I would be relying on some sort of, you know, on the ground reporting. Do you have an idea, Tyler, of whether or not this is real? We've seen demos of this robot before where it pulls the battery out of the back.
Speaker 3:Yeah. I don't know for for sure if it's real, but it is company.
Speaker 2:Yeah. Yeah. And so down 2%. Brett kind of needs this company to be totally fake because UB Tech is a public company. It's valued at around 7 and a half billion dollars.
Speaker 1:Okay.
Speaker 2:And they have they have real revenue.
Speaker 1:Okay. So Ubitech. Man, they're the the European market over in China is extremely competitive. You have Ubitech and then you then you have the the the what what's what's the other company I keep forgetting? Unitree.
Speaker 1:Unitree? They're they're two different companies. Right? But they're both publicly traded, both have revenue, both make humanoids. I wonder if there's, like I wonder what the CEOs of these two companies would actually say.
Speaker 1:Like, what is the differentiation between the two the two products at the, because, they look pretty identical. And we need to do a side by side. But I don't know. What, what what else here? He said Martin Scrawley said, best part of UB Tech is it's public with real revenue, so its valuation is naturally far below pre revenue robotics companies.
Speaker 1:Naturally. That's wild. Yeah. Yeah. I Yeah.
Speaker 1:We'll see what I do think it's real, but I don't know. Like, it it's it's really hard to prove it one way or another. It's hard to prove any of these videos that that that come out with the humanoids because humanoids are just like it's the textbook, like, CGI product. Like, you can just if you're at all good at CGI, you can make a humanoid robot look great because it's all just polished steel, basically perfect reflections. It's much harder to make a human face look c g CGI real.
Speaker 1:And so we've had the ability to make, like, CGI Stormtroopers, CGI c three p o. Like Yeah. Like, that's been at perfect indistinguishable level for years. Yep. But getting to the actual human level.
Speaker 2:Yeah. To to be honest, I care a lot less about about did they use c g CGI to, like, put a 100 of these robots in one room versus, like, what are the actual capabilities of the individual robot?
Speaker 1:Yeah.
Speaker 2:Right?
Speaker 1:Yeah.
Speaker 2:Yeah. So that's why I think one x, I think they're pretty straightforward about about it being teleoperated or that being kind of the value as you're buying a robot that can be teleoperated in your It
Speaker 1:really feels like these are think question is like United States like fame.
Speaker 2:Is why is Adcock like obsessing over a competitor? And then what what he what can he do in the next three to six months to justify his $40,000,000,000 valuation? Right?
Speaker 1:He probably needs to ship a bunch of these things. Like, just for any reason, just manufacture a lot of them, would imagine. Because with Unitree and this other company and, you know, one x is starting to ship and Elon's clearly getting serious, like, the the race is on to, to actually start manufacturing and shipping them. And it'll be it'll be interesting. With with the flying car thing, a lot of it's, like, regulatory.
Speaker 1:So you're it's harder to assess what the progress is like because you can always just kinda get hung up in in regulatory. I wonder in the humanoid space. Well, speaking of flying cars, what what's up, Tyler?
Speaker 3:I was just gonna say, I I think it's interesting. We we still haven't really seen any humanoid CEOs, like, talking about sanctions against China.
Speaker 2:Yeah. Know. That's the thing to call for. Yeah. Because it's like a very easy argument
Speaker 3:to fake. I mean, you can do that. But you you should just say, like, even if they are real, like, we want these made in The US, like, in the way that you see kind of Dario saying in AI. And I it's just kind of weird that you don't see, like, Elon saying that we need to make these in The US or the the one x guy is saying Yeah. Bring out the ban hammer.
Speaker 1:Bring out the ban hammer. Let's
Speaker 2:I mean, yeah. I just I I that's gonna be an easy one for you. All you have to do is like, do you want a million robots in in American homes that could have, you know, the the sci fi scenario where you have a backdoor Yeah. And
Speaker 1:But the argument against DJI was always like, well, you know, if some tiny drone is in your bottom, you know, sock Like, what's it gonna do? It's not it's just gonna bust out of there. But, like, a humanoid robot will just bust out of the whatever you put them in. Unless you store them and you're like, you're gun safe or something, walking gun safe. Let me tell you about numeral.com.
Speaker 1:Sales talks on autopilot spend less than five minutes per month on sales tax compliance. And then, we have an update from Keller from zipline. We're gonna watch this two minute update from him.
Speaker 2:Pull it up.
Speaker 9:Hey, everyone. It has been an insane two months, but I thought it'd be cool to give a two minute update. Whenever I post something on x, people are always asking me, like, when is it coming to my metro? Why aren't you scaling faster? We are definitely hearing you.
Speaker 9:We are scaling as fast as we possibly can. In fact, I am standing expansion space for the manufacturing facility as we speak. We're getting ready to build 20,000 autonomous aircraft a year, all here in South San Francisco in The United States. Mid December, we will actually start producing the first aircraft here in this space. So this past week, I was in Dallas visiting a lot of our different customers, going and visiting a lot of the different stores that Zip Money is delivering from, and my mind was basically blown.
Speaker 9:Right now, we're growing the number of deliveries we do per day at around 15% week over week. And we've been growing that fast for about thirty weeks straight. A lot of our customers out there are placing orders three to four times per week. In fact, some customers are ordering three times a day. People actually just fundamentally change orders.
Speaker 9:Some people are grocery once every one to two weeks and then ordering from zipline three to four times a week just to do fill ins. We've also been able to launch a new Walmart supercenter every week across Dallas over the last couple months. And by the way, I, you know, have talked been talking about really exciting hyperscale in The US, but a lot of people are often like, well, wait a minute. Like, isn't that Zip Line operating a huge logistics network in Africa? Yes.
Speaker 9:In fact, that network is growing faster than ever. Today, we serve hospitals and health across Rwanda, Ghana, Nigeria, Cote D'Ivoire, and Kenya. That has become the largest commercial autonomous system on earth. Together, what we do in The US right now is Zipline is doing an autonomous delivery about every thirty seconds. We're also adding a lot of new products.
Speaker 9:For example, in Ghana, we just added HPV vaccine to the overall network. And in the first week, we delivered a 150,000 doses of vaccine. This is a
Speaker 2:crazy scale. John's back. I'm back.
Speaker 1:He's coming on the show next week where we love Keller. Congrats to all the folks over at Zipline on
Speaker 2:Yeah. Really wild building building in South San Francisco. Yeah. Scaling deliveries like crazy.
Speaker 1:Yep.
Speaker 2:I think this is one of those things that's hard for it to be hard to be that excited about until you
Speaker 1:get into experience. Question in the chat. How long until they pivot to a weapons company? I don't think it will happen. I think that, drone defense is, like, the most it's it's such a such a such a a crowded industry.
Speaker 1:It would be really, really hard to break through there. I don't know. Maybe may maybe there's something in, like, logistics. I've talked to a few folks in defense that will do drone based transportation or delivery for, let's say, how do you how do you get supplies from land onto an aircraft carrier that's stationed off of the coast? Well, you could fly a whole helicopter there.
Speaker 1:But what if you just wanna deliver one smaller package back and forth? You could use a smaller drone for that. There's companies that are building in that category. So I I mean, I could see it happening, but I wouldn't expect the zipline to be, you know, on the front lines of Ukraine competing with Niros to, you know, arm the resistance there anytime soon. The drone delivery, like, delivering a burrito is gonna be a massive market.
Speaker 1:Like, DoorDash is does it You know, that's why it's a $100,000,000,000 business. Like, I don't think that they they're they need to deal with all the craziness of DOD procurement. Anyway
Speaker 2:So someone in the chat mentioned that UB Tech fired back and released a behind the scenes video No.
Speaker 1:Of podcast. Okay. We gotta pull that up. Do we have it? Thank you to the chat for letting letting
Speaker 2:us I'm adding it here.
Speaker 1:Let's add it. In the meantime, more on robotics. Blake Robbins has a great take that I was curious about. If anyone knows anything about this, please, fill me in. He says, as robotics continues to get more attention, I always wonder what Boston Dynamics is cooking.
Speaker 1:It feels like Boston Dynamics should have been the open AI of robotics, and yet I can barely mention anyone that worked there. And there's a whole bunch of different debate on, you know, what happened. Boston Dynamics was sold a few times.
Speaker 2:To be studied.
Speaker 1:Yeah. Boston Dynamics.
Speaker 2:What's the dynamic over there?
Speaker 1:Wait. Wait. Boston Dynamics. It's the original browser company in New York. They just took their city and what they do and put it together.
Speaker 1:This is the the you know, they should the Dynamics company of Boston rebrand, come out with a humanoid. Let's play this video. It's behind the scenes video.
Speaker 2:Los Angeles dynamics would just be, like, an like, Lincoln Bios.
Speaker 1:Well, at one at one point, Boston Dynamics sold to Hyundai Heavy Industries, so I believe they were across the Pacific Ocean. Let's react to the second video posted by the Humanoid Robotics company. Okay. UB Tech Industrial Walkers, they've been pumping these out. Feels like the question has never been, can China make a lot of these things?
Speaker 1:Like, obviously, they In
Speaker 2:the in the bio, they said they said it looked too perfect to be real. Yeah. And then they used some chatty bitty slot, but perfection isn't fabricated. It's delicately engineered.
Speaker 1:It's so good. You know you know, for a long time, people were saying that, there was no way to watermark AI created content with because, like, oh, how would you do it? You you change one. It's like, actually, all AI content is watermarked. Turns out.
Speaker 1:It's just perfectly watermarked. Yeah. This looks real to me. I I don't know. It also could be CGI honestly.
Speaker 2:It's pretty funny to see Brett say this was all faked.
Speaker 1:Yeah. It it looks it looks real. I mean, it would be way they could have done so much better to make this look real. Put a bunch of humans there, touch them. A lot of the hard part in CGI is the handoff between the CGI character and the human character.
Speaker 1:And so what you should be doing is you is you should have a human who takes, like, a smoothie and pours it on top of the robot and then, like, wipes the robot off clean with a towel, and you're seeing how the fluids interact with the robot, interact with the person. And, like, that was that was not actually that satisfactory. I don't know. I think, I don't know. I'm not calling it fake, but it could be fake because CGI is really, really good.
Speaker 1:Like, CGI just is at that level where that's possible. Anyway, yeah,
Speaker 2:we know the we know the caption or the the description of the video was AI generated.
Speaker 1:That is hilarious that they they had to use it for the caption.
Speaker 2:It's like I mean
Speaker 1:It's like AI on it. And it's like, after all, it is an AI company. Like, it would be on brand. Anyway, fin dot a I, the number one AI agent for customer service. Number one in performance benchmarks.
Speaker 1:Number one in competitive bake off. Number one ranking on g two. You can get started for free. Our next guest is Luca from Bending Spoons in the restroom waiting room. Welcome to the show.
Speaker 2:Welcome to the show. Good to meet you.
Speaker 1:How are doing?
Speaker 6:Hello. Hi.
Speaker 1:Thank you so much.
Speaker 6:Good to
Speaker 1:meet I imagine it's late there. Thank you for staying up late and coming and chatting with us. For those who don't know you, would you mind introducing yourself?
Speaker 6:Of course. One of the cofounders, the CEO at Venice Pounds. And what we do is we, look for digital technology businesses with an express potential, and then we acquire them if they'll sell them to us and transform them sometimes quite radically by rewriting big chunks of of the software, rearchitecting the cloud infrastructure, redesigning the UI, launching a lot of lots of features, optimizing monetization and marketing, rebuilding big parts of the organization. So lots of hand hands on work. And then if we do it right, we generate a lot of value.
Speaker 6:We plug back into bigger acquisitions and strengthening, call it, our platform. So basically, proprietary technologies, our expertise, access to talent.
Speaker 1:The company's huge now, $11,000,000,000 valuation. How did you get started with all this?
Speaker 6:So I first funded a startup in 2010. Interestingly, talking about AI, we were trying to create a self rising diary or journal with AI in 2010, which was pretty early. Yeah. We couldn't I mean, it worked fine, but it wasn't good enough. So that was like your typical start up.
Speaker 6:You work from a garage. It was really our, you know, living room in our apartment with more or less the concept is the same. We we worked on it for three years, couldn't make it work commercially, and then we kinda shut it down. And through that experience, we came up with the strategy for Benning Spoons. Basically, why don't we try to outsource looking for product market fit to the market?
Speaker 6:We try to be the best in the world at the, call it, functional expertise that's necessary to run a digital technology business. So software engineering, product design, growth, and all all these things. And then we we buy businesses where the owner is basically doesn't wanna work on it any longer or where maybe we can do better so we can offer an exciting price for all involved.
Speaker 1:Is the reference is the name a reference to The Matrix?
Speaker 6:Actually, yes. Yeah. It is. Cool.
Speaker 1:Yeah. It it is it it feels like, at least to me, like, it's kind of an odd name for any business. I it's cool. I I like the reference. But why did you pick that name particular in in particular?
