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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.
Speaker 2:This went insanely viral. The CEO of a company called Astronomer, was caught on the kiss cam hugging one of his employees, the head of HR.
Speaker 1:Oh, look at these two. Alright. Come on. You're okay? Uh-oh.
Speaker 1:What? Either they're having an affair or they're just very shy. And I said
Speaker 2:But Chris in the video, Chris Martin is like, something's going on here.
Speaker 1:I said startup CEOs can't even hug their chief people officer at a concert in this country anymore. It
Speaker 2:is crazy when the Internet descends on a current thing, how viral it is. Like, just you have to jump in on the current thing.
Speaker 1:Well, before we talk more about this
Speaker 2:Yes.
Speaker 1:I wanted a quick word from our sponsor. ASTRO by Astronomer is the orchestration first data ops platform built on Apache Airflow, empowering your team to build, run, and observe data pipelines that just work all from one place.
Speaker 2:Do you do you believe the conspiracy theory? Put on the tinfoil hat.
Speaker 1:Yes. So do Will you
Speaker 2:steel man the tinfoil hat? What what is the tinfoil hat explanation here?
Speaker 1:Tinfoil hat explanation here is
Speaker 2:All press is good press?
Speaker 1:Is that Nathan for you, this is just part of an elaborate stunt.
Speaker 2:Yes.
Speaker 1:And Nathan's plan was have the CEO get caught having an affair with a coworker to increase brand awareness and get a buzz going. This was Charlie Light over on X.
Speaker 2:Definitely got a buzz going.
Speaker 1:Yep. A lot more people know about Astronomer today.
Speaker 2:100%. 100%.
Speaker 1:But hard to see how it would have been planned. There's been a bunch of jokes. Ryan Peterson said, Boards should give them a raise. Without this viral moment, I'd never know that Astronomer is used by enterprise clients to manage Apache Airflow and achieve 70% higher uptime than self managed airflow. So lots going on today.
Speaker 1:Alex Cohen says, imagine losing half your life savings at a Coldplay concert.
Speaker 2:Why half? Oh. Because he's gonna get a divorce. Okay. I thought was about him getting a
Speaker 1:It's very sad. I thought
Speaker 2:was a vesting joke.
Speaker 1:These are adults that made their own decisions.
Speaker 2:Yeah.
Speaker 1:And they now have to live with the consequences. But I doubt either of them would have would have paid, half their net worth for, those tickets.
Speaker 2:Yeah. Rough. Very, very bizarre. I was reminded of what Emily Sundberg told us when she came on the show. I was asking her how the Hamptons has changed since the era of social media, the the age of the Internet.
Speaker 2:And she said that there are so many TikTokers documenting everything that happens in the Hamptons now that you can't even leave a party with someone else's wife. That's what she said to us. Do you remember this? Yeah. And I'm wondering, like, what does this actually mean for birth rates?
Speaker 2:What does this mean for like, this seems predictable at this point. This is the first one that's happened. I've seen these in their videos.
Speaker 1:Having debate this morning, which is that find my friends is the best thing to happen to
Speaker 2:marriage is
Speaker 1:monogamy. Yes. Potentially ever. Yes. Because if you are in a committed long term relationship and you do not want your partner to have visibility into your whereabouts, you can make a pretty bad argument for privacy.
Speaker 1:Yeah. But it ultimately, it doesn't, it's really hard to stand behind. And so I think it's potentially a really positive force against social media
Speaker 2:Yep.
Speaker 1:Dating app culture and things like that. Yeah. So the answer to technology problems is more technology.
Speaker 2:More technology maybe. Yeah. It was like this it's this countervailing force because, like what what was it? Like, Instagram is, like, constantly flooding you with, like, recommended, like, look at this girl. Look at this random person.
Speaker 2:Look at this thing. Look at the you know, like, go down this rabbit hole and then and then find my friends is maybe pulling you back. But, I mean, he probably told he probably said I have to go for this for work. Yeah. This is client.
Speaker 1:This issue.
Speaker 2:Doesn't really fix this issue. Lulu The KISS does. The KISS cam is a Linde technology. Lulu had
Speaker 1:some advice. She says, just given out priceless
Speaker 2:Yeah. Pretty much.
Speaker 1:Crisis comms for the, astronomer team. She says, don't bother with crisis comms here. The CEO will try to get you to protect him, but it's not his company. He's a temporary steward. Your job is to protect the company.
Speaker 1:The CEO is a professional manager who's only been there two years. The HR person has been there less than a year. Neither is tied to the identity of the company. Preserving trust is more important. Your business model is to handle sensitive data and your priority is scaling and that's tough to do when multiple known lie with multiple known liars on the senior leadership team.
Speaker 1:A better comms plan than trying to save the situation. Andy Byron is on the board, but he's not a founder. He doesn't have control. The other five members should replace him. You can then use the new CEO announcement as a reset and get people to focus again on Astronomer's actual business instead of its drama.
Speaker 1:So we did reach out to Andy this morning to see if he wanted to tell his side of the story. Felt felt like an extremely you gotta be a little bit crazy like Soham to want to come on Yep. After you the current But in this case, we should have the new CEO on of Astronomer whenever that comes. So there's a poly market today
Speaker 2:Mhmm.
Speaker 1:On whether he'll be out by the end of next week. Odds are currently sitting around 38%. Mhmm. I would not be surprised if there's somebody new stepping into the CEO role at the company. This seems to have been a way way bigger than just the current thing on X.
Speaker 1:It seems to have really broken containment.
Speaker 2:Is this a Databricks competitor? Like, Apache Airflow is it says open source workflow orchestration platform used to programmatically author, schedule, and monitor data pipelines. I wonder if their business is just exploding. DAG directed Quite
Speaker 1:the lineup of investors. They've got Bain Capital Ventures.
Speaker 2:Let's go.
Speaker 1:Just led a series d D. This year into Let's go. Into astronomers. So let's hit the size Go.
Speaker 2:That. It's probably fantastic business. And then
Speaker 1:Insight is also Okay. Led the series c in March. Yeah. So pretty Venrock was in the series a as well. And then Sierra Ventures, who I'm not familiar with, has led a couple different financing.
Speaker 1:So, yeah. This this business has been around for a while. They're gonna get through this. I'm sure that Bain Capital and Insight and the other members of the board are already figuring out who they can get to step up and run this company.
Speaker 2:Yeah. There just seem to be some sort of line between, like, bizarre, salacious, but ultimately, orthogonal to the core business drama and, like, actual core business drama, like some fundamental flaw in the business plan that's exposed. FTX or Theranos versus just this, like, you know, drama that's happening here. I I keep I keep laughing about that that that analogy we go back to where if you found out that, you know, I think what what do I have? I have what what are Pilot Sport tires?
Speaker 2:Is that Bridgetown? Michelin. Michelin? Michelin tires? So if the if if you told me that the CEO of Michelin was was caught at a Coldplay concert with the head of Michelin HR, it would be a tall order for me to go get new tires.
Speaker 2:Right? I'd be like, the tires work pretty well.
Speaker 1:Yeah.
Speaker 2:That issue doesn't really affect my tires.
Speaker 1:It's more it's more so that the the difference here is that being caught is different than being on the KISS cam and getting a 100,000,000 views today. My post alone has a million views. And I posted it a few hours ago.