Speaker 6:So we we knew we weren't gonna work on just one product. Okay. So we couldn't call it, say, Facebook Yeah. If you do, you know
Speaker 1:Yeah. You need, like, a name for a holding company on day one, sort of.
Speaker 6:Yeah. Something like that. So we we chose to to find a name that would somehow convey a couple of principles or values that we thought were important to us. And bending spoons reminds us of two things. One is the power of the mind.
Speaker 6:For obvious reasons, if you are gonna ban spoons with your with your mind, it means you believe it's powerful and you can do great things with it. And the other one is call it perseverance, hard work, dedication. In my imagination to to get to the point where you can bend stones with your mind, you probably have to work pretty hard at it. So Impossible was kinda memorable, so we we liked it.
Speaker 1:Yeah.
Speaker 2:I like it. I I reached out or or one of us reached out when when the where the AOL acquisition got announced. Like, give it give us a backstory on on that deal, how it came to be, when you started thinking about the business, what what value you saw in the business, and and maybe why it was a target that that was overlooked by by, maybe American private equity players, and and what you saw in it.
Speaker 6:There were multiple private equities that we're looking at it too. So we weren't the only ones. You know, it was owned by a private equity or it it's still owned because the the acquisition was only signed. It hasn't closed yet. Mhmm.
Speaker 6:And so you could imagine how they would run a proper competitive process. The typically, we we follow our business for a long time before an opportunity to acquire presents itself. I I don't have precise statistics, but my my off the top of my head, I'd say it's quite rare that we end up acquiring a business we haven't followed for at least a year, sometimes more. So we have been following AOL for a while and, you know, when when it became available, we we made an offer that we thought was quite competitive and here we are. What do we see in it?
Speaker 6:So I think it's a it's actually a great business. People are a bit stuck in the with the idea of AOL from the nineties or maybe early two thousands of Internet connectivity. It doesn't do that. Haven't done that for a long time. Today, it's two different products.
Speaker 6:There's a web portal for people to consume news and entertainment and and an email client, like Gmail, pretty much, you know, like that sort of thing. They have well well in excess of 30,000,000 monthly active users, 8,000,000 daily active users. So it's huge. Give or take one in 10 Americans uses it. And and it's just not necessarily, you know, the the the new hot thing that you would read about online, but it's still massively used and, you know, very good retention because people are self selected if if they still use it for really liking the brand and the offering.
Speaker 6:Yeah. And we we you know, nevertheless, we think we could help make the product more modern, more effective. We think that through AI, we could create better recommendations for the web experience, essentially better content to consume. We'll see, but it's exciting. We look forward to working with the team on it.
Speaker 6:Plenty to to refine and expand. We it's it's and it's exciting to work on a storied brand. You know, it's I find it kinda cool actually to be able to get our hands dirty with with with a brand of the caliber of AOL.
Speaker 2:Yeah. It truly is one of the great America Online, one of the great one of the great names in in business history. How do you think about like, I feel like Silicon Valley, like, has a sense that businesses are either in hyper growth or they're dying. Right? And there's nothing in between.
Speaker 2:And that's just because, like, the industry venture capital dollars are deployed into companies that are growing really quickly. And as soon as you stop growing, like, that that sort of source of capital is is turned off, and you kind of fall out of the headlines. But how much, like, I assume a lot like, the kind of, part of the thesis for Bending Spoons is that a lot of these businesses are just, like, way more durable than, like, the tech industry maybe gives them credit for. Because even after they're not getting like headlines in tech crunch, they can still generate a lot of cash flow for a very long time. But how how do you think about like durability of of digital businesses and and when they be can can become sort of like Lindy and and survive across decades versus when they evaporate?
Speaker 6:Yeah. I would say I kinda agree and I and I will say that if anything, a business that has a lot of history, it's a lot easier to project its, you know, its future and and and make accurate forecasts. Maybe, you know, it's not 10 x, but you also have a ton of data historical records for all the cohorts at scale to know roughly where it's going. So, yes, maybe the upside is not transformative as it would be in a seed or VC investment. Investment.
Speaker 6:But if every all the stars align, you know, maybe 10 extra even a 100 extra money, but but you also know you're very unlikely to to seed melt in your hands.
Speaker 2:Yeah.
Speaker 6:Many of these businesses have excellent metrics. They're just not cool and hot, so to say. And so the the entire capital markets, particularly on the private side, not so much the the public side, but the on the private side is geared towards growth, very aggressive growth. And there's merits in that, but it also means there's perhaps an opportunity to be less opinionated about growth at all costs. We we know on our part, we we try to we're basically quite mathematical about it.
Speaker 6:We make our projections, have our own return thresholds, and then we are happy to buy fast growing businesses. We have many times stagnant businesses, decline businesses as long as the math checks out. And this has been quite good for us, not not being too, you know, thesis, you know, limited by a very narrow thesis, but actually staying opportunistic.
Speaker 1:How are you structuring Bending Spoons? Do you have a deal team and an operational team that goes in and actually runs the companies? Or is it more of a, you know, a hybrid model where a partner who finds someone who finds the deal might be immersed in that company throughout the life cycle of owning the deal?
Speaker 6:Yeah. So it's actually say that we're kind of 25% private equity, 75% tech company. Yeah. So we do have an m and a team. It's actually pretty small, probably eight, nine people.
Speaker 6:Mhmm. And and they they do what you would imagine a private equity firm would do. They they create a pipeline, scout the deals, negotiate the deals. And then really probably 95% of the of the team here are software engineers, product designers, growth managers, AI researchers. And once we close a a transaction, we add a call a task force of experts to get, you know, get in the trenches with the acquired team and study things in fine detail and help with those kind of radical transformations I was describing earlier.
Speaker 6:So that's the tech tech technology company part. We almost all we do is writing software, developing and refining technologies, user experiences. And we we buy to hold and operate forever. We're not a fund, to be clear. Mhmm.
Speaker 6:More like a Berkshire Hathaway. We buy off the balance sheet if you've sold a business nor doing ten two.
Speaker 1:So you so is it is it fair to think yeah. You'll you you imagine AOL and Vimeo existing as companies in fifty years or brands is fifty years or both? Like, what what is the critical Business units, I will call it. Business units. Okay.
Speaker 6:So the the the the if a company is more a kind of a legal entity, that that may be dissolved in the future. Maybe yes, maybe no depending on considerations. But there there will be a business unit with its dedicated management team and engineers and designers. And sorry. I don't know why
Speaker 1:That's on our side.
Speaker 6:Zoomed in.
Speaker 1:We we we just zoomed you in a little bit for the sorry.
Speaker 6:Okay. I can see my baby's cradle just in the background.
Speaker 2:Oh, nice.
Speaker 1:Congrats. Have we have five kids on our side. It's amazing. Yeah.
Speaker 6:Mine is two and a half months old. So it's
Speaker 1:today in Tennessee Station. Well, thank you so much for taking the time to come talk to us. We really appreciate it.
Speaker 6:My pleasure. Thank you for having me.
Speaker 1:I'd I'd love to know, like, what what what what is it actually like buying a 5,000 person company? Or like, because I imagine, like, if I'm, like, if you buy a company and you can actually go interview everyone, but with 5,000 people, you're, like, layers and layers and layers deep into everything. Like, how do you actually go and start rightsizing? We've seen a little bit of what happens through the stories of Twitter, what Elon did there. Obviously, that was a that was a company that it seemed like post Elon was massively overstaffed.
Speaker 1:But, but even even even if your the staffing is correct, I mean, Apollo's owned AOL for a while, so I imagine that it's not wildly overstaffed. How do you actually go in and and just get your handle on everything that's happening within the business because it's such an such a huge entity?
Speaker 6:Right. So we we have never acquired a 5,000 person company. The largest is about a thousand people.
Speaker 1:Okay. Thousand.
Speaker 6:I think your your point stands. I mean, but Sure. Just to for accuracy sake. Yeah. Yeah.
Speaker 6:Well, I I think it's very difficult, perhaps impossible to do if you are, again, a private equity and you have a small investment team. Mhmm. In our case, we will add a task force that's sized in relation to the size of the organization we're trying to study. And so if we acquire a 1,000 person company, we'll probably have, say, 50 people. Okay.
Speaker 6:If it's a 100 person company, maybe as few as 10. Mhmm. And then over the course of couple of months, you know, we will split the work so everyone is in charge of understanding a piece of the organization that's not not too big for like, the right size for them and and specific to their capabilities and expertise. So if there is a more technical part of maybe an engineer, if it's something has to do with design or marketing, you know, and so on and so forth. And then those people will be talking to each individual in in that part of the organization multiple times.
Speaker 6:They will be looking at the code base. They'll be contributing on ongoing projects. So we take our time to learn. I mean, was about to say everything there is to know. Of course, that's not entirely true.
Speaker 6:Like, you don't learn everything in two months. True truly learn the vast majority of what matters. And only then do we come up with the say a a new vision for the company, a new road map, the a new design for the updated organization. It is extremely time consuming and only feasible you have if you have a large, call it corporate staff of of experts, like in our case, only only then can you do it at scale. Otherwise, yeah, you couldn't.
Speaker 6:I agree.
Speaker 2:Yeah. What how how much is, I'm assuming when you're thinking evaluating potential acquisition, you're thinking how much can this company benefit from AI and what is kind of the AI disruption risk? Oftentimes, it could be both. I can I can, you know, imagine with AOL, you're saying, like, better content recommendation that you could roll out maybe with with less resources invested? But at the same time, there's risk of new companies entering the market.
Speaker 2:But what's your any framework that you're using to evaluate what companies are going to do well? Because nightmare scenario is you buy a great business today, and that becomes less relevant. But there's also think Silicon Valley also maybe again, going back to my earlier point around durability. There's companies that have been disrupted multiple times that can still continue to produce cash flow, but I'm I'm curious what your framework is.
Speaker 6:Yeah. So I think there's I believe you can come up with plausible visions for the future. I mentioned earlier, we were working with AI in 2010 where I I I didn't know a single other person who was interested in AI back then. So, I mean, I'm sure there were many in the world, but it was not mainstream. So, you know, we did have a big vision for AI in the long in the long run.
Speaker 6:It turned out to be way too early, maybe a decade or more. So I'm I'm I'm a big believer in, yes, you wanna have a vision for the future, but at the same time, if you think you know what's gonna happen and especially over what timeline, you're very likely to be disappointed. So I would never wanna bet our future on those sort of assessments. What we try to do is evaluate whether a company is more or less likely to be disrupted and, of course, also enhanced through AI, and that that's basically a qualitative assessment. We try to embed that in our acquisition thesis, but also we all always need a a contingency plan in case there is a very aggressive rapid disruption.
Speaker 6:So we need to make sure that we have ways to get back our investment in case we end up in that or most of our investment in if we end up in that scenario. So you some businesses are structured in a way that if things don't go well, you you may be able to trade long term health for short term returns and at least salvage your investment overall. I mean, it's not gonna be a stellar investment, but still the breakeven. So we we try to have a an escape route just in case things don't turn out the way we we think it will. And of course, the fact that we're so diversified, the biggest business we own contributes about 15% to our revenue, and they are across many different segments.
Speaker 6:We are massively less exposed to sort of disruption than any company running a just one product, no matter how successful that one product may be today.
Speaker 2:Yeah. Makes sense. Any any plans to create a Neo Cloud or anything of the sort? Or you guys like staying at the product level?
Speaker 6:No. No such plans for for none.
Speaker 1:What's the Italian early
Speaker 2:I stage wanna dig I I wanna dig into that a bit more just just out of curiosity because I'm I'm I'm assuming there's a lot of different players that would love to give you guys capital to help deploy, cloud given that you're running a lot of, you know, companies that are gonna be, buyers of of compute and you have a track record of being able to deploy large amounts of capital, is the decision to you like you the strategy is you're you're invested in a bunch of different companies, but do you like them to be the same kinds of companies? And that, like, again, is it just a mandate around digital products? Or would you one day branch out? Because again, if you use the Berkshire Hathaway comp, it's like you've seen them buy everything from Coca Cola to Google. Right?
Speaker 2:And operate a bunch of different businesses.
Speaker 6:Yeah. Look, I I think there's a trade off between let's say there is a meet you know, going back to Warren Buffett, a circle of competence, as he calls it, where you you're proven you're good or very good, better than most. And so on the one hand, if you stay within that circle of competence, you're more likely to do well. But at the same time, if you venture outside of it, you extend your toolkit, your capabilities, and the TAM grows with it too. So there is a trade off between expanding that circle over time while seizing the opportunity at hand with what's already have proven that works.
Speaker 6:In our case, we'll we'll be next year will probably be at about 2,500,000,000.0 in revenue. And the overall the overall digital technology market is about $2,000,000,000,000. Yeah. So it's not exactly we're saturating the opportunity here. So before we get into something we know very little about other than on a high level, I I I think we should make sure that we are accelerating the core opportunity.
Speaker 6:But, yeah, maybe in five or ten years, if we ever feel that we're getting too big for for the TAM, maybe we'll look beyond that. We'll we'll know what will be appealing then.