Speaker 2:But do you think do you think it's it's it's going to actually affect like revenue I
Speaker 1:don't think it will the business at all necessarily. Maybe a little turbulence because of needing to find new management and
Speaker 2:having Certainly stressful weeks of dealing with stuff.
Speaker 1:On the the on the exec team is gonna be a challenge. Mhmm. Ultimately, their customers are not going to, you know, say, hey, we're we're turning off. You know, we we want out of our contract. If if the product is good, maybe some people use it as an excuse.
Speaker 2:Sure.
Speaker 1:But, yeah, I don't see this affecting the business. But then again, it's like, if you're Bain Capital or Insight, do you really want, do you want a a he came in two years ago. Sounds like he's been executing. The team has been executing well. If they got from series c to d over the last couple of years, it means they're they're probably growing nicely.
Speaker 1:But and and I don't necessarily think that that this is the end of this guy, either of their careers.
Speaker 2:Yeah.
Speaker 1:It just should be the end at this company. Yeah. Because if because if you're the board and you and you tolerate this, that just means, yeah, we we tolerate people of, you know, poor moral character.
Speaker 2:Sure. Yeah. Also interesting, I mean, this company's, like, never even heard of it, and it's on an absolute terror series d at this point. And does this not sound like something that should be in the AWS dashboard? Like, we were talking about browser based yesterday getting, like, quote unquote copied.
Speaker 2:And there's just something about these, like, point solutions that just are are, you know, nailing a specific problem. You know, in this case, it's like deployment deployment and management of an open source project. It's literally anyone can just run Apache Airflow. They just help you do it better. And that's kind of what, Databricks did with Spark.
Speaker 2:Like, Spark's an open source project. Now they now they for these data pipelines, now they help companies actually install, manage, run them, and then put a bunch of software on top of it. And Databricks has been massively successful. And so it's it's interesting to bring it back to Brazzarbase because it just kind of reveals that like these companies can be kind of grinding in silence for a while. Just I guess the note for Paul Klein is probably stay out, avoid being the current thing.
Speaker 2:Like, because the the the failure mode could could be less technical and more interpersonal.
Speaker 1:Yeah. I don't know.
Speaker 2:True. Anyway.
Speaker 1:Work, retire, die may have been inspired by my post. Okay. Or it could have been totally random. He said married CEOs can't even hug and romantically sway with their married head of HR during a Coldplay concert anymore because of woke.
Speaker 2:Oh, because of woke. Okay. Yes. Yes. Yes.
Speaker 2:Are there is there anything else to cover on the
Speaker 1:Sophie NetCap Girl says it's so hard to get noticed as an AI company these days. The astronomer CEO had to cheat on his wife for marketing. Yeah. It's dark out there.
Speaker 2:I don't think I'm not believing the tinfoil hat one on this If
Speaker 1:you've been living under a rock
Speaker 2:Yes.
Speaker 1:Grock launched a NSFW anime mode to the app, audio and visual. Mhmm. And I I believe it's part of their it's part of the paid
Speaker 2:tier box for $300 a month, something like that. There's a report in Wired about this. I wrote about x AI from Kylie Robinson, who's been on the show. I wrote about x AI's new creepy waifu bot and its even weirder companion Rudy, which has a bad version that told me all skull f your deed blah blah blah. Very vulgar.
Speaker 2:Not not family friendly. Not approved for this show. When I asked what you thought of Musk, it referred to him as Lord Elon and said he's a galaxy brained egomaniac. I can't even read this. It's all bad words.
Speaker 2:But anyway, I am I've been thinking about this and I and I think that there is an interesting steel man argument that we should go through. We should talk about it. So in general, I think that x AI's Grok strategy is a little bit all over the place. So they're trying to be super quantitative and benchmark build. I'm serious.
Speaker 2:They are. They're they're they're super benchmark build. They're like, look, Arc AGI, the insiders inside the most insider AI test you can possibly have. Yeah. We have the best score on it.
Speaker 2:We're on LM Arena. We're, you know, we're we're we're, you know, maxing out all these different benchmarks.
Speaker 1:That's right.
Speaker 2:So it's like and it's like, it's this incredible engineering effort to build the 100 k cluster. Like, they're clearly hiring great talent. I think Jordan keeps laughing seeing the the
Speaker 1:I'm just I'm not gonna look at you.
Speaker 2:The steel 100 k.
Speaker 1:I'm not gonna look at you. That'll help me
Speaker 2:So they're very they're very benchmark built. But then they're also trying to do this, like, sassy and anti woke thing in the in the in the post replies, and, like, the fine tuning on top of that was so crazy that it spawned, the Mecca Hitler thing. Yeah. So it's, they're they're they're they're kind of, like, all over the place. One is, like, super quantitative, super focused, super benchmark pilled,
Speaker 1:like, just the best kind of edgelords internally.
Speaker 2:Yeah. Well, it's like it's almost like two different extensions of the product. Right? Yeah. Two different teams building towards two different goals.
Speaker 2:One is just, like, the most beautiful, like, solve physics, solve math, like, the the create, like, a great
Speaker 3:AI product.
Speaker 2:Yeah. The pursuit of truth, all that, like facts and usefulness and tools. And then on the other side, it's like it's like fight this culture war thing, which is like a very different battle to be fighting. And then and then we saw this last week after the launch. There was there was a new there was news that everyone was memeing because it seemed like it was very, very opposed.
Speaker 2:So one was that Grok had signed a contract with the Department of Defense that's like as serious as you can get in AI. It's like OpenAI has one of those contracts, I believe Anthropic, Palantir, and then Grok, which is like this from the outside, like, seems like a chaotic, like, product.
Speaker 1:As soon as it was born on something like 4chan.
Speaker 2:Yes. Exactly. All of a sudden, like, the DOD is going be adopting that. Like, what does that mean? And then simultaneously, there's like they're getting into the romantic companion market with this anime theme.
Speaker 2:And so AI companions, I think the general mood in tech is that it is a very dark thing. Like, people get addicted to them. They become less social. They stop interacting with real people. They don't have kids.
Speaker 2:And then the population collapses and humanity ends. Like, that's the bad ending to the to the AI companion narrative. Now
Speaker 1:And to be just to give you some context, there's a variety of companies that do this today. Exactly. Varying levels of vulgarity.
Speaker 2:Yep. Replica. We've actually talked to founder and she had a bunch of nuance around it. So I I don't
Speaker 1:And just think for context, so Replica has over 225,000 reviews in the App Store. Are definitely using it. Were very early to this. Character AI was also early to the AI companion space, has tens of millions of users. Mhmm.
Speaker 1:It's one of the biggest websites in the world Yep. Still. And so anyways, there's a variety of players in the game. But what's interesting about Grok is when you look through the other labs from LAMA to Google or or sorry, Meta Superintelligence to to Anthropic to OpenAI, Nobody has been willing. Everybody knows that this is a use case that there's an obscene amount of demand for.
Speaker 1:But no one else, had the guts to go and do it. At least a player that had billions and billions of of of dollars Yes. To deploy against a strategy like this.
Speaker 2:I believe at this point, every other company that's playing in the companion space is not should not be considered really like a mega scale research lab in the sense that they're not raising billions of dollars anymore because Character went through that zombie aqua hire that probably cut off the capital canon
Speaker 1:Yeah.