Speaker 2:Do you think it's funny that the The US venture capital ecosystem is somewhat like off balance sheet r and d for you guys? It's like they can deploy a bunch of capital into these categories, create good products like Evernote, then you guys can come in and and, own them for the long term?
Speaker 6:Look. We when it comes to acquisitions, we're opportunistic. I don't you know, whatever the market offers, if we think we can deliver great returns, we'll be happy to buy it regardless of the particular history. Usually, I don't know. I don't have a other gratitude or any particular opinion on on that.
Speaker 6:Know, VCs have many have done really well. I guess it's normal that at least in some cases, their investment didn't turn out to be the
Speaker 2:Yeah.
Speaker 6:Exceptional success that could have been.
Speaker 7:Well, in
Speaker 1:many cases, some of
Speaker 5:those firms
Speaker 1:have IPO ed, and, you know, delivered a bunch of returns for the LPs in the venture fund. Yep. I I am interested in now you you've you've acquired Evernote's probably a good example. Yeah. But any any example of acquiring a company that's already publicly traded, how does that work?
Speaker 1:How how do you work through those that process? Are you going directly to the board? Like, are there are there best practices around, like, when a company or or a group of shareholders might be more receptive to a to a takeover? Or or do you see yourself ever getting into more of like a hostile takeover scenario? Does that does that does that matter to your strategy?
Speaker 6:We've done two take privates
Speaker 1:Yeah.
Speaker 6:So far. One is Brightcove Yep. Early this year, and the second one is Vimeo.
Speaker 1:Yeah.
Speaker 6:So I know like, I wouldn't consider myself a world expert in Sure. Private, but I've seen a couple of them, so I can probably provide at least some some input here. We have done it quite collaboratively reaching out to the board and and just saying, look, we'd be interested and we will make an offer. The I would say the the the negotiation is not massively different from what you would do in a private deal, but the there is a lot more pressure on a board of a public company to to to to act in the best interests of the broader shareholder base because the liability is a lot more legally speaking, it's probably not very different different, but of course, the transparency of that process makes it really difficult to say, I don't like it. Fuck you.
Speaker 6:You know, if it's a good offer, you have to entertain it. So on the bright side, if you have a great offer relative to the stock price, you have, I think, better certainty that it'll be at least entertained than with private companies where sometimes you find you you're absolutely confident you're making a an incredible offer, but say the founder is just not not gonna sell or a particular investor maybe invested at a really high valuation and they're now maybe even delusional in thinking, oh, we'll get back to 3,000,000,000 if we wait for, you know, long enough. And so there, you don't really have any leverage. It's like, okay. End of end of the conversation with a public company that can't really happen or at least is quite rare.
Speaker 6:On the on the you know, so that that's the positive. On on the negative, the process is a little bit more uncertain because with with a private deal, typically, if you have a handshake agreement with the two, three decision makers, then it's quite unlikely that the deal falls through. The public company, basically, at any point in time, if someone comes with a better offer, and it can be quite public, so everything is, you know, back to square to square one. Mhmm. You need to show all their votes.
Speaker 6:So you only know after multiple months, and so you're kind of keeping your fingers crossed. But overall, I love public deals. I think they're in many ways more straightforward. There's no hiding behind delusions. I mean, your stock price speaks volumes and if it's been at a certain level for a long time, that is it, you know, for the most part.
Speaker 1:Yeah. Is it also do you have more confidence in audited financials, or any other sort of process power that comes from actually being a public company. Do do you do you feel like when you go into a company that's been taken private, you can just feel the difference. Oh, okay. This this company has been operating like a public company, and that has maybe pros and cons, but it you can definitely tell?
Speaker 1:Or is it purely in the deal stage that you feel that there's a difference?
Speaker 6:Yeah. We have seen private companies that are run really well in terms of the FPNA and we've seen public companies certainly have to reach a pretty high bar. So, yeah, I guess we're we're more certain that on the one hand, you're more certain that the public company will be better geared to to provide you with the say that the due diligence materials you need and whatnot. On the other hand, there's generally, and and understandably so, and rightfully so, more more risk aversion in a public company. Because if there is a leak that can truly, you know, create a pretty difficult situation for for everybody involved with private companies, it's leaks are also less likely because the incentives to leak something are lower.
Speaker 6:Mhmm. There are all sorts of perverse incentives with a public company for obvious reasons because the stock is so liquid. So sometimes deals are leaked that if the company was private, wouldn't be leaked. Mhmm. So I would say, yes, the data tends to be a little bit more ready, cleaner.
Speaker 6:But on the other hand, the the company tends to be more careful in bringing people under the tent. And so at the end of the day, it's not always necessarily faster or easier. You know? I I think, frankly, I don't see that's a major point of difference, to be honest. I think that's also important when you look for for an acquisition.
Speaker 2:Yeah. Do you have any type of internal forecast around when some of the current the new generation of, like or or just the the new crop of AI native startups will start becoming for sale. Because, like, right now, if you're growing quickly and you have a great product, you can probably raise a bunch of capital. But I could imagine in in two ish years, there's companies that maybe don't fully break out that have great products but aren't necessarily gonna be, you know, public companies one day themselves.
Speaker 6:No. We haven't discussed that. We and our because the we try to focus our time and effort on things we control. So our our focus right now is to just meet as many great entrepreneurs and investors and private equities and management teams and and bankers as possible to make sure we are involved promptly every time there is an intention to sell a business. We have historically been a great acquirer very fast.
Speaker 6:IS IS bid every single time we actually competed. And essentially, no requirements on management teams to stay if they don't wanna stay. So we just need to make sure we are called upon if something is happening, but we don't necessarily need to know or have an opinion whether in three years time or two years time a particular company becomes available. There are so many variables that we wouldn't be planning for
Speaker 2:Yeah.
Speaker 6:For being ready for that anyway. So who cares in a way?
Speaker 2:Yeah. Makes sense.
Speaker 1:Last question from my side. How are you thinking about synergies across the portfolio? You're not doing roll ups, but there are some similarities between, the video products developed by Brightcove, Vimeo. Like, are you thinking about how these businesses fit together over the long term, or do you see them all as, like, individual project products and companies that you want to kind of grow in their own way?
Speaker 6:Yeah. Great question. So the short answer is the latter. The reason is that the I think that those synergies are actually much more limited than people would imagine.
Speaker 1:And
Speaker 6:and also, and perhaps more importantly, we believe that our business units tend to perform a lot better if they are allowed to operate with extreme levels of autonomy and flexibility. Mhmm. We want our small teams to feel like they're almost like a startup, like, basically, we trust them to make decisions and move quickly. And if you if you start asking many business units to coordinate on branding and cross selling and yada yada yada, then all of a sudden you're creating a ton of glue that and and that kills sense of ownership, agility, excitement. So it's a trade off.
Speaker 6:You wanna have teams that feel very entrepreneurial and empowered or maybe extract an additional 5% of revenue through, say, cross selling or some sort of bundling. We we found the former in the long run. He has much better returns, so we go for it. In a way, I think you can think about Benning's Fools a little bit like the technological version of the P and G, Procter and Gamble, where Yeah. There is a ton of shared infrastructure and capability.
Speaker 6:In their case, I I suppose, I don't know them well, logistics and distribution and marketing and product development. But the when you look at the brands they sell, they most people wouldn't even know Yeah. That they are by the same broader corporation. And and in a way, we would like that in this point to be similar. We don't really care necessarily that a say, an Evernote customer knows that that Evernote is behind it.
Speaker 6:And we're finding out a way, but we don't try to push that message on them as long as they think Evernote is perfect for them and they stay subscribed and they love it. And and in fact, we think that if we try to homogenize our brands, we will be destroying a lot of the value that we acquire in the first place with these storied brands and and loyal customer bases.
Speaker 1:That makes a ton of sense.
Speaker 2:Makes a lot of sense.
Speaker 1:Thank you so much for taking some time so soon after having a a child to join our show. We really appreciate talking to you. I learned a lot. So thank you so much for taking the time.
Speaker 2:A ton, Luca. Come on anytime.
Speaker 1:Yeah. We'd love to talk to
Speaker 4:you more.
Speaker 2:To following the journey.
Speaker 1:Have a good one. Cheers.
Speaker 6:My pleasure.
Speaker 1:Take care. Before we bring in our next guest, let me tell you about Adio customer relationship magic. Adio is the AI native CRM that's build scales and grows your company to the next level. Fun fact, Jordy, Brightcove acquired by Bending Spoons was founded by Jeremy Alaire who runs circle now. Yeah.
Speaker 1:In 2004. Very fun. Well, our next guest is Healy from boom pop. Healy, how you doing? Welcome to the TVP at ultra.com.
Speaker 1:Hey. How's it going? Good to see you. What's up, man?
Speaker 4:Been a while. How are doing, man? Good to see you.
Speaker 1:Good to see you. Introduce yourself for those who don't already know.
Speaker 4:Yeah. Yeah. My name's Healy Cypher. I'm the CEO, cofounder of BoomPop. Yeah.
Speaker 4:And we are actually that's so funny. Hold one second here. I'm a close this.
Speaker 1:Yeah. No worries. Okay. I got you.
Speaker 4:Yeah. We're an AI powered group travel company. I've been running and selling companies my whole career. I'm from Nebraska, which is a small state in the center of the country you probably haven't been to, and the plot twist is like over it. In Saudi Arabia.
Speaker 1:Wait. Wait. You grew up in Saudi Arabia? I didn't remember that. That's crazy.
Speaker 1:Oh, yeah. Yeah. Yeah.
Speaker 4:It's fun. Riyadh for sixteen years.
Speaker 1:Sixteen years.
Speaker 2:Wow. Yeah. Yeah.
Speaker 1:Very cool. Anyway, let's go back to the business.
Speaker 2:What is somebody if if if what what is the must do thing in Saudi Arabia for you to
Speaker 1:Beast World wasn't there when you were there. Well, how did you survive? Beast Land. Beast
Speaker 4:The the new hotness in Saudi, there's this place called,
Speaker 7:I think it's
Speaker 4:called Alaaba. It's like Petra in Jordan, but in Northern Saudi.
Speaker 1:Okay. And they actually
Speaker 4:I think they're building an Amman there right now. So there's, like, there's some stuff going down.
Speaker 1:Yeah. Pretty cool. It's scary. We have a little Amman property. Fine.
Speaker 1:So give us the latest. Give us the news. Give us the fundraising news.
Speaker 4:Yeah. Yeah. Thanks, man. So we raised a $25,000,000 round, pulled in some
Speaker 1:oh. Yes.
Speaker 2:Thank you. Go. There
Speaker 5:that. Appreciate
Speaker 4:that. You, Jordy. Pulled in some debt and equity. And, yeah, it's it's all about growth. You know?
Speaker 4:Yeah. I think travel has produced some really good returns for venture. You know, you
Speaker 5:think about
Speaker 4:Airbnb, Expedia, Booking. It's crushed. People don't think about it. Travel's, like, 10% of global GDP. It's $11,700,000,000,000.
Speaker 1:Wow.
Speaker 4:And often when you think of travel, especially in the corporate setting, you gotta think of like, whatever. Your EA is booking you a flight.
Speaker 1:Yeah.
Speaker 4:Turns out 60% of corporate travel is stuff involving groups. Yep. It's like an off-site or an SKO, and and especially in today's day and age, we're finding the demand for group travel is the most it's ever been. Some fun facts. One, most people are exceedingly less trustful of Zoom meetups.
Speaker 4:They wanna be people people in person. Most AI companies now are hiring event teams. Like, it's one of the first hires because it turns out for scaled AR businesses, events are, like, one of the number one demand channels. And so as you looked at group travel, we were kinda like, wait. Wait.
Speaker 4:Wait. It's this massive part of travel, and it's so anachronistic. Like, if you wanna if you wanna, for example, book over 10 hotel rooms, you literally can't do that online. Did you know that?
Speaker 1:Yeah. It's crazy. We run into this Yeah. Run into this a fair amount of times just with the small team traveling. Like, it happens.
Speaker 1:I don't know if you saw that block party that they had. The or, like, showed up in their earnings because they spent so much
Speaker 2:on travel. Like 68,000,000 or something on
Speaker 1:one trip. Of the craziest stories.
Speaker 2:On one trip.
Speaker 4:No. This is this is real. Like, I was at this conference, and the then president of Brex walked over to me. He was like, hey.
Speaker 1:Yeah.
Speaker 4:Are you Huey at Boompop? And I was like, yeah. But who cares, man? Like, you're the president of Brex. Like, I'm nobody.
Speaker 4:Yeah. He goes, no. No. Guess what the second biggest expense category is for all of our companies after payroll? And I was like, no way.
Speaker 4:He goes, it's group travel and events, man.
Speaker 1:Yeah.
Speaker 6:I was like,
Speaker 4:holy shit. So it it's on the rise. It's crazy.