Speaker 2:Such that even if the RemainCo employees the ghost ship, I don't wanna call it I mean, it's kind of rude to call it a ghost ship because it seems like the employees at Character AI are, you know, running it and But doing it doesn't seem like the new CEO of Character AI will be able to go out and be like, I'm raising $5,000,000,000 to build a one gigawatt cluster, and I'm gonna buy a 100 KGPUs to train my own model. Like, character will be on top of it. Trying
Speaker 3:to just
Speaker 1:run it profitably Yes. And make a great user experience.
Speaker 2:Yeah. And so you'll always have this kind of this kind of back and forth with, like, your API provider because the API providers, the Foundation Labs, they care about their brand. They care about how they're perceived in as being ethical or moral. And so they might not want to offer that even at the API level. So what's interesting, and this is where, like, the steel man comes in.
Speaker 2:So the the worst possible outcome for AI companions, very dark people, you know, it basically reduces the coupling rate. But we've already seen a decline in in birth rates. So it's not so it's unclear if it's like this is a new thing that will accelerate it. This is status quo. Anyway, I think I think that's kind of like where
Speaker 1:we'll Well, yeah. The concern would be like pornography has existed as long as the Internet.
Speaker 2:Online dating is another
Speaker 1:thing As long people are skeptical as the Internet has existed, I'm sure that has led to some not so great outcomes. Yeah. The concern is that companions that are real time and adaptive and really mimicking a human would create even worse behaviors than
Speaker 2:Yes. Think NSFW content.
Speaker 1:And and
Speaker 2:I think that's a reasonable point, although it hasn't been borne out in, like, data or any sort of, like, research at this point, but it feels intuitively reasonable. But let's actually think more about the market because in order to scale your lab, we know that you can't do it as a nonprofit. We know that it's not just a $100,000,000 donation one time, a bunch of geniuses working, you come up with the elegant algorithm for superintelligence. You need scale. You need capital.
Speaker 2:You need talent. And ultimately, you need a capitalist flywheel, a corporate a for profit corporation that's increasingly getting more users, putting that into user adoption to get more users, to get more data, to train the model, to refine the product. Save and save the world. And yes. And then yeah.
Speaker 2:This is where I'm going. And then and then also raise more money. And then if you're gonna raise money at a certain level, there has to be a financial, like, model that math math's out. Now it can be kind of funky, like 1% of AGI, but there are still on the margin many investors in Foundation Labs that are underwriting, you know
Speaker 1:Well, was asking
Speaker 2:the question last week is At a multiple of earnings.
Speaker 1:Well, yeah, where is Grok's revenue going to come from? ChatGPT has a great consumer business.
Speaker 2:Would say OpenAI has a great cogen business. Yeah, I would say OpenAI has dominated and owns knowledge retrieval. Anthropic owns cogen, and they both have kind of flywheels that are accelerating. And now they're obviously fighting it out. Anthropic would love the Claude app to become really popular, and ChatGPT would love to have their cursor competitor or their clogged code competitor, Codex Codex.
Speaker 2:Really, really take off. Maybe that'll happen. They're duking it out. Meta is building on top of the world's biggest social networks in the world. They have three of them, really, Facebook, Instagram, and WhatsApp.
Speaker 2:So they have a ton of data that's accumulating and firing back, and they have tons and tons of cash cash flow coming in from that so they can justify new CapEx internally without raising
Speaker 1:Meta's one of the they had launched AI Companions, but it was like talk to Dwayne Rock the Johnson or Dwayne Rock Johnson. Dwayne
Speaker 2:Dwayne Rock the Johnson. Dwayne
Speaker 1:Dwayne the Rock Rock Johnson. And I don't and I think that product flopped back in the day. I remember because Dara at Delphi saw the launch and he was like, dang it. That's annoying.
Speaker 2:At the same time, saw some screenshot that showed that there was an Instagram account that was owned by, like, Meta AI that was just cow and it had, like, millions of interactions. So, like, maybe people want to talk to just a cow more than
Speaker 1:they want to talk to I I think that's very possible.
Speaker 2:So so but but yes. But at the same time, I think that the Meta super intelligence team is aware of the issue that will come from the inevitable New York Times profile on, like, if it's truly, like, anime waifu romantic companions, that's a step further than Cow or The Rock. Right? One thing was remember the John Cena thing we covered? How someone had jailbroken the John Cena Instagram AI and made it, like, romantic.
Speaker 2:Remember this? Yeah. So, like, I think meta is, like, is, like, we're fine ceding that territory. Like like, we don't need to play in that. Just like they don't need to show NSFW content on Instagram.
Speaker 2:They're like, we're fine losing the market, seeding that market to to OnlyFans on a on an ethics basis, we think that it makes our company more valuable overall. It makes it more hospitable to our advertiser community.
Speaker 1:And so the reason that just to just to kind of bring us back to why this has been such a hot topic is that Elon Musk has has posted many many times about the under population crisis, the birth rate crisis. He said, Scheele highlighted a post from 2022, a collapsing birth rate is the biggest danger civilization faces by far. So the steel man is that Elon is doing something about it. Yes. Right?
Speaker 1:Saving a lot of children.
Speaker 2:But in oh, but but but this the real steel man about Grok romantic companions is that how will they actually increase the amount of humans in the world? How will they reverse the population? That's the hardest argument to make, and that's why
Speaker 3:I'm wearing
Speaker 2:the steel helmet because it's very hard argument to make, but I have one. So
Speaker 1:And Sheel Yes. For the record, is saying, I think Rock Companions is probably accelerating population collapse.
Speaker 2:Yes. So as the Steelman, I'm going to be debating against Schiele.
Speaker 1:So Get ready, Schiele. Get your straw man hat on.
Speaker 2:Last of the labs, Google, they're building on top of the biggest search engine, and they also have YouTube. And Google, you also know, is not going to go into Romantic Companions. So XAI needs this user flywheel, and every other lab has self selected out of competing in the companion space. We went through some of these. Google famously skipped the Character AI product in favor of the team in their zombie acquihire, Paul Graham.
Speaker 2:And so this is all about, in my mind, as the steel man, counter positioning. So you remember Avi Schiffman was releasing the a new hardware device, an AI friend. Right? And he was everyone was saying you're gonna get steamrolled by Apple. Like, if you try and come out with a company with a product that is in fact a new device that fits within the Apple ecosystem and it's leveraging the the Apple branding world, you will just immediately get cooked by Apple because they will just eventually launch a better version and they'll have better supply chain, better pricing, all the different things.
Speaker 2:You'll have the full integration. Like, you you can't go after them that way. And so Paul Graham replied to Avi Schiffman and said and said, here's how to compete with Apple and hardware. You have to build something that contradicts their fundamental assumptions. For example, imagine if you built a device whose appeal was that you could customize the case to make it as tacky as you wanted.
Speaker 2:Apple would hate to follow you there. So no other lab wants to follow x AI into the romantic companion market for brand and ethics reasons, But there are users who will pay real money and share real training data for romantic companions as a product. And so if you want to sell the most number of Grok subscriptions, at some point, you will be and so this is where we get back to how it affects the birth rate. So if you want to sell the most number of Grok subscriptions, at some point, declining birth rates are going be a problem You're for going to hurt your business. Yeah.
Speaker 2:And so you're going to have to think about And right now,
Speaker 1:for context Yes. Grok is blowing up in Japan. Yes. It is the number one free app on the Japanese app store. Is above ChatGPT and all the different local products that I can't read the names up.
Speaker 1:So it is dominating in Japan. It's hit in Japan already.
Speaker 2:Yes.
Speaker 1:And it's not it to me, it's not hard to imagine this product finding a million people in the world that will pay the ultra premium plan. Yes. And that is billions of dollars of revenue.
Speaker 2:Yes. And so, at some point, if Grok gets big enough, and the population's declining, and it's and Elon looks at what the Grok product is doing
Speaker 1:Saying what have I done?
Speaker 2:He will say, I need to pull people back from the abyss. I need to actually use my super intelligence to increase the birth rate. How will you do that? Well, we've talked about this before. Someone in some woman is talking to a male companion, AI, and some man is talking to a female AI companion and they're very similar.
Speaker 2:And Grock says, why don't you two meet for coffee in the real world? And so they actually meet and it basically turns into the best dating site that actually gets people to get off. It's a stretch. It's why I'm wearing the Steelman helmet. But I think it is possible.
Speaker 2:And I think the economic incentives might be there. I think this is the same reason why you don't want to over optimize a social network for slop and brain rot because people will churn. Like, you might be able to keep the time on-site going for by showing, like, horrific videos. You can't look away. Oh, it's so controversial.
Speaker 2:You're miserable. And you might be able to keep someone on and say they were gonna use the app for fifteen minutes. You keep them on for an hour, but then they're like, you know, I need one of those apps to monitor my screen time. I need to uninstall it. Maybe I'll and then if they do that, they can actually quit it.
Speaker 2:And if they actually quit, then you lose them as a user forever. So there's this balancing act between between giving people enough brain rot to keep them on the site as much as possible and not losing them forever. And the same thing happens in romantic companions. Like, you want to give them the companion that, like like, they pay for and they're happy with, but not so you don't wanna make the companion so good that they don't reproduce and then the second the next generation doesn't exist for you to sell them subscriptions.
Speaker 1:Fortunately, John, businesses tend to think in quarters and yearly
Speaker 2:It's private company. Elon owns a lot
Speaker 1:of it. You think he's thinking about the next generation?
Speaker 2:That is the steel man.
Speaker 1:No. I mean, the the the I can I believe this will be by far the largest revenue line item for x AI within if it's not already? I mean, already might be a stretch. They have some big contracts. But this is a $300 a month plan if you want, you know, unlimited access to your, Grok companion.
Speaker 1:And Elon was demonstrating too it it can even help you study for school. So, imagine a companion that's not just a maybe a romantic friend, but also can help you pass your algebra test.
Speaker 2:Well, that concludes
Speaker 1:the Steelman segment. Steelman segment.
Speaker 2:And I'm back to the normal world. Great.
Speaker 1:Great work. You know, keeping a keeping a straight face and really really getting out your
Speaker 2:The Steelman I think this is I think it's valuable to to to interrogate this stuff. I think it's interesting.
Speaker 1:Yeah. The other the only other thing that I would add is the unique thing about this launch is that there has never, you know, clearly, many people around the world spend money on OnlyFans or other, NSFW content. And but Elon has never created a product for those type of people. And so I think the sort of latent demand that would would feel maybe above Yep. You know, paying for for OnlyFans or something like that, likely would would give themselves, like, the pass on something like this.
Speaker 1:To be like, oh, I'm just, it's just one of the Elon companies. I'll sign up for it. I I trust I trust Elon. I have a Tesla. And then suddenly, there's like an entire new market of people that are willing to, you know, put their credit card down and pay for something that previously they wouldn't for a variety of reasons.
Speaker 2:Totally.
Speaker 1:Yep. This will be one to follow. How's it doing in The US App Store?
Speaker 2:Oh, no. I mean, it's all most of my Grok interactions are within Axe. My primary use case is still I see a post and then I go and I click on the little Grok button and it explains exactly
Speaker 1:what's going on. Two app. It's still behind ChatGPT.
Speaker 2:In productivity?
Speaker 1:In productivity.
Speaker 2:I'm surprised it's still in it's funny. It's in productivity. I'm I'm actually surprised it is in productivity because X is famously in news, not in social networking. And so X will typically be at the top of the news subcategory because it would be much harder to compete in the product in the social networking networking category category against against Instagram Instagram and TikTok. And so better to be a big fish in a small pond in some in some way.
Speaker 1:Cognition has signed a definitive agreement to acquire Windsurf.
Speaker 2:Let's go.
Speaker 1:The acquisition includes Windsurf's IP, product, trademark, and brand, and strong business. And above all, it includes Windsurf's world class people.
Speaker 2:No way.
Speaker 1:We've privileged to welcome Really? Our team.
Speaker 2:They they don't hold hands to me.
Speaker 1:We are also honoring their talent and hard work in in building Windsurf into the great business. It is today this transaction is structured that 100% of Windsurf employees will participate financially. They will also have all their vesting cliffs waived What? And will receive fully accelerated vesting for their work to date.
Speaker 2:Let's go.
Speaker 1:At Cognition, we have focused on developing robust and secure autonomous agents while Windsurf has pioneered the agentic IDE. Devon and Windsurf are a powerful combination for the developers we serve. Working side by side will soon enable you to plan tasks in an IDE powered by Devon's code base understanding, delegate chunks of work to multiple Devon's in parallel, complete the highest leverage parts yourself with the help of auto complete, and stitch it all back together in the same IDE. Cognition and Windsurfer united behind a shared vision
Speaker 2:It makes so much sense.
Speaker 1:For the future of software engineering, and we've never and there's never been a better time to build. So, there's a video up between, Scott, Wu and Steve over at Windsurf. And we're hoping to have them on the show later today if we can coordinate together.
Speaker 2:Oh, that'd be awesome. Yeah. That'd be great. Cool.
Speaker 1:So anyways, this, apparently Scott got to work this big Friday. And not only negotiated, I mean, to do this kind of deal during all of the chaos. Yeah. This other deal that's happening. Yeah.
Speaker 1:And then put together a deal that delivers a win for every member of the team.
Speaker 2:That's amazing.
Speaker 1:And the other thing that's interesting here is, you know, historically, Cognition had, I wouldn't say overinvested in engineering, but they were heavily heavily skewed towards technical talent.
Speaker 3:Sure.
Speaker 1:The people that got left behind at Windsurf were sales, account management, GTM, right? That's crazy. Over the weekend I'd heard other teams that were kind of circling, wanting to hoover up their GTM team. But the fact that they were able to get this deal done in just a couple days is fantastic.
Speaker 2:This is incredible. So Wow. What a fantastic end to the story. Or a beginning. New beginning.
Speaker 2:Yeah. New beginning. New beginning for sure. I don't even know if we should go through the full history here. We can kind of go through whatever.
Speaker 2:But, I mean, you kind of know the end of the story, but I think we should take you through some of the debate that rose up. And there's still the question of, like, even though it feels like everyone got the good ending, there still is this question about, like, we're in this weird zombie structure era where you can be left in limbo. What is the cost of that? What is the what is the risk to that? Do we need new employee contracts?