Speaker 1:Yeah. So talk through the actual product experience. How do you and then and then how do you actually make money? Are you just taking a fee on top of whatever is booked? Is that the secret?
Speaker 4:Yeah. Yeah. Yeah. So so The product is pretty rapid.
Speaker 2:Secret to success?
Speaker 1:Or or I mean, it could be like seed based.
Speaker 2:Yeah. Yeah. Yeah.
Speaker 4:Turns out you should buy low, then sell high.
Speaker 1:Yes. This is good.
Speaker 4:This is good. I like it. Heard heard it here, folks. Yeah. So it's it's simple.
Speaker 4:You talk to our AI agent. You give it a simple prompt. You're like, yo. I wanna do an off-site within whatever, a two hour drive of LA
Speaker 5:Yep.
Speaker 4:A budget of this, 50 people with some cool fun outdoor activities. What should I do? And it looks at millions of data points. It looks at weather, seasonality, hotel pricing, what you've done, what your guests like, and then it puts together a couple of really good options. Like, here's Joshua Tree by the minute of what you do.
Speaker 4:Sure. Here's Pioneer Town you haven't heard of. You should go there. Here's Montecito. Go there.
Speaker 4:And then if you like it, you just say, hey. Cool. Do it.
Speaker 1:Yep.
Speaker 4:The AI will then go out. It'll reach to the vendors. It'll negotiate for them. Look at the contract. It'll book them for you.
Speaker 4:It makes an agenda. It even makes your website in a couple seconds, keeps it live. And when people RSVP, my favorite thing is everyone gets a text message. All your guests get a text, and it's from the AI on the phone. Mhmm.
Speaker 4:And so over text, it's like, yo. How can I help? And you can say, hey. Like, how do I get to the hotel? It's like, take an Uber, you idiot.
Speaker 4:Like, oh, okay. Or like, who else is landing right now? And it's like, oh, well, Jordy and Kuggan land around this time. If you wanna share an Uber, and you're like, oh, that's awesome. So it's it's like this corner of travel, which is so big, and it's all these random joint solutions, like point solutions, and we decided, let's just put it all into one place where it's super easy.
Speaker 4:Our ultimate vision is very simply, we want to be the default way the world gets together. I'm sure you guys have seen all the you know, I saw Chesky on on Yeah. EBPNN, I think it was last week. Like, we got a problem, guys. We have a real problem.
Speaker 4:I mean, people are lonely. They're not getting together. I don't know if you saw this study. Back in the seventies, it was eight out of 10 high school seniors said they would party twice a week. Now it's one in 10.
Speaker 4:Like, that's a problem. Party.
Speaker 7:That's where you party. Red
Speaker 4:alert. Red
Speaker 2:alert. We don't even know how to party in this country anymore.
Speaker 1:We don't. That's right. That's right.
Speaker 4:That's right. So that's how it works.
Speaker 1:Yeah. And then, yeah, it's
Speaker 4:it's it's a simple SaaS model. You pay a very low amount, and then we make money from the hotels.
Speaker 1:Oh, okay. Cool. Cool.
Speaker 4:Yeah. All the money in travel turns out is in hotels. Yeah. It's not in flights.
Speaker 1:Yeah. That makes sense. Yeah. Are you so so we we were thinking about taking the team to f one, and I ran something through ChatGPT. Hey.
Speaker 1:Build a whole thing. Couldn't get to a place where we could just build it. Didn't really didn't really hit the goal. But are you worried about some of the agent to commerce being a headwind, or can you turn AI and ChatGPT into, like, a tailwind and actually, like, more of a top of funnel for you?
Speaker 4:Yeah. Yeah. Totally. No question. It'll be it'll be a tailwind and top of funnel.
Speaker 4:I think about this a lot. Like, AI applications are under a lot of scrutiny. Like, aren't you screwed? Like, it's kinda like the nineteen nineties. Everyone's like, why would you build an app?
Speaker 4:Microsoft is gonna roll you. And that's what everyone says about AI apps. It turns out Yeah. It's not gonna do everything. Yeah.
Speaker 4:And so there's kinda I think there's three things you can do in general as an AI app to, like, protect yourself. One is you have some sort of proprietary data. We've got that. We spent two years building out a database, and it's got all the stuff you can't find in Chateappity, like private dining rooms, which how would you do that today? You gotta Google it.
Speaker 4:You gotta call. Meeting spaces. We have a bunch of stuff you wouldn't get. The second thing I think you gotta have is a learning network that they don't have access to. So every event that happens in our platform, it makes the next event faster and easier, and the next event faster and easier.
Speaker 4:So if you talk to a hotel, and they come back and try to negotiate something, we know exactly what they did at the last 100 events. We're not gonna send that to them. We make it easier. Sure. And the third thing, which tends to be under indexed, is just building a purpose built application for a specific use case.
Speaker 4:Yeah. It turns out
Speaker 2:like So underrated.
Speaker 1:Black and white.
Speaker 2:I honestly know. I I totally agree. I totally agree with you. I mean, I've I've just been testing like LLMs on on finding, like, browsing the Internet for cars that I'm that I'm interested in. Yeah.
Speaker 7:And you're and you're
Speaker 2:And they're just it's so Yeah.
Speaker 1:You would assume that like Auto Tempest is cooked. And yet you can still go to like an Auto Tempest and search across all the cars. Right? Yeah. Yeah.
Speaker 1:This is wild.
Speaker 3:Totally. And that's
Speaker 2:not even to mention. Mean, my my experience on John John and I are are probably not good at at like event logistics. Like, just don't pay any attention to it. So whenever we're traveling, we're like, what airport are we going to? What what hotel are we at?
Speaker 2:Like, finding and and so Nick on our team, bless his heart, is just like kind of locked in around the clock when we're traveling to make sure and it would just be nice to be able to go to a single place
Speaker 1:Yeah. In order to. You can. And we thank you for coming on the show. Have a great day.
Speaker 1:Thanks so much for coming and hanging out. Yeah.
Speaker 4:It's alright. Thanks, dude. Thanks, Jordan. Appreciate it. And congrats, by the way.
Speaker 4:This is awesome.
Speaker 2:Thank you. Great to have you on, and and congrats to your whole team.
Speaker 1:Yeah. Cheers. We'll see you soon. Thanks. Let me talk about public.cominvesting for those tickets.
Speaker 1:Seriously, they got multi asset investing industry leading yields. They're trusted by millions. Our next guest is John Tennant from Chaos Industries, I believe. Chaos. Yeah.
Speaker 1:Chaos Industries. Correct?
Speaker 5:Yeah. How you guys doing? Great.
Speaker 2:We're great. Welcome to the show.
Speaker 1:Thanks so much for hopping on the show.
Speaker 5:I love one. I I love the suits. Yes. Bo and I were gonna wear the dumb and dumber tuxedos to our
Speaker 1:Christmas party this year, so
Speaker 5:we might need to go yellow.
Speaker 1:Yellow is a good one. Alright. Because your I imagine your whole brand is, like, black and white, so you can't get too crazy with it. But have you ever Yeah.
Speaker 5:You know, we got some we got some tan in there, but that's what we figured, like, maybe go dumb with dumb tuxedos, light it up a little bit.
Speaker 1:Maybe, like, high vis high vis. Like, you're on the work site, like, you know, orange or something. That might be good.
Speaker 5:Like high vis multi cam, like like
Speaker 1:I think that could work
Speaker 4:pretty well.
Speaker 1:For Yeah. Yeah. Yeah. Yeah. Bring the construction site into the into the suit, the formal suit this holiday season.
Speaker 1:Anyway, let's kick it off.
Speaker 2:Half a billion dollars. Huge number.
Speaker 1:Huge number.
Speaker 2:Who'd you raise it from?
Speaker 1:Let's go.
Speaker 5:Yeah. We led from Valor Equity Partners. Hey. By the way, also, sorry. I got I'm like swagger jacking you guys in every turn.
Speaker 5:Where did you get the Gong? Because, again, this is something Bo and I have been talking about. We wanna get, like, a sales Gong in the new office.
Speaker 2:Gotta get one. We should honestly
Speaker 1:make we
Speaker 5:should make it.
Speaker 1:We should yeah. We yeah. Yeah. We'll figure out how to how to send you a Gong.
Speaker 3:I'll buy it from
Speaker 1:you guys. Yeah. Yeah. Yeah. We have a couple, we we actually become, like, somewhat of Gong experts where we've tested a number of different Gongs.
Speaker 1:We've learned that if you don't warm them up, you can break them. Their durability, sound quality. Also, the price gets exponentially bigger, like, exponentially higher. So going from, like, a 30 inch Gong to a 80 inch Gong will, like, 100 x the price. So you go from, like You're gonna need 800.
Speaker 2:You're gonna need to
Speaker 5:It sounds like it's a good margin for you guys.
Speaker 8:I know.
Speaker 1:Yeah. You raised you raised My quite a co is probably,
Speaker 5:like, the greatest technical mind of a generation. The like, the in-depth conversation he and I got into about the right type of gong that he wants to buy from the LA office.
Speaker 1:Oh, yeah. Yeah.
Speaker 5:So I think we may have to both come back and talk through this with you guys pretty soon.
Speaker 1:Yeah. Yeah. Anyway It's our favorite topic. Here just to talk about Gongs. We're here to talk about you.
Speaker 1:Can you Yeah. Introduce, like, yourself, the shape of the business, how you're describing it these days?
Speaker 5:Yeah. Yeah. So first of all, thanks again for having us. Of course. Yeah.
Speaker 5:So founder of Chaos Industries. So we sort of look at the world in in three waves, kind of as this sector has grown over the last twenty some years. And, you know, wave one, you have Palantir and SpaceX. Wave two, have Andoril. And, you know, wave three, we didn't see, like, another big multiproduct sort of new prime being built.
Speaker 5:And and that's sort of where that was the sort of initial thesis seeing kinda where the world was going in terms of especially, you know, the Russians have been taking advantage of of the lack of integrated air defense systems in Ukraine, and they've been attacking energy infrastructure and civilian targets sort of in an in an effort to break the wall of the of the of the Ukrainian people. You know, the the Iranians have been helping them, you know, build their drone capacity. And so we sort of saw this. And and all the while, by the way, the Chinese are watching here about, you know, what you know, what's gonna you know, what what could happen in in in Taiwan. So Yeah.
Speaker 5:I think we we took it from from the angle of, you know, we got worried about the fact that America's losing air superiority.
Speaker 6:Yeah.
Speaker 5:And so we wanted so, like, the first wave of our products, we we wanted to build get get away from sort of the monolithic legacy structures that were built during the Cold War and and bring new systems to the war fight and really protect our people downrange.
Speaker 1:So multiproduct, interesting. Androil certainly gotten there, but started with a a sensor tower. And then Yeah. You know, Anvil, like one, you know, counter US drone system. Did you follow a similar path, knocking down, single products to get multiproduct, or did you do, like, the compound startup thing where you, on day one, were working on multiple products to bring them all together?
Speaker 5:So we we were so we were the chunk we we're biting off first is sort of in the radar market. So we got four different products.
Speaker 1:Okay. That makes sense.
Speaker 5:Now now there's now but there's a sort of long tail of of products that we're investing in that Cool. The Department of War has been asking for as well.
Speaker 1:And Yeah.
Speaker 5:We'll come back on and talk about some of that stuff in the future with you guys. But Yeah. But the goal here is we're gonna do this the right way. You have to be multiproduct.
Speaker 1:How much of ray what you're doing in radar when you say multiproduct within radar is different radar technologies or the same radar, like the same data output, but this one is waterproof. This one flies. This one goes in the back of a truck.
Speaker 5:So I'd say different delivery packages.
Speaker 1:Yeah. Yeah.
Speaker 5:I would say, like, completely different form factors, different technology
Speaker 1:Oh, everything.
Speaker 5:Types of sensing technology. So we're we've kind of, like, rewritten the book on how it's done. Sure. And I think a big credit to, obviously, Beau. Yeah.
Speaker 5:Oh, he he knows more about, you know, weapon systems, radars Mhmm. Than than, you know, most people. He's forgotten more than most people will be able to learn in a lifetime.
Speaker 1:He's Yeah.
Speaker 5:Probably the most brilliant technical mind, I've ever seen. And so
Speaker 1:Why is the old radar not good enough? Is that because the drones are getting smaller
Speaker 4:these days?
Speaker 5:Drones. Right? These are legacy monolithic systems. Right? So one, manufacturing times are way too long.
Speaker 1:Sure.
Speaker 5:Two, the form factors are enormous. So I think if you look at at Patriot, right, like, the things size of a tractor trailer, you'll be lucky to get those within two and a half years of of or in in three. And, like, look. They do some things really, really well.
Speaker 6:Like, don't
Speaker 5:get me wrong. But these are sort of, like, monolithic legacy Cold War era built systems, and and the the reality is the battlefield's changed very dramatically, and and you need more tradable systems as well as sort of, like, more expeditionary systems. I think, like, you guys have my buddy Scott Sanders on this week. Right? Yeah.
Speaker 5:Forterra. So shout out, Scottie. Love you. But, you know, we partnered with Forterra. Right?
Speaker 5:Because, like, the ability to have these systems be mobile and move around the battlefield
Speaker 1:Mhmm.
Speaker 5:And not have your transmit and your receive in the same location, I think, is you know, buys our warfighters so much more time than they would already have. And I think if you talk to our chief mission officer, Chris Musselman, you know, Musselman was yeah. Well, he's an ape field named Chris Musselman, by the way.
Speaker 1:Oh, let's go. Half the
Speaker 5:reason I started by the way, half the reason I started trying to get my PRs in the weight room again is because Musk comes and talks shit to me every day
Speaker 6:in the office.
Speaker 5:Excuse my language. I don't if can curse on here. But I think Musk will tell you Yeah. But I think Musk would tell you that, you know, thirty seconds is in a a in in a gunfight. Like, we're buying exponentially more time.
Speaker 6:Yeah.
Speaker 5:Yeah. So that that's really the goal here.
Speaker 1:Is the US Department of War happy to buy systems that are maybe influenced by the war in Ukraine? Like like, are the learnings there translating? Or or or do the Ukrainians want something that is maybe fundamentally different from the way The US is set up?
Speaker 5:No. I mean, I think I think Ukraine is one of the best test beds out there. I mean, we've had our systems over there Yeah. For for a long time. Mhmm.
Speaker 5:I think as we we sort of look at this as two pronged, right, because there's a big international component to what we do. So our international partners, all they care about is, hey. Has this been tested on the front lines in Ukraine? Right? And then I think, you know, if you look at some of the work we've been able to do overseas, you know, in The Middle East and in Ukraine, it is a it is a real key discriminator when we go in.
Speaker 5:It's like, we don't have a PowerPoint. Like, we've got data. The thing works. You know? Mhmm.
Speaker 5:Take a look at it. Right? And so I think it it's it's been a big big help.
Speaker 1:Yeah. Are you optimistic about the the Ukraine war winding down? It feels like it's it's gone on much longer than I expected it to. Yeah. It's been this war of attrition.
Speaker 1:I've been very hopeful that there'll be just some sort of conclusion.
Speaker 5:You'd you'd hope so. You'd hope so. I mean, I think, obviously, it's just terrible what's been happening over there, and so this is why, you know, we wanna do our part to help. Yeah. But, you know, it doesn't seem like it's ending anytime soon.
Speaker 5:But, again, you know, I'm not a policymaker, so I don't have an asymmetric view into it.
Speaker 1:Yeah. Putin needs to pivot to AI. He's falling behind in the race for artificial intelligence. Should be focused on building data centers instead of
Speaker 2:We're transitioning the, you know, building tanks into building gongs.
Speaker 1:Yes. Yes. Do something productive, Putin. Stop fighting.
Speaker 5:I still wouldn't buy gongs if he made them, though. I'm only buying from you guys. Guys. Thank you. You.
Speaker 5:Merry gongs.
Speaker 1:Well well, thank you so much for coming on the show.
Speaker 2:Do do you have another question? Great to meet. Yeah. And congrats. Congrats on
Speaker 1:the massive round. Congrats on all the progress. And thank you for everything that you're doing to support.
Speaker 5:Appreciate it. Thank thank you guys. Hope to, hope to see you guys in person soon.
Speaker 1:Yeah. That'd be
Speaker 2:great. Come on the show for for the next round. Whatever whatever letter that is.
Speaker 5:Will do. Absolutely. Cheers. Thanks, guys.
Speaker 1:See you soon. Bye. Let me tell you about 8sleep.com. Get a pod five five year warranty with thirty hours free free shipping. And also, let me tell you about adquick.com.
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Speaker 1:Seamless ad buying across the globe. Was checking my eight sleep score. I got a 93. Let's go. Let's hear it for me.
Speaker 1:Hey, we got Reid. Welcome to the show. How you doing? Here. Have a seat.
Speaker 1:Have a seat. The yellow guys. Yeah. While he's sitting down, I'll also tell you about
Speaker 2:I love that.
Speaker 1:Bezel. Get bezel.com. Love the yellow. Bezel concierge available now source you any watch on the planet. Seriously, Quick any
Speaker 2:wrist check.
Speaker 5:Yeah.
Speaker 10:Sorry. You know, I missed the yellow jacket and pants.
Speaker 1:Yes. Yes. The memo. Was it was a it so our our lead sponsor, Ramp, raised a big fundraising round today. We have the CEO on the show.
Speaker 1:Fourth fund
Speaker 2:Fourth round of the year. We knew they were gonna be raising a lot, so we decided to get these suits.
Speaker 1:And when we initially yeah. When we initially thought of the bid, oh, let's get some yellow suits, I sort of assumed that we'd just go and buy, like, a yellow suit from Target. Jordy called our tailor and and got a very nice tailored yellow suit. And I was like, that's that's hilarious. It was very funny, but we wound up using it a lot.
Speaker 2:Looked great for us.
Speaker 7:It looked
Speaker 1:really great. Anyway, please introduce yourself for those who might not
Speaker 10:Yeah. My name's Reed. Founded a company called Knight. Yeah. You and I have known each other Yeah.
Speaker 10:Now going on probably like three years. Yeah. But we represent the biggest creators on Twitch, YouTube. It's it's kinda taken on a life of its own now. I'd say we're like, the the idea at the beginning was like be the Internet's management company.
Speaker 10:Sure. That's kinda transitioned to like be the Internet's media company. And so we bought a podcast network from Warner Brothers called The Roost. Okay. We have a venture studio.
Speaker 10:A few things that have come out of that like Feastables
Speaker 1:Mhmm.
Speaker 10:With Mr. Beast, Tone with Kai Sinat Mhmm. Outtake Yeah. Which is a company that you guys are probably familiar with. So that that's a little bit of the company.
Speaker 10:And then, you know, I represented MrBeast for seven years. So it was a crazy seven years.
Speaker 1:Okay. Maybe maybe we start with, like, a like a state of the union in just, like, where opportunities are for creators. It felt like TikTok was the hottest place to to if you were gonna be a creator, TikTok was the place you could go break through. Then Mark Zuckerberg copied it with Reels, and and YouTube answered with shorts. And maybe the plateau in TikTok world was like a little bit like, maybe they were slowing down and then they were going through this, will it get banned?
Speaker 1:Will it won't? And so there's a little bit of hesitance if you're a new creator to maybe pick that platform. Mhmm. Is that overstated? Is there still opportunity on TikTok?
Speaker 10:No. There is. I I think being a creator today, it's the easiest it's ever been just because discoverability is so easy. Yep. You know, I think I think that also becomes the hard part with TikTok is the algorithm has gotten so good that like if you the three of us pulled up our For You pages, like all of them would be completely different.
Speaker 10:Totally. Yeah. So I think breaking
Speaker 2:makes it more competitive for existing creators where the if you were living in a world that was like wasn't algo feeds, if you just got to a critical mass of subscribers, it wasn't it wasn't as competitive with like a new creator would have to grind it out for five, ten years before they could actually be competitive. And now, if you're just making better content, it will get surfaced faster.
Speaker 10:Yeah. Yeah. If you like, during COVID, everyone was seeing Charli D'Amelio dance videos. Like, she went from zero to a 100,000,000. That's very challenging to do in today's world just because your content gets fed to the people that only wanna watch that, and your content doesn't get seen by people who don't want it.
Speaker 10:Mhmm. I think the the platforms have actually done the same thing across the board where they don't really want creators to break out and become a Mr. Beast anymore. They'd rather like widen out the mid tier. And so they'd rather have, you know, YouTube for example, think would rather have 10,000 creators with 5,000,000 subscribers than have a 100 creators with a 100,000,000 subscribers.
Speaker 10:Like, they don't they don't want that. I think a lot of that is like they don't they also don't want creators to have any leverage against the platforms. Yeah. And so it's been interesting seeing that like shift over the last three years to this like, you know, push down a little bit further and make make it harder for people to really break out.
Speaker 1:And what is the nature of of MrBeast's leverage over YouTube? Is it just that if he says YouTube isn't treating creators, you know, correctly, that'll be front page news? Or is it something more about the structure of his business?
Speaker 10:I think a lot of it is when, you know, there is, like, negative press. And we we saw this for those people that are like OG YouTubers like PewDiePie kind of went through this whole like adpocalypse back in the day. Yes. Yes. That was very negative on the platform as a whole.
Speaker 10:Sure. And so I think when you when you get individuals that are at the top of those platforms and they start to almost overshadow the platform because they've gotten so big Mhmm. That when negative press starts to come out about them, now advertisers are pulling out. Mhmm. We started to see this a little bit on Twitch Yeah.
Speaker 10:Because it is a very top heavy platform. And so I think that has a lot to do with it. You know, I think in in Jimmy's case, like, for the longest time, you would go on Trending Page and he was just dominating Trending Page. And so it's you know, now it's like people don't really go on Trending Page. But even on on homepages now, there's a lot of variety of different content.
Speaker 10:That's ultimately what the platforms want. They're trying to widen out their fan base
Speaker 1:as well. Talk about the evolution of Twitch. It's, you know, you gave us the basics on TikTok. Twitch is interesting, because when I see what Google is doing, YouTube is, like, front and center in so much of what, YouTube does. And yet I feel like with Twitch, it's not really the front and center, you know, star property for Amazon as a corporation.
Speaker 1:And I'm wondering if that reflects just it being a little bit more arm's length, a little bit newer of an acquisition maybe. Mean, it's still been a decade. But what what's the vibe on Twitch these days?
Speaker 10:Man, we could have a whole conversation about this. I think your your observation is correct that Twitch inside of Amazon, they haven't really cared about it. You know, they'll they'll do deals now that is predominantly focused on Amazon Prime Video Yeah. And Twitch is is somewhat ignored. You know, I I do think like it's such a small like peanut inside this Amazon ecosystem that even if Twitch's revenue quadruples, doesn't really do anything Yeah.
Speaker 10:For for Amazon as a whole.
Speaker 1:So It also has this weird dynamic where, and correct me if I'm wrong, but there might be a lot of money being made on Twitch, but a lot of it is driven by the Twitch Prime program, which is not actually new dollars for Amazon. Whereas, subscribers on YouTube YouTube, premium subscribers, that's just actual dollars that people are paying.
Speaker 10:Yeah. You're saying like net new. Or I can explain that for a second. So a couple years ago, Amazon released something where where every Amazon Twitch or sorry. Every Amazon Prime person gets a free Twitch sub.
Speaker 10:Yeah. So they can essentially use their Amazon Prime to subscribe to some person's Twitch, which which would be $5 a month Mhmm. In most cases. So what you're saying is like, no, that's no longer net new revenue. They've never released how many actual Twitch like subscribers are like actual Amazon Prime.
Speaker 10:Oh, So we have no idea. Oh, we don't. But I would guess it's a large number.
Speaker 1:It felt like it was like, at least in the early days, it was like 80% because it was like Yeah. My parents have have my parents have Amazon Prime.
Speaker 2:Did anybody try to make a stream that's just like make me a millionaire and they're just streaming and they're just trying to get people to like use their one Amazon sub? Well, I
Speaker 1:mean, tell some stories about Subathons.
Speaker 10:Yeah. I mean, the Subathons became a thing couple years ago. Kai's obviously had the most notarrival one. They had MafiaThon, which led into the third version of that that we did this last year. And it was, you know, thirty one straight days, twenty four hours a day.
Speaker 10:He had he broke a million subscribers over a thirty one day period. But subathons are not a new thing. But people using Amazon Prime to subscribe to Twitch has been around for a while. Mhmm. And that and that is like the hook that a lot of people use.
Speaker 10:They'll be like, use your one Amazon Prime sub on me. Mhmm. And but the And so Twitch does, we know kinda what their advertising revenue is, but we have no idea what the makeup of like a Twitch Prime subscriber is. Yeah. But it it has been disappointing.
Speaker 10:Think from someone who sits on the creator side that, you know, whose company represents the majority of of the Twitch streamers, You know, YouTube leans so heavily or Google leans so heavily into YouTube as as a platform underneath their umbrella where Twitch does feel like this, like, kind of like band of misfit toy inside of Amazon that they don't really care about, don't really talk about. Even when they do the, you know, the the NASCAR deal and they're negotiating to get all these rights for the NBA, it doesn't even feel like Twitch is in those conversations. That that's also been frustrating for us too because for a lot of guys that are streaming on Twitch, that's their main distribution.
Speaker 2:Have you tried to buy Twitch?
Speaker 10:Think that we would have to
Speaker 2:because I know, no, and I and I I know like it sounds crazy, but there's a world where you have all of the talent, like a lot of the most important talent on the platform. There's a lot of investors out there that if they would happily probably if you're like, hey, this is being under, you know, this underappreciated Amazon and we can turn it I don't know what what wasn't it like a billion dollar acquisition? Yep. Like, damn it. Like, that that feels like worth well more than that.