Speaker 2:Do we need new understanding of how of expectations? Yeah. Because it's one thing for a CEO to say, hey. I'm I'm building I'm trying to build something really cool in Silicon Valley. I'm gonna build a tech product, and I want you to join me as a salesperson, operations person, an engineer, whatever.
Speaker 2:And we're gonna go on this journey where you can go really hard, and we're we want you we all wanna be aligned like, thinking long term. So we're doing a four year vest with a one year clef, pretty standard. And the expectation, at least the history, has been like, you will have clarity throughout that process. And now that we're in this weird, weird regime, like, you're getting like, okay, the last, the end of the, the last chapter of the book could be really dramatic. But we got the good ending, and the question is like, has there ever been, if this deal kind of exposed the risk of like the bad ending and that it is possible that that could happen.
Speaker 2:It didn't in this case. But the big question I think people are debating is like how much of this is due to the chaos? How much of the chaos is a function of FTC and and the antitrust regime? And Ben Thompson talked about that a lot versus just the differences in communication styles of different mag seven companies. That's interesting.
Speaker 2:The experience of CEOs, like, you look at the way Scale AI handled it, Alex Wang is he's a generational communicator. He's been on Theo Vond. Yeah. Yeah. Different dynamic too.
Speaker 2:But it sucks
Speaker 1:lead in acquisition. Totally. Having that founder mode confidence, fully in control of the And, you know, everything we've heard from various parties says that Varun was muzzled. But again, like everybody involved should have been saying, how do we avoid making it so that hundreds of people don't feel like they've been, you know, completely screwed? Even for twenty four hours.
Speaker 2:The evidence that was overwhelming. Like, would first like, you were post.
Speaker 1:People were messaging me Friday and Saturday morning saying the Windsurf employees got screwed. Yep. And I was messaging them back and being like, you're misreading this. This is the standard deal And that they've always then the overwhelming amount of more information from high quality sources saying, no, they're screwed. Yeah.
Speaker 1:It it just flipped and I said, okay, maybe maybe they are. Right? And and the key so so now we had this whole other kind of tangent that we were going to go down, is like what happens to the ghost ship. Right? Yeah.
Speaker 1:It could potentially be this like Lord of the Flies dynamic where there's now hundreds of people that are still working on Windsurf, but the competitive pressure is insane. You're losing a lot of your top talent and your founders, are you going be able to keep momentum or is churn going to be crazy? Totally. And then do people try to stay a long time so they can get like a distribution or do some people leave because they want to pursue other opportunities? Yep.
Speaker 1:And now we don't have to debate that because Windsurf is home with Cognition and Scott Wu.
Speaker 2:And you know the best part about that?
Speaker 1:What's that?
Speaker 2:Everyone, all those employees who are now onboarding to Cognition. I know
Speaker 1:exactly what you're gonna say.
Speaker 2:They're getting ramp cards, baby. Because Scott Time is money, save both. Save both. Easy to use corporate cards, bill pay, accounting and a whole lot more all in one place. Go to ramp.com to get started.
Speaker 2:And you know, Cognition has a huge lineage with the ramp team. And so we're very we're very excited for Cognition, we're very excited for Ramp and we're excited for all of the Windsurf employees who landed. Well, this is funny because there's so much that we should that we could go through. I think we should go through a little bit of the timeline of like what actually happened, how people how the debate evolved because it is very interesting. So the the context of like why is Windsurf selling at all?
Speaker 2:And I think this big question, the first one is let's just say hypothetically, you owned 100% of Windsurf last week. And let's say a completely financial investor comes to you, not there's no even like big tech dynamics. It's like Warren Buffett. He calls you up and says, I want to buy 100 of your stake in
Speaker 1:He's which like, these agentic IDEs. I need it. I need I have to have
Speaker 2:one. I have to have one. Yeah.
Speaker 1:I I wanna buy I wanna buy a great business at a fair price.
Speaker 2:Let's do a deal. Yeah. Yeah. So that's the question. Is is like if you were if you owned a 100% of Windsurf, Jordy, would you sell at $2,400,000,000 last week?
Speaker 2:And I think for most people, the answer has increasingly become yes. And there's a few reasons. So the last the last big post that Varun, the CEO of of Windsurf had interacted with on X was this post by Technium who says Windsurf wrecked. And it's a quote of Nick saying, breaking. Anthropic just pulled the rug on Windsurf.
Speaker 2:Windsurf will be cut off direct will be cut off from direct API access to Claude in less than five days. 3.5 SONNET, 3.7 SONNET, 3.7 SONNET thinking. Windsurf never even got direct access to Claude four anyways. And so this has been the question of, you know, how much like, if you are in this, like, wrapper business, I think it's I think it's a great product. I think it's I think it's great.
Speaker 2:I think I'm actually very excited about wrappers, but there is this competitive dynamic with the underlying Foundation Lab, and Anthropic does seem to be more aggressive about where the value accrual will happen. So, you know, if it's fifty fifty by default, all of a sudden, Cursor and Windsurf start pulling 80% of the gross margin dollars from what they're adding on top, well, then the underlying foundation model is going to say, like, hey, like, let's pull this back. Let's make sure some of those credit cards live in our Stripe account. Yeah. And you're not just paying us big API fees.
Speaker 2:And so there's a big debate about this. Cursor had to go through it. Windsurf had to go through it. And Varun responded to this and had and had a good analysis and was and was basically making the case, like, we can get through this. And I think that's true.
Speaker 2:I I I I think there's totally a world where it gets true. But to your you you were saying earlier, like, it is an extremely competitive market. They were not the number one product in the market. That's Cursor and by most accounts. Yeah.
Speaker 2:And so and so they were in a, you know, not a super tough spot. It's a great growing market. It's it's, you know, it's developer tooling. How many how many, you know, database softwares, enterprise SaaS products are on the public market. Yeah.
Speaker 2:There's like there's like like the seventh one is probably worth 10,000,000,000. Right? So it's not like they couldn't have gone higher than 2.4, but 2,400,000,000.0 feels like a great deal for a company, for a product that's one years old one year old, for a company that's four years old and a hypercompetitive space with
Speaker 1:A product that launched less than
Speaker 2:less than a year ago. And your direct suppliers are trying to come for you and getting aggressive. And so this went on Hacker News. Not sure how much you should read into it, but they said, Web Serve is absolutely dead in the water. And while Cursor hangs on for now, all value is going to go back to the models, says Jake.
Speaker 2:In my opinion, other than the Microsoft IP issue, I think the biggest thing that has shifted since this acquisition was first in the works is Claude Code has absolutely exploded. Forking an IDE and all the expense that comes with that feels like a waste of effort considering the number of freeopen source CLI agentic tools that are out there. Let's review the current state of things. Terminal CLI agents are several orders of magnitude less money to develop than forking an entire IDE. Clog code is dead simple to onboard.
Speaker 2:Use whatever IDE you're using now with a simple extension for some UX improvements. Anthropic is free to aggressively undercut their own API margins and middlemen like Cursor in exchange for more predictable subscription revenue and training data access.
Speaker 1:Yeah. So so so the the other context here is this year, Anthropic, you know, Windsurf went from zero to somewhere around a $40,000,000 run rate. Yep. Anthropic this year has gone from the beginning of the year to 1,000,000,000 to $4,000,000,000. And so they, you know, you want to say, they've been running away with the market.