Speaker 1:The psychology of the $99.09 $9.09 is so funny. It's like, clearly, was some weird board fight.
Speaker 10:I just don't know why Amazon would sell it. Like, why would they part ways with it? It would only ultimately make them look bad if someone could come in and and actually operate this. So
Speaker 1:I don't know. Yeah. We yeah.
Speaker 10:We were joking about first in line.
Speaker 1:But We we were joking about how we were praying for Andy Jassy to to get on Twitch because, obviously, he's a very buy the book. You know, he operates AWS. He's a very quantitative executive. But if you look at, like, Mark Zuckerberg, he's on Instagram. Mhmm.
Speaker 1:He's using the platform. And it's like, of course, Apple's keynote will be streamed on Apple TVs. Of course, Google's gonna do IO on YouTube. And yet Amazon hasn't really leaned into Twitch in that way of like, hey, maybe if we bring our executives here, it's always been like, it's a little bit too crazy. Like, that's a little party
Speaker 2:Yeah.
Speaker 1:And we're like a little bit more serious
Speaker 2:over here.
Speaker 10:You'd have to think like if you're gonna pay a billion dollars for the NBA rights Yeah. That you would have to allow Twitch streamers to go stream courtside whenever they want.
Speaker 6:Yes.
Speaker 10:Yes. They get full locker room access. Yeah. Like, you'd have to open up the app It'd cool. All those creators could benefit from Amazon owning the NBA rights, which ultimately, like, just keeps people in the system that can then watch the games or watch their favorite Twitch streamer backstage or whatever that stream ends up being.
Speaker 1:Who who knows? Just feels like it hasn't been fully integrated in any meaningful way, whereas with with YouTube is like front and center in so many of the different parts of the ecosystem with like v o three and the generative AI stuff, it flows right back. Yeah. And so
Speaker 2:What what's the best and stuff. What's the best platform to be a top creator on when you think about Twitch, YouTube, Instagram, TikTok?
Speaker 10:It's it's to me not even I it's not even a question. It's YouTube by far.
Speaker 2:Mhmm.
Speaker 10:Like, I I think just their alt monetization, their AdSense monetization, like, if if you're at the even in the top 10,000 channels on YouTube, you're making significant income. Mhmm. And I've said this for a long time, like we we kind of value a fan of just like relative time spent with that individual and people are spending a lot more time with individuals on YouTube than they are on TikTok. Yeah. You know, you'd have to watch I don't even know how many TikToks of a single person to get up to like a seventeen minute Mr.
Speaker 10:Beast video where the average person's consuming 70 to 80% of that video.
Speaker 5:Yeah. Yeah.
Speaker 1:Yeah. So Do you believe in this I like this exchange rate concept. Maybe it all just boils down to watch time. But I feel like it's it's 10 times harder to get like a live viewer than a video essay viewer. It's 10 times harder to get a video viewer than a shorts viewer.
Speaker 1:Maybe there's maybe there's like a chain of exchange rates through these things.
Speaker 10:Yeah. But you you can parlay it now on YouTube Yeah. Which is why I said YouTube because you can use YouTube Shorts as the discoverability mechanism For your
Speaker 3:long which is a
Speaker 10:lot easier to get someone in the door Yep. To then figure out what your content is to then create long form videos Mhmm. To now they're watching a twenty minute video and they're watching mid rolls and a unskippable ad. Yeah. And so I think YouTube has done such a masterful job of just like continuing to build the platform for amazing place for creators.
Speaker 1:Yeah. What do you think about this this idea that like YouTube just seems to be coalescing around the old TV formats like MrBeast, it feels like he landed on like, oh, it's about a twenty two minute video which is like exactly how long Mhmm. Like an episode of The Simpsons is in a thirty minute time slot. And then there will be around eight minutes of ads because that's just the ad load that TV discovered and some of those will be in in the video and some of those will be out of the video. But effectively, it just feels like humans landed on like, yeah, like half an hour slot.
Speaker 10:Yeah. I I think a a lot of it comes down to, yes, you can put multiple mid roll ads within a twenty two minute video Yeah. And so you can kind of just understand like how many mid rolls you can fit in a twenty two minute video. But TV watch time on YouTube is now I believe 11% of of watch time consumed on an actual, like, smart TV.
Speaker 1:Mhmm.
Speaker 10:And so YouTube also is feeding those those videos into a system. And and YouTubers have gotten smart. A lot of them have syndicated their videos on other platforms like an Amazon or a Tubi. And in those formats, usually you have to deliver a video that's like twenty to twenty five minutes in length. Mhmm.
Speaker 10:You can't distribute a ton of videos that are nine minutes onto Amazon or Tubi or some of these other places. And so I think just creators have gotten smarter Mhmm. Over the years of like playing to the how do I get high AdSense and how do I syndicate my content on other platforms.
Speaker 1:Yeah. There's, like, these, one off ARB opportunities, I feel like, that happened. Like, for snap Snapchat was a was one for a while where the the creator monetization program was really good. I don't know if it still exists in the same, like, lucrative way, but there was a moment where it was like, if you have a backlog on YouTube, just go put it on on Snapchat because you're
Speaker 3:just making money.
Speaker 10:It still exists, but it you have to make native content. So the the ones that do well like David Dobre does really well on Snapchat, but he's making a 100 plus pieces of content a day. And then the the programmatic ads are just like slated. Yeah. He's he's posting a 100 times a day.
Speaker 10:So so it's like mean, there's a lot of creators that are doing this where it's just like spam posting your entire day.
Speaker 1:Okay.
Speaker 10:So you're you're essentially vlogging your entire day, you're filming it in ten to fifteen second increments.
Speaker 1:Okay.
Speaker 10:And so people will just like continue to click and like watch the entire video and then Snapchat will insert ads Okay.
Speaker 7:And that
Speaker 10:whole thing. Yeah. Yeah. That makes It's done well. Yeah.
Speaker 10:I don't know if gonna continue like that. I don't know if Snapchat will continue to be able to sell ads within that system, but it's worked for the for the biggest creators at least the ones
Speaker 2:that prediction there were there was sort of the the, the era in which a podcaster could get paid 50 to a $100,000,000 to, like, go exclusive. That kind of happened. There was the same thing happened in live streaming. Do you ever expect like, I I don't think both of those have, necessarily panned out that well for the platforms. Do you do you expect somebody to like try to run that playbook back again to like kick start a new network?
Speaker 2:Or do you think it's been learned enough times that it's not necessarily
Speaker 10:I don't know. It always kinda feels like someone has to continue to try to spend a $100,000,000 to create a competitor to Twitch or YouTube or TikTok. So I I don't think it'll be the last time. I do think someone else will come to the system and put up money to do some of these things. Mixer probably won't be the last like competitor to Twitch that fails.
Speaker 10:I would imagine someone else is gonna try and do it and they're gonna be able to raise a ton of money to try. But we've just seen time and time again that like even in the Twitch example, the community on Twitch is hard compete against. If you're a mixer, you could spend a $100,000,000 and still not even put a dent. Yeah. And like Kick is trying this right now.
Speaker 10:They're probably the newest one, which is like owned by Stake. And they've spent hundreds of millions of dollars on trying to figure out how to compete with Twitch and they just really haven't been able to like really crack any of the livestream
Speaker 1:has not gotten into livestreaming yet.
Speaker 10:That may happen.
Speaker 1:Microsoft, Google, Amazon, all these companies have
Speaker 3:Mhmm.
Speaker 1:Plays in livestreaming but not NVIDIA.
Speaker 2:What What's your point of view on creator payouts on different platforms? Feels like, obviously, you would love for platforms like Instagram to do at scale creator payouts. We've had a debate on the show whether x payouts are good. And we ultimately got to a place where we think like creator payouts on x make the platform worse because the content is relatively easy to make. And if you just create this sort of like profit motive on the platform, it just floods the the platform with content that I wouldn't say the content is like better today than it was like five years ago Mhmm.
Speaker 2:Pre creator payouts. Whereas on YouTube, making great videos is really hard. And so you talked about it like there's if you can be in one of the top channels, you can make a great living doing it and that has a very positive effect and that more people can spend all their time, you know, creating content. But curious what your view is.
Speaker 10:Yeah. I think on X, like, they reward shit posting. Yeah. Like, in all the, like, Twitter meme accounts or X meme accounts. Like, if you start getting likes and retweets, like it just continues to go.
Speaker 10:And so like memes do really well or just shit posting does really well. On YouTube, it now like comes down to statistics. Like you need a good click through rate and a high retention or else
Speaker 1:Mhmm.
Speaker 10:The YouTube is not gonna recommend your videos. So it's really hard. Like, it's impossible to shitpost on YouTube. You can like have a clickbait thumbnail, but if the video assets stinks
Speaker 1:That was the craziest thing. Mister Beast released that video. It was like, here's his video to like ten years in the future or something, and I think it flopped. Like, I think it it was
Speaker 10:It was only three minutes in length. Yeah.
Speaker 1:Yeah. It only three minutes in length. It just wasn't in the meta. And even though it's like, it was mind blowing thing and, you know, it's this moment, it's still just like the algorithm expects twenty minutes and a million dollars poured into the production. And so your your face video, you're just like, hey, to the camera video, even though it's novel, just doesn't break through in the same way.
Speaker 10:But but if x is ever gonna compete with YouTube, they have to monetize. Right? Like, they have to sell ads. Sure. So I I just I I don't know where they're kind of at in terms of like, do we need a video player?
Speaker 10:You guys obviously live stream on
Speaker 1:Yeah. Yeah.
Speaker 10:On X. But it seems like they have to get to a point where they're monetizing or they're allowing creators to monetize their content. Or I just don't see why anyone that actually puts quality yeah. Quality into their content podcast or whatever would post it on x. Unless you're a podcast and you're already putting five ad reads in your video and AdSense is an afterthought and then you want more scale and distribution by x and you're already monetizing the video, that that I can see.
Speaker 10:But I just I just don't think if x really wants to compete with TikTok and and Instagram and YouTube that they cannot monetize their content.
Speaker 1:Yeah.
Speaker 2:How early how early are you signing creators today? Because it's I mean, you guys have a lot of leverage from all the talent that you've worked with, and just the track record. But at the same time, I'm sure that when somebody pops up and now that they get shown to a ton of people really quickly, they can go from zero to millions of views in no time. I'm sure it's like a highly competitive dynamic where in a perfect world, you're like, well, I'd like to let this person like create content for another like at least a few months, but if I don't, somebody else is gonna like jump in and sign this person. And then, you know, maybe it'll be hard to kind of like, you know, take over that relationship.
Speaker 10:We're we're definitely never the first. I would say we're hopefully the last. Usually, everyone that we sign already has had like a manager, an agent, or like someone in play. You know, I think we come in with a little bit different value prop of, you know, we've done it so many times and kinda have the blueprint for like how do you get a creator to scale then how do you build businesses on top of them that have real enterprise value. So I would say we're we're a little later and we don't really represent that many people.
Speaker 10:So we're not like chasing, hey, what's hot and viral at the given moment? Although I pay attention to it and my screen time is incredibly high.
Speaker 2:And I
Speaker 10:don't think that'll ever change. But I'm just like, I keep an eye on people. I think like we have this whole system internally where we just have thousands of creators and we'll just keep an eye on them. Interesting. What are they doing?
Speaker 10:Are they It's hard to have like real longevity and it's really hard to stay creative over like years.
Speaker 6:Yeah.
Speaker 10:And so I I see a lot of creators like come and go into the system, they'll make a good video, they'll go viral, and it's really hard for them to back that up month over month over month.
Speaker 2:Yeah. Or they have like one bit that's hilarious for and there's also like creators like we there's this guy on on Instagram that we've been laughing at a lot lately. He makes these videos where I don't even know his I I forget the account name which just goes to It's tell you like like five point Yeah. Yeah. Like it's like, it's not a super valuable account, but he has this one joke that we just think is absolutely hilarious.
Speaker 2:And like there's there's probably nowhere for it to go. Like it's probably like he's getting like millions and millions of views Mhmm. With this one joke. Yeah. And then eventually it'll fade or something like that.
Speaker 2:But I mean, I think, yeah, not not all not all views are are created equally.
Speaker 10:Yeah. Mean, there's this creator that I really like to watch and he like eats lemons in public places. Mhmm. So he'll be like on a plane and he'll like pull up. Have you seen this?
Speaker 10:Yeah. I don't know how it does onions? He does onions too and now and now eggs. Like not a hard boiled egg, like a full egg and he'll just chew it. But like that
Speaker 2:Tyler, get ready to eat eggs, buddy.
Speaker 3:Yo. Have you guys have
Speaker 10:you guys ever tried to bite a lemon? It's hard to eat a whole lemon. It is? Yeah. Like, he's like gagging, so that that like yes.
Speaker 10:I I can't remember what his Instagram is called, which goes to fact of like I'm like doom scrolling. Yeah.
Speaker 1:Yeah. Yeah.
Speaker 10:And I'm like, oh, I found this guy. He's hilarious. He eats lemons. But I'm like, there's no real longevity here.
Speaker 5:Like, I
Speaker 10:don't know where this goes.
Speaker 2:Yeah. Versus Lincoln
Speaker 1:Harris who like, you
Speaker 10:know Yes. Like beautiful storyteller.
Speaker 1:And he's in the thumbnail and he tells you, oh, he brings you into his whole life.
Speaker 10:Yeah. And so
Speaker 1:many of those folks that actually do a great job.
Speaker 2:Do you think the nature of some of these live live streamers is actually forcing them to create products and startups or like businesses earlier than maybe on YouTube? Because I feel like a lot of the the Twitch streamers, like, there's so much unpredictability because it's a live stream that they're not super advertiser friendly. Yeah. Maybe don't
Speaker 10:I think a lot of them have figured out other ways to make money. Mhmm. And and that can be like, you know, apparel was the easiest one. Mhmm. Like I think a lot of them have Minecraft servers or Grand Theft Auto RP servers or now Roblox games.
Speaker 10:And so they they've all figured out other ways to make money that's not so centered around Twitch, Prime Subs, or YouTube AdSense. Mhmm. And so I think like just in this like Internet world, these like kids are in the crevices of the Internet. They just like figure out how to make money. Like if you're a Grand Theft Auto streamer Mhmm.
Speaker 10:You probably have an RP server. Mhmm. You're probably monetizing that RP server. Things that you guys probably don't even think about. Oh.
Speaker 10:Yeah. And they're like, oh, like I know he streams on this like Grand Theft Auto game. Like, you wouldn't even think that like, oh, people are paying to be in this server. Yeah. And so things like that, like, these kids have figured out.
Speaker 10:Like, even the first gamer that I represented had a really large Minecraft server. It was like a PVP server in Java. It was pay to win and made It
Speaker 1:was pay to win.
Speaker 3:Was pay
Speaker 10:to win. It was it was like not EULA compliant. I don't know if Minecraft's gonna care anymore. But like, wasn't EULA compliant and it just printed Interesting. And, you know, he would use his YouTube channel as the catalyst to drive people into that.
Speaker 10:I agree. Yeah. That that server was the the real way that he would make money.
Speaker 1:Yeah. That's interesting. So Do do you have an internal philosophy on how you talk to creators through, like, where they should draw the line on their comfortable? Because, like, pay to win Minecraft that feels like gambling adjacent. But at the same time, you know, like, we talk to entrepreneurs all the time and they're like, yeah.
Speaker 1:My first first way I made money was, like, doing some crazy stuff on on, Minecraft. And I'm like, is that really that bad? And then you look at some of the crazier stuff, and it's like, obviously, like, a rug pulling a coin on your audience is, like, the worst thing you can do. But how do you think about like the gray area in between coaching creators, giving them like are you just hitting them with a ton of anecdotes?
Speaker 10:It's become so much harder. Like there there's I mean, you can now just you can buy CS skins and now you're playing Counter Strike and you're like incentivizing kids to buy crates. There's just we we've kinda taken the line of like, if we understand that gambling exists and daily fantasy football is fine, some of our creators have stake deals that will livestream on kick. And so it's just like, where do you draw the line? Like I'm having a hard time with that right now because gambling is so widely accessible in so many different genres including video games, which I think like even NCAA football, that's gambling.
Speaker 10:Like they have packets that you open
Speaker 1:Yeah.
Speaker 10:Within their game mode and you just like spin packs and try and get players. So it's like every video game now has some type of gambling baked into it and so it's it's hard for someone who like came into this industry that like didn't wanna be in the the gambling world Sure. Every single video game including like maybe a Roblox. Like there's like things that you can buy where it's more like pay to win esque. And so it's it's tough.
Speaker 10:Like I I think that it's not something I wanted to get involved in, but now it's like we sit so deeply in the Internet and in gaming that it's just like become of, like, a part of every creator's business.
Speaker 1:Yeah. Yeah. It's it it it's fascinating. I mean, I played Counter Strike 1.3, 1.5, like, before it got productized at all. And, yeah, I mean, it's hard to think back because I was talking to, one of our buddies, Sagar and Jetty, over breaking points, and he was kinda chastising me for being pro video game.
Speaker 1:And I was talking about my experience with Counter Strike, but it was a very different game then than it is now. And so, yeah, where where where you draw those lines?
Speaker 10:But it's still like it's a $5,000,000,000 economy. Just just Counter Strike skins, weapon skins, knives. It's a $5,000,000,000 economy. And so that that would to me, will just continue when if GTA six ever comes out. Yeah.
Speaker 10:You know, there's gonna be a lot of people with RP servers Sure. And there's gonna be pay to win mechanisms. There's gonna be rank mechanisms that Yeah. Kids are paying for. So I I don't know.
Speaker 10:That that's like a big that's a tough one for me.
Speaker 1:Yeah. I wonder if yeah. I wonder I wonder where this will actually meet, like, where the rubber will meet the road because you could imagine some level of regulation around, you know, can you target a something that is gambling legally to kids? Like, maybe that the you know, if there's this type of advertisement in it, it goes over into this pool of the algorithm that's maybe 18 plus. I'm not sure.
Speaker 1:It'll it'll it's it's obviously something that, like, America is publicly discussing right now. Yeah. But, it's tricky.
Speaker 10:Have you are you guys using Sora at all?
Speaker 1:Sora?
Speaker 10:Yeah.
Speaker 1:No. Not really.
Speaker 10:Okay. Not not on it? Like, don't
Speaker 1:No. I'm I'm on it. I I I made my Cameo, like, available. Anyone can do one with me.
Speaker 10:You do? Okay. So people can make videos
Speaker 1:for Yeah. Was like, yeah. Go crazy.
Speaker 2:Only absolutely Jack.
Speaker 5:Oh, yeah. Yeah. I put I put
Speaker 1:in always depict me as a bodybuilder, it's really funny.
Speaker 10:Is there a lot of videos on Sora? Like, are people actually doing it?
Speaker 1:Not my community has not certainly not moved over, and, and the retention on, the I think on both the viewing, certainly on the scrolling, we've been polling everyone in the studio. Hey. What's your screen time on Sora this week? What's your screen time on Sora? Because we wanna know.
Speaker 1:Are are people actually, getting into this as, a consumption tool?
Speaker 2:Is there any hope for Sora?
Speaker 1:We haven't seen any of that. Now I do see occasionally there'll be a new, clearly, a Sora video that's been integrated into vertical short form in one way or another. I found a funny guy who makes, like, tech comedy. And at the end, he puts a little Sora clip just to kind of, like, add a little spice on top, and it's funny. But I haven't seen a lot of stuff that's been like really breaking
Speaker 4:out.
Speaker 10:I mean, at the at the current moment, I I don't
Speaker 2:If
Speaker 10:if you just like base it on momentum, it feels like it's lost.
Speaker 1:It does feel like it's falling off.
Speaker 10:Yeah. But I mean, there's hilarious videos on there.
Speaker 2:Pull this pull this video so you can watch it.
Speaker 10:Is he fully jacked?
Speaker 1:Wait. Did somebody make one of me?
Speaker 7:Are you laughing?
Speaker 2:Yeah. Can you guys pull it up?
Speaker 10:I'm gonna I'm gonna I'm gonna go home and I'm gonna have like a Discord server just make thousands of videos of you and just flood the Sora system.
Speaker 1:I love it.
Speaker 10:And it'll just be your videos all over the place.
Speaker 1:Yeah. Yeah. I mean, I I don't know.
Speaker 7:It it
Speaker 1:might be like uncanny valley thing. We we do use v o three a decent amount for, for, like, previs on, hey, we wanna shoot this video. What if it looked like this? Let me get some ideas for, like, lighting and tones so I can send it to somebody. This is what we're thinking we're doing.
Speaker 1:But we always shoot everything normally. And we have we actually have a benchmark where we have something that we shot manually. Like, we shot the normal way, and then we try and recreate it in all the video the AI video systems. And it's remarkable how hard it is even when you have a perfect idea.
Speaker 2:Alright. We got great things. Sorry. Watch this. Oh, you
Speaker 7:are. Why
Speaker 3:am I
Speaker 1:walking a pig?
Speaker 2:And the caption is what too many ramp ad reads does to an MF.
Speaker 1:They they figured out how make my legs small. They hacked me. They hacked me.
Speaker 10:Wait. Aren't those your real legs?
Speaker 1:Those are not my real legs. I did
Speaker 2:not scare my Real arms and real legs.
Speaker 1:What is the nature of the pig? Why do I have a pig? That's hilarious. It does it does look like he gave the face. But there's a little bit of
Speaker 2:little gimmickable.
Speaker 1:Gymshark? Oh. Yeah. You got
Speaker 2:a Gymshark stringer.
Speaker 1:Oh. Oh, wow.
Speaker 10:Yeah. I don't know. It it feels like it's lost a lot of its momentum. I I'm I'm not convinced like people are gonna go on there and and watch content.
Speaker 1:So my my core thesis for, most of the AI generation apps like Midjourney, Sora are that they are more like video games than than consumption mechanisms. And so you go on there and you have an idea and you are trying to express it. And once you get it to generate it, you watch it and you watch it just for you and then you're like, yeah. Awesome. Yeah.
Speaker 1:And maybe you said it's like one other person. But you really aren't it really isn't just sit there and just a random person makes something and I enjoy it. It's more of the experience of like, can I get it to generate the thing that I have in my mind whether that's Suno or Midjourney? Somebody described Midjourney as like art therapy. Mhmm.
Speaker 1:People like going on Midjourney and just and just whatever they dreamt of last night, they'll prompt. And the images, they look just like any other Midjourney images. There's no value to you. But to the person that generated them, they enjoy it. So pay the content that they produce themselves.
Speaker 4:Yeah.
Speaker 2:How do you think there's a dynamic in the future? I think we're pretty far away Mhmm. From this point from a just model progress standpoint. But right now, YouTube doesn't make any videos themselves. Why are you smiling?
Speaker 1:I just need to go edit my sore prompt to say never depict me with my skinny, small legs. No.
Speaker 10:I'm taking advantage of that sore later. You're gonna see all kinds of videos.
Speaker 2:No. But so right now, any any video that YouTube surfaces, let's say, is they're paying out like a fixed, basically, revenue share on that. And there's a world in the future where YouTube knows exactly the kind of video that someone likes. Yeah. So like, at night, I watch like documentary style videos.
Speaker 2:Yep. Right? So it's like, okay, Jordy likes World War two, like, voice over documentary style videos. We could just serve we could serve them a video of an existing creator or we could just serve Jordy a video, same topic, but it we created it ourselves. So there's, like, some cost to, like, generate the asset Yep.
Speaker 2:Serve it, but theoretically a lot less. Like, do you like, I think that, that scenario creators are gonna be creators that are worried about AI today are not worried about the right thing necessarily. They're worried about, like I don't I don't know. But I I think that's, like, a very real possibility.
Speaker 1:They're overestimating how much they can destroyed in a year and underestimating how much they can get destroyed in a decade.
Speaker 10:Do you but does YouTube, who has been predominantly very creator first, pivot to that where they're now, like, making content through generative AI Yeah. That is ripping off, let's say, a documentary storyteller or true crime? Like, did just feels like they
Speaker 2:they would they would do that if the number if, like, watch time continue to go up. Like, that that, like So I I They're they're they're a massive public company. They have an incentive to like increase profits.
Speaker 10:Yeah. I'm just saying 100% of
Speaker 2:the Yeah. Yeah. I'm just saying like it sounds great in theory that they're like, okay, they're very greater aligned and they've made a bunch of good decisions to But Yeah.
Speaker 1:I mean, I
Speaker 2:just And I don't think it's
Speaker 1:that that that that sort of that we just watched, like, that was generated by someone who prompted it, someone with a sense of humor, obviously. It it doesn't seem that crazy to me to actually figure out how to parcel out the ad dollars. Like, if that video generates a $100 of ad revenue because people watched it and then they immediately watched an ad before or after or whatever, and it's attributable, you could give me a slice because of my likeness. You could give the the prompter a slice. You could give Jim Shark a slice since their logo's in there.
Speaker 1:You you could give whoever created the Jim Shark
Speaker 2:should pay for that.
Speaker 1:Yeah. And and so if we have AI that's good enough at generating that, we should also have AI that's good enough to say, hey, this is a mash up between these two artists. Let's split the revenue share fifty fifty. YouTube already does this. If you put one song in, it'll route the I I I actually made a video about mister beast once.
Speaker 1:I used some footage and and it got routed to his team. Probably you you got the check. Sorry about that. No. It's all good.
Speaker 1:You're
Speaker 10:never seeing
Speaker 1:that voice.
Speaker 10:It's gone.
Speaker 1:It was yeah. It would like you you know, so there's like fair use discussions. But in general, it's pretty easy for a system to understand, okay. This is a combination of of this footage from here, this music from there, that IP over here. They took Donald Duck off the shelf over there, some Mickey Mouse, some Batman, some Spider Man, and they're all from different IP owners, but let's just flow all the money through.