Speaker 1:And Cursor's revenue is equally incredible, although from starting from a smaller base.
Speaker 2:And so this was some of the like, okay, things might be getting tougher from here on out. Yeah. I don't know that I fully agree with that but people were saying this. And then we covered this last week but the meter team did these evaluations where they ran a randomized control trial to see how much AI coding tools speed up open source developers. And what they found was that developers said that they expected products like Cursor and Windsurf to improve them by 20% but they were actually 19% slower.
Speaker 2:And so you have this weird dynamic where, okay, maybe the future is like so I I don't know how real this is. I think that we could totally be in a world where Curse is incredibly valuable for less experienced developers working on more vibe coding projects than like pushing the pushing the frontier of really advanced projects. And then also just the next the next version of these tools could be really cool and solve this problem. But there was some worry that maybe developers were going to take a hard look at their AI coding IDE stack and say, wait a minute, like, I'm kind of using this too much. I'm leaning on it too much, and maybe I should just, like, go back to the old way.
Speaker 2:So there were some reasonable points around, like, maybe now is a good time to exit. Right? Then, so after that, the question becomes when you sell, you have the board has a fiduciary duty to shareholders.
Speaker 1:Yep.
Speaker 2:And the big question that I think everyone was actually debating was this concept of was the Windsurf deal with Google a Pareto improvement for all stakeholders? Which means in a Pareto improvement, basically, you can think of, like, the baseline is how everyone's doing. In a Pareto improvement, some people might go up a lot. Other people might go up a little in in value, but no one is going down. Not a single person is going down.
Speaker 2:This is the goal of, like, all political legislation. You want to create things that are not just positive sum in the sense that, like, you know, I tripled my net worth and you only lost half. Like, that sucks. Right? You don't want that.
Speaker 2:Pareto improvement is like, I tripled, you doubled. Yeah.
Speaker 3:We
Speaker 2:both I won, but we both won and we're both happy. Right? And so in in a in a in a good acquisition deal, everyone is it's Pareto improvement. Everyone gets more than they than they, you know, had before. Everyone gets paid out.
Speaker 2:Then the flip side is something called Caldor Hicks improvement. And a Caldor Hicks improvement is where some people go up, other people go down, but when you sum them, it's still a net improvement. Mhmm. So very few people were saying, like, you know, the VCs, even when you add up the VCs and the employees and the founders, it's a net loss for everyone. Very few people were
Speaker 1:making that argument.
Speaker 2:To be clear, the employees got hosed
Speaker 1:It seems and everything like else to everybody would have done better on an OpenAI everybody would have done better on an OpenAI acquisition. Probably. And so when the 2,400,000,000.0 number came out on the evening of Friday. Mhmm. It seemed like, okay, not as great.
Speaker 1:Yeah. But still everybody's going to do well. Yep. And then twenty four hours later it was, oh, wow. Like, this might have been structured in a very funky way that, you know, people were, I won't report the number, but people were messaging me information on how much Varun personally made and that was still in the
Speaker 2:context I mean, of you can just do the rough math. Found her stake. Couple rounds of dilution. How much do you think he made? Right?
Speaker 2:Like, it's not rocket science to figure this or to at least ballpark it to the right order of magnitude. Right? But you build a great product that gets some traction that solves some problems and you you you build a great team and big tech wants you, like, you you you know, I I I I'm not upset about it. Yeah. But the question was, like, what's fair for the employees?
Speaker 2:What's fair for, you know, all the different stakeholders? And so a lot of people kept coming out with really interesting stories. So William Allen here has one about Scott Belsky and Behance going to Adobe we should read through. Yep. So William Allen says, I don't think he's ever told the story, but it's worth telling.
Speaker 2:When we were selling Behance to Adobe many years ago, Scott Belsky made a spreadsheet of every employee, 32 of us at the time, and personally negotiated each person's title, salary, and incentive structure and made that part of the overall deal terms. I'm going to choke up. It's so virtuous. I heard the phone calls where he went to bat for each individual. He not only didn't have to do this, but it actually complicated some of the other factors in the deal, of course.
Speaker 2:It changed the trajectory of so many people's lives, including my own. Two years later, 100% of that original team was still at Adobe. Even today, a dozen years later, many of the core members are still there building. I was inspired by it then, and I'm inspired by it now. And so I think that was a good a good case study in, like, the founders do have a lot of hard power in the sense of board control and and actual voting shares to
Speaker 4:Yeah.
Speaker 2:Almost every founder can veto a deal, which gives them leverage to build that spreadsheet and actually decide who gets what. And then on the flip side, they have a ton of soft power because you can't really do a hostile takeover of a private VC backed company where the founder has board seats and stuff. It just doesn't work. And so it's incumbent upon the CEO to actually take that step, and that was the fear, that Varun didn't do that, that he didn't go far enough.
Speaker 1:Yeah. There was another there was another example from Parsh, Ilya Sukar's So one of his former employees says, we got news, our startup was being acquired five days before my one year cliff. I thought I'd get nothing. Our shares were accelerated to a 100%. It was a life changing event and I'll always appreciate that our founders did the right thing for us at Parse.
Speaker 1:And said, Ilya Ilya quoted it and said, a 100% acceleration for everyone but the active founders. We went backwards and re vested our vested. Glad someone remembers. Very heartwarming.
Speaker 2:Yeah. And so, people were people were debating, you know, did, like, was the core team taken care of? It feel it felt very rough. But then pretty quickly, it came out that so we were going back and forth on this on Saturday. And and and the core the core debate like your post went pretty viral.
Speaker 2:You got 2,000,000 views, 4,000 likes, and it and it definitely struck a chord. Folks were debating this one line. From what I've heard, the employees are getting screwed regardless of their vesting status. And it's like
Speaker 1:And that was because people had people were on a four year vest. Yes. But they hadn't hit their cliff even if they had joined eleven months ago. Yes. And had, again, they had worked on the product up until launch.
Speaker 1:Yep. Launched the product. Yep. Scaled it. Yep.
Speaker 1:Thought that they were getting this three bit, you know, massive outcome in which, again, some people would have not been able I'm sure OpenAI wouldn't have kept everyone.
Speaker 2:Yeah.
Speaker 1:Right? Totally. I'm sure that they would have made a bunch of people effectively reinvest
Speaker 2:always in layoffs post merger acquisitions like that happens all the time. That's not that's not a crazy thing. So certainly reasonable. I mean, other question is just like, you know, if you worked at this company and you were like, I like working at this company. I I really would love to work at Google and you don't get carried along like that is getting screwed.
Speaker 2:Like not getting a job at Google in some ways is getting screwed. Even just the ambiguity over the weekend is a little bit of like a screwing. And so I still will defend your initial characterization but I thought that there were things that could potentially shift the narrative. And so I quote tweeted your yours with the steel man argument which is one
Speaker 1:And we tried to get a a knight in shining armor suit for We we were getting the steel man suit ready, but then we knew we didn't have
Speaker 2:to We will Production team will get the steel man suit. Knight of suit of armor eventually. We we we need to order from a prop shop. We take Yeah.
Speaker 4:It's on
Speaker 1:the way. We're working on it.