Speaker 1:Then, yes, if you're coming out with something completely new, then you don't need to pay as much and maybe you minimize that. But this all just feels like it'll happen just over decades. So I
Speaker 3:don't know.
Speaker 10:Yeah. I mean, music's kind of figured this out where, you know, you have writers, producers, like, there's so many different people on a track. Yeah. Oh, you sent out to. So I I could see that happening in the future.
Speaker 10:I I hope we're we don't live in a world where YouTube is understanding, like, psychologically what type of videos I watch
Speaker 6:at
Speaker 10:9PM, and so they're feeding me generative AI videos that like is taking away from a human, but like maybe that is a world that we live in ten years from now, and
Speaker 2:Yeah.
Speaker 10:That's that's who you're competing against. You're ultimately competing against the system of YouTube who is making amazing videos, and their their incentive is to own a 100%
Speaker 2:of the assets. The AI lot investment thesis is around labor displacement, which is like we have to you know, these companies are like, we have to invest in AI because like future spend in the economy, instead of going to labor, will go to these data centers effectively.
Speaker 1:Yeah. I do wonder I do wonder about YouTube's positioning with creators because, that sort of when you describe 9PM, serve you generative imagery
Speaker 2:But that that, to be clear, is like a very specific type of content that where I don't feel the creator matters as much. Right? If it's like
Speaker 10:Yeah. But what but what if it's like sports news or or just news in general? Yeah. Yeah. Would I would imagine you could pull they could pull that in real time and be talking about what's going on.
Speaker 1:What I mean is that's already happening because there's going to be a a company out there that says, let's use every available AI tool. Let's be the AI native, you know, beast enterprises. And let's have no one in front of the camera and spend $0 on cameras and spend a lot of money on Sora credits and v o three credits, and let's start producing as much as possible, and let's use YouTube as our distribution pathway. And maybe YouTube takes a stance. I don't know that they would.
Speaker 1:I think that those creators who are who are puppeteering all the AI slop will probably stick around enough. But I don't know. It's it's there there might be a reckoning to the degree where where YouTube says, hey, we're detecting AI and we're putting it in a different tab or we're not allowing it on the platform. But I would be shocked if they do that. I'd be very shocked because you could use because there are so many creative ways to use AI.
Speaker 1:Like, we just watched that. It was genuinely funny because we had context. Yeah. It it was not just like, you know, trying to take a dime out of someone's pocket.
Speaker 10:Yeah. I think I think it'll start with thumbnails. Like, that'll be you know, you'll get a AI generated thumbnail as soon as you upload your video. Yeah. It'll it'll watch your video and explain like what it thinks the thumbnail should be and then title maybe titles is first, thumbnail is the second.
Speaker 10:Yep. Where it goes from there, I'm I'm a little unsure. Yeah. But you guys need Neil Mabon on the show so ask For sure. Him this directly.
Speaker 1:Yeah. Yeah. Yeah. The I mean, the title thing is like I've I've titled hundreds of YouTube videos. I hated doing that every single And so and I never got to the scale where I had like, oh, yes.
Speaker 1:Like, I have a title person who's like amazing on my staff, and and like I would be displacing their job if I had a if I had a tool for this.
Speaker 10:Well, it it now. So title AB testing, thumbnail AB testing. Eventually, it probably just prompts you what they think you should title it and then it'll AB test it on its own and figure out where it lands.
Speaker 1:So Yeah. Makes sense. Anything else, Jordan?
Speaker 2:Lots more on my mind, but All over the place. Can do it again soon. Yeah. Thanks for
Speaker 10:having me, guys.
Speaker 2:Yeah. Super fun.
Speaker 1:Awesome. Thanks so much for coming.
Speaker 10:Thanks, guys.
Speaker 1:Yeah. We'll close out the show, and we will talk to you in just a minute.
Speaker 10:I will wear yellow.
Speaker 1:Yeah. Next time. Yellow suits. Thank you so much. We have to tell you about Wander.
Speaker 1:Find your happy place. Book a wander with inspiring views. Hotel grade amenities. Dreamy beds. Top tier cleaning.
Speaker 1:Twenty four seven concierge service. It's a vacation home, but better. Deleon has a post here. He says, just read this in an investor update. This is bad news for Tyler.
Speaker 1:He said older engineers who graduated from college pre GPT are actually best suited for our purposes. They have fundamental programming ability that's lost amongst most of the current generation. The AI induced thinking slash skills decay has begun wild. What do you have to say? Are you low background radiation steel, pre war steel, or are you post war steel?
Speaker 3:What's the next model? We just need the next model.
Speaker 1:Then you'll be good. Then then then you'll be able to prompt, explain to me what you did when you built the thing. So it is it is funny. I I don't know. I think that it it it certainly depends on I mean, there's obviously people that use, you know, GPT coding tools and it accelerates their learning.
Speaker 1:There's probably a lot of people who are effectively cheating at learning anything and do not do not accelerate. But I don't know. I wonder if this phenomenon will be sticky. I wonder I wonder with the durable we're still so early in understanding the the the durable trends that come out of out of the AI era and and how it changes people. I don't know.
Speaker 1:Kevin O'Leary is neck deep in data centers right now. I love that. What a what a quote. That's hilarious. So what is this a treaty post?
Speaker 1:I am starting to be a real believer in AI. Will be a megatrend like no one like no one is really imagining right now. I'm sure lots
Speaker 2:of Shit posting.
Speaker 1:Drops along the way though.
Speaker 2:That's Shit posting.
Speaker 1:Oh, well. And Bill Ackman, of course, said, may I meet you is his preferred pickup line. What a time.
Speaker 2:That's why, of course, why I asked you, may I podcast with you?
Speaker 1:May I podcast with you? In other news, Dario from Anthropic went on sixty minutes and gave a number of interesting answers. The one thing that stuck out to me, and I'd love to know if anything else stuck out to the rest of you, but previously, he was the the the quote that came out of Anthropic was half of all white collar work obsolete by some timeline, five or ten years. And and the twist the thing that stuck out in my mind was it was half of all entry level white collar work being automated by AI, which felt like a step back in terms of, like, a a g I ness. What do you think, Tom?
Speaker 3:Yeah. I mean, I I feel like we have to look at the exact
Speaker 1:Original quote.
Speaker 3:Because this is one to five years.
Speaker 1:Okay.
Speaker 3:This is next year. Yeah. Half of all white color.
Speaker 1:He's so bullish. I love him. He's he's so bullish. But, yes. I I don't know.
Speaker 1:I mean, yeah. It is it's an interesting quote to match with that that that Dalian post about what's going on with the younger, the current generation programming ability, the AI induced thinking skill decay that's begun. Maybe you don't need the skills because, you know, AGI is coming. Why build skills when you can just say, do it for me. Don't make mistakes.
Speaker 1:Yes. Half of all AI could wipe out half of all entry level white collar jobs and spike unemployment. Let's play this clip. Let's play this clip from Anderson Cooper.
Speaker 2:Spike unemployment to 10 to 20% in the next one to five years. Yes. That is That's shocking.
Speaker 4:That is that
Speaker 11:is the future we could see if we don't become aware of this problem now.
Speaker 2:Half of all entry level white collar jobs?
Speaker 11:Well, if we look at entry level consultants, lawyers, financial professionals, you know, many of kind of the white collar service industries, a lot of what they do, you know, AI models are already quite good at. And without intervention, it's hard to imagine that there won't be some significant job impact there. And my worry is that it'll be broad and it'll be faster than what we've seen with previous technology.
Speaker 1:You did It's such a funny thing to say because it's like you're the one doing it. I still don't get that. It's like and that's why I up every day. Like, what what is his proposal? Does he actually have a proposal?
Speaker 1:Is it UBI or something?
Speaker 3:The the the other
Speaker 5:What is his proposal?
Speaker 3:Here is actually even better. He says Yeah. I'm deeply uncomfortable with these decisions being made by a few companies by a few people. He says, Dario Mode, CEO and co founder of AI company Anthropic. It's Lee.
Speaker 3:He's talking about himself.
Speaker 2:It's me. It's me, Dario.
Speaker 1:Oh, well.
Speaker 3:He has to bring peace and safety.
Speaker 1:Peace and safety. That is wild. Okay. Let's read this post from Dwarkash to close out. He says, people with short timelines sometimes shrug off models' inability to perform basic economically useful tasks end to end by saying, oh, but we haven't trained models to specifically do those things.
Speaker 1:But this misses the point. Human workers are valuable precisely because we don't need to build bespoke schleppy training loops for every small part of their job. Every day, you have to do a 100 things that require judgment, situational awareness, situational awareness, and skills and context learned on the job. These tasks differ not just across different people, but from one day to the next even for the same person. It's not possible to automate even a single job by just baking in some predefined set of skills, let alone all the jobs.
Speaker 1:People will sometimes debate how much progress have we made so far between village idiot and AGI? And I'm just thinking, what the f are you guys talking about? The models are currently so much dumber than the village idiot. Village idiots generally generate trillions of dollars in wages a year. Taking shots at the village idiot.
Speaker 1:These models generate 30,000,000,000 in revenue a year. That's a good take. That's very funny. Who's the who's the real village?
Speaker 2:Idiots are underrated.
Speaker 1:Who's the real village idiot? It's the AI models. In fact, I think people are really underestimating how big a deal actual AI AGI will be because they're just imagining more of this current regime. They're not thinking about billions of human like intelligences on a server which can copy and merge all their learnings. And to be clear, expect this, aka actual AGI, in the next decade or two.
Speaker 1:That's crazy. I completely agree. It is crazy. I've been recently What else is in here?
Speaker 2:Another post here, Moustafa over, CEO of Microsoft AI says, already our Fair Fair Water data center in Atlanta has taken over 15,000,000 labor hours to build. Even more once it's fully finished. For comparison, the Empire State Building took seven million. And Elon comes in ratios him and said, are you sure you're doing it right?
Speaker 1:Oh, it's so ridiculous. Okay.
Speaker 2:Well Let's let's do a lightning round for just just another pod guy who I invited on the show a while ago.
Speaker 1:That's good.
Speaker 2:He's worried about In Docs. Exposing himself. But he says themes for 2026 in no particular order. AI trade intensifies. Panikins gets steamrolled.
Speaker 1:Believe it.
Speaker 2:Humanoid robot production ramp. I guess we're seeing that with UB Tech. Robotaxi accelerated rollout. Starlink capacity ramp with Kuper fast follow. SMR nuclear d reg and pilots.
Speaker 2:Federal warp speed for The US electrical grid and pharma APIs. Drone US manufacturing ramp, enterprise software spend, shifts towards AI at cost to traditional SaaS. He's a SaaS bear. AI models go true multimodal and crank engagement levers. Grand bargain with higher ed to restructure system in exchange for student loan forgiveness.
Speaker 2:Federal housing program that attempts to free up supply, likely fails as soon as home prices drop by 2% and boomers riot. GLP one adoption and second order impacts accelerate with recent price drops. AI for drug discovery becomes a hot topic, and naysayers will rush to downplay but will look stupid before the year is out.
Speaker 1:I This is so crazy. There's so many predictions in here. People forget about quantum. Panikins realize that auto loan DQs were a nonevent driven by illegals defaulting. Panikins pivot to pivot to attempting to quantify systemic risk, like, blah blah blah blah.
Speaker 1:It keeps going. Yeah. It it gets it gets
Speaker 2:steadily wilder wilder and wilder, but we'll check back on
Speaker 1:this next year. Decouple from China. Very funny. Anyway, I think that's good for today. Martin Scarelli also has some data on institutional trading of private market stocks.
Speaker 1:The team's laughing because we just keep going. And
Speaker 2:Just one more post.
Speaker 1:Alright. I'm laughing at it many times. You said one more post. To close it to close it out, you gotta update the ramp figure in his data because ramp raised an up round. Let's go.
Speaker 1:Well, thank you for watching. Thank you for listening. What you got, Tyler? Wait. One last thing.
Speaker 3:Okay. Tyler Cowen on Marginal Revolution, he said there's no great stagnation, not anymore.
Speaker 1:Interesting. It's official.
Speaker 3:Wrote the famous book.
Speaker 1:Yeah. Wait. He wrote the famous book?
Speaker 2:What book?
Speaker 3:His book, A Great Stagnation. That's Wait.
Speaker 1:Oh, I I I
Speaker 3:That's Tyler Cowen.
Speaker 1:Yeah. I didn't realize that he wrote a book on the great stagnation. I will have to Yeah.
Speaker 3:The Great Seignation from 2011.
Speaker 1:Very cool. Well, it's over. It's been officially declared over.
Speaker 2:See you.
Speaker 1:I'm excited. Let's dig into that tomorrow. Let's figure out what metrics he's using, what his GDP assumptions are. I wanna know more about that piece, but I wanna read it before we get on air. Thank you for tuning in.
Speaker 1:Great show today. Have a good evening. We'll see you tomorrow. Goodbye.