Speaker 2:Yeah. Okay. We're counting and and just make sure it's great when it comes. And so, I had three points. One was that employees who haven't reached a one year vesting cliff don't have that strong of a claim around I built this with sweat and need a liquidity event and we don't know the ten years of all the left behind employees.
Speaker 2:So there is an argument that like if you joined three months before, it was already like really big. Like, should you really get accelerated four years and like Oh, and
Speaker 1:I and I I never would have made that argument. Totally. But it was the fact that you could have worked there for eleven months 100%. And gotten zero. Yes.
Speaker 1:It's like, no, you're getting a ride on the go ship now. Ride the go ship into
Speaker 2:the sunset.
Speaker 1:And that was in the context of the founders and this is why people in group chats and DMs were getting so angry because it was in the context of, you know, somebody that worked for you for eleven months was potentially going to get zero. Now that's not the case now. But, and then and then you're walking away effectively Yep. Defecting Yeah. And and taking a a multi $100,000,000 payday.
Speaker 2:It it it is a weird dynamic with these startups because clearly, I I don't know exactly what Windsurf's headcount was. I think everyone was saying it was around 500 at the time of this deal. And a year ago, pre pivot, what do you think their headcount was? Couldn't have been more than 50. Right?
Speaker 1:Definitely not.
Speaker 2:So you're looking at a 10 x increase in in employees who haven't really been like, they've been on this rocket ship. So I think I I personally think they totally deserve liquidity and accelerated investing, it sounds like they're getting and sounds like they're going to do great. But but it but it is like not the nature of the initial which is, like, one year cliff, four year vest. Like, if it came out that it was, like, okay, they're getting paid out to the tune of, you know, how long they've been there, I don't think anyone would be, like, that upset, but then somebody was making a good argument that basically, like, you when you sign up with, a four year vest, you're saying I'm going to keep working for four years. If you sell the company and put me on some zombie ghost ship, like, I didn't bail, you bailed.
Speaker 2:Yeah. So you so you shouldn't you should accelerate me. And I I I think that that argument
Speaker 1:Yeah, is the other dynamic here was, so when Character AI, when Character AI founders and part of the core team went back to Google, the Character AI became a ghost ship, but it was cool in the fact that they had 20 plus million users. They also had a 100,000,000 on the balance sheet. Yeah. And it wasn't this insanely gnarly enterprise market where and I know people on the character team. Yeah.
Speaker 1:And they were like, it's pretty cool. We have a $100,000,000. We have tens of millions of users. Yeah. And we're just kind of going to experiment to try to find, you know, figure out how to monetize this.
Speaker 1:And I just don't think that that was I I don't see that the code generation market playing in the same way where
Speaker 2:trying to think about that. Like, is there a world where, you know, if the ghost ship had planned had had like stayed a ghost ship and they pivoted, is there some world where they, you know, niche down? Like there was this rumor that they were gonna niche down in b two b. Like, could they have niched down Windsurf into some like niche category and actually had like a pretty durable business? We were talking about like, could Jeremy Kaffan make it work if he acquires it and like turns it into some cash flowing business.
Speaker 2:I just wonder like is there is there a niche where like, I mean we've heard we The example I would give is like, we've heard that like these code gen tools are like particularly bad at like rewriting old programming languages like Fortran for example. So if you created like cursor just for like rewriting Fortran, it's like that's not sexy at all. That's not gonna be hot on on Twitter X but it could be really valuable in like, you know, the bowels of like legacy banking and like Yeah. You could pay, you could charge a bunch and you wouldn't like the TAM wouldn't be very big but the business could be quite good. And and that that that might be a weird outcome but it Yeah.
Speaker 2:It could be a silver lining. Don't know. Anyway, the second point that I made was that, you know, I said the second, the real culprit might be FTC antitrust. This is a hyper competitive market, and Google still feels like they can't just do a normal acquisition. And I thought that was crazy because it's like, this is textbook, they should be able to acquire this company.
Speaker 2:Right? Like, cursor's out there. They're not acquiring a market leader.
Speaker 1:Yeah.
Speaker 2:OpenAI is clearly going after this market. And to the tune of what's what what's their valuation? Like, 350,000,000,000 or something like that? Like like
Speaker 1:We haven't we we should try to get an update there.
Speaker 2:But
Speaker 1:like I not think the Masa, I I'm I'm not sure the the full
Speaker 2:It's not even one tenth of it's it's greater than one tenth of Google's market cap. Right? Yeah. And so you're looking at, like and then is Microsoft gonna compete in this? Absolutely.
Speaker 2:They have company They
Speaker 1:already do.
Speaker 2:They already do. And
Speaker 1:so Yeah.
Speaker 2:It it it it's like you're you're basically, like, I don't know, second, third, fourth in this market. There are four very serious players. Like, this should be textbook rubber stamped good good to go. Do the deal. No problem.
Speaker 1:There's also a there's also
Speaker 2:a very long
Speaker 1:list of founder led companies that were that are may that were maybe less hyped than Windsurf, but have incredibly talented teams. There's like Poolside.
Speaker 2:Yeah. Poolside.
Speaker 1:That's There was that one that Nat Freeman and Daniel Gross did that was Magic? Yeah. Was The magic dot dev.
Speaker 2:They were found, apparently, they were training their own foundation model for a while, and that was kind of like, you know, very CapEx intensive and and and maybe slowed down some things in the product side. But still, like, clearly, it's a competitive market. Everyone's working on it. They're also, we're we're missing out, like, there's probably a ton of YC teams that are working. There was actually one YC team that got in trouble for forking like Cursor too hard or something.
Speaker 1:Forcing a little bit too hard.
Speaker 2:Yeah. They crossed some line there. I think they did fine and I think that they wound up like cleaning it up. But people were upset about like when you fork something, you have to abide by the MIT license or whatever the underlying license is. And so you can't just like steal open source code and not abide by the open source rules.
Speaker 2:And then and then I said three new facts might come out, which they did. And and FTC thing was interesting because there there was a little bit of pushback on that. People were saying like, oh, like Lena Khan ate my lunch. Like Lena Khan's like like like responsible for everything. And I wasn't I wasn't necessarily saying like Lena Khan was 100% responsible for how this was was was structured or, like, how this played out.
Speaker 2:But she did kind of, like, warp the road a little bit that made it a little bit wonky to drive on.
Speaker 1:Basically, we made hardcore capitalism illegal, so we nerfed capitalism. And then and then capitalism ended up coming in and saving the day.
Speaker 2:Yes. Yeah. Yes.
Speaker 1:With Scott Wu.
Speaker 2:Yes. Seriously. Seriously.
Speaker 1:So the solution to
Speaker 2:capital Anti capitalism. Is more capitalism. This is the Brad Gershuner point.
Speaker 1:Yeah. Totally.
Speaker 2:And so so I still don't I I still think that there's a that there is a way that even with the weird new FTC antitrust regime, Google and the Windsurf founding team could have probably been a little bit more aggressive, taken a little bit more FTC risk and avoided this whole PR dust up. But that would have been more risk for Google. And I think that the way they did this here where they I mean, it's
Speaker 1:a great outcome for Google. It's like we didn't buy the company. Look. Exactly. They bought the company.
Speaker 2:They bought the company. Exactly. So it really it really is a great outcome for Google. Even though I'm sure that they their comms team was up all weekend calling people. Yeah.
Speaker 2:Like, I I have to imagine that this was like
Speaker 1:I mean, it was war
Speaker 2:room for
Speaker 1:them. It was serving, you know, it the best possible story that the New York Times could have ever asked for.
Speaker 2:Yo, totally.
Speaker 1:It was like big tech
Speaker 2:Yes.
Speaker 1:Buys hot company that was competing, you know, not necessarily, like, the whole point of Lina Khan's thing was that, you know, big tech is like squashing competition Yeah. By buying these companies early. Totally. And so you had the story that was served up to them, was, you know, exciting company in cogen, lot of traction. Yep.
Speaker 1:OpenAI almost buys them. Google says, okay, we're going to buy them. That's Google. Google and OpenAI are arguably, you know, the the two competitors that actually, like, matter in search right now. And so it was just the perfect story.
Speaker 1:And then and then the, you know, I I think Scott Scott over at Andreessen had a good post that I that let me pull up here for a second. He was basically saying there
Speaker 4:is
Speaker 1:an irony that Lina Khan's activism has resulted in deals that are far worse for everyone except the people she was targeting.
Speaker 2:Wait, who
Speaker 1:tweeted Sorry, Martin Casado.
Speaker 2:Oh, yeah, Andrew Sanderson, yeah.
Speaker 1:And, yeah, it's like the people with the lowest you know, it's It's crazy. It seemed at the time that the people with the lowest leverage, the employees that had joined recently Yeah. Were getting the worst outcome
Speaker 2:Yeah.
Speaker 1:Out of out of a deal that that should have benefited everyone.
Speaker 2:Well, if you're looking for code review for the age of AI, head over to graphite.dev. Graphite helps teams on GitHub ship higher quality software faster. You can get started for free at graphite dot dev. So my question is, Google, it feels like PR nightmare, accidental PR nightmare because they had done, what, character? Just fine.
Speaker 2:It it was not that big of a deal for them. Not a and bit then scale had happened.
Speaker 1:Well, it was very clear that that that situation was interesting too because it it Google has delved into social in the past. Hasn't had the
Speaker 2:best Not beaming the ChatGPT script.
Speaker 1:No, that was intentional, No, of but they've messed around in You can tell that Google doesn't want to own the AI Totally. Totally. They just don't want the association
Speaker 2:think there was a rumor that Gnome didn't want to be in that. They kind of like, was just like, I want to train a great model. I want to train a great model. I want to do AI research. And then that became the use case.
Speaker 2:They found product management. And then he was
Speaker 3:like, I don't really
Speaker 1:like You build this type of see what Elon's launching today with the I won't even say it on the show, but his new launch today basically signals that that is a very
Speaker 2:important And he's interested in that market.
Speaker 1:Yeah. He's interested in that market.
Speaker 2:Yes. Anyway, my question for you is, so feels like a PR nightmare for Google, feels like a couple stressful days, feel like
Speaker 1:Great timing over the weekend.
Speaker 2:Then ask my question. Do you think that they are, that they were intentional and happy about releasing the news after market close because the the the all of the facts had come out over the weekend, and it was such a hairy deal that more deals needed to be done even after the story came out, and it couldn't be super clean. You have to do it on on late on a Friday. So then Saturday, Sunday, people can talk, deals can get done, and then announcements can go out Monday, and then it resets the whole news cycle. So you kind of skip the the the crazy news cycle.
Speaker 2:I think
Speaker 1:think the world's too online. So I think I think it helped that that that it wasn't a weekday. But I mean, to to me, this this whole thing, you know, from from everything that we've kind of triangulated, this this could have been avoided by managers taking it upon themselves to basically call each individual person at the company and say, before you have a negative reaction, I need you to be patient. I know you've been patient through deal with OpenAI.
Speaker 2:Yes.
Speaker 1:It's not the deal that we wanted. Yeah. But we are working to make this a positive outcome for anyone don't cry yet. Yes. Don't just don't cry.
Speaker 2:And it's particularly hard because if you if you're in the scale situation, a lot of those people had been there for four years. And with Windsurf, most of those people had been there for less than a year, almost certainly. And so the the strength of those connections socially outside of work is weaker. So there aren't as many, oh, yeah, like, my boss, like, we are we're already on signal with disappearing messages, so we just talk back channel all the time. Yeah.
Speaker 2:It's like the crazy thing to
Speaker 1:you is the argument was the new company has a strong balance sheet. Yeah. And they're going to be able to just do a distribution or pivot or Yep. Like that was effectively the suggestion.
Speaker 2:It was intentionally ambiguous. And
Speaker 1:at the same time, employees left behind on the ghost ship Yeah. Were already talking with other companies. Other companies were coming to them trying to recruit I like
Speaker 2:that you're coining ghost ship because like everyone involved in the deal would prefer you to use the term remain co. Remain co. But that's not as sticky as ghost ship. So I think ghost
Speaker 1:ship ship without a founder. I don't think that's
Speaker 2:gonna be the last ghost ship we see. I think it's like a new pattern and we're just going to see this
Speaker 3:No. More and
Speaker 1:But but so so then you have this dynamic where the the these talented people, I talked to a founder who was talking with a lot of people on the go to market team Yeah. Being like, these are very talented people. Right. They took a company from 0 to tens of millions of dollars in ARR and a bunch of enterprise contracts Yep. In a very short period of time.
Speaker 1:Yep. I want to scoop them up. And those people were entertaining conversations because it was just totally unclear to them what what was going to happen. Yep. So
Speaker 2:So, yeah. I mean, I still I I think some of our friends hold the FTC like 100% accountable. I'm probably under a 100, but maybe over 50. But my key point is that never lose faith if the FTC is giving you trouble. Dylan Field didn't lose faith when he was dealing with a messy situation with the FTC at Figma.
Speaker 2:And also, you should use Figma. Figma.com. Think bigger. Build faster. Figma helps design and development teams build great products together.
Speaker 2:You can get started for free at figma.com. Anyway, there there was another side of stakeholders that was interesting that the this that this guy Publius said in your in your in your response to your post, which I don't think anyone was talking about at all
Speaker 1:the I know.
Speaker 2:Is cool. And and this is something people don't really think about. I think we're in a good spot with these folks now, and I think they'll actually probably be in a better spot now. Much better spot. But let's read through it.
Speaker 1:Yes. You're getting more work there.
Speaker 2:Says, there are more stakeholders here that have not been discussed. There is a whole network of software resellers that invested millions into building partnerships with Windsurf. I was leading the team at one of those partners. We have customers that we have been selling to for years who we vouched for Windsurf for Windsurf too. I am sending out a note to our 300 customers on Monday that we are stopping all partnership activity with Windsurf effective immediately.
Speaker 2:I hope you didn't send that because it's gotta recall that email. Don't send the email. Cursor has no channel partners and this will cost our firms millions. Oh, interesting. I didn't realize that Windsurf had a channel strategy and Cursor does not.
Speaker 2:Very interesting. So Windsurf actually has resellers who go and sell it into their partners because they're doing something on, you know, we do software development consultancy. We come in and help your team run more efficiently. We help you pick the right tools. You can imagine, like, McKinsey, I don't know where this guy works, but like, you can imagine a consulting firm coming in and giving advice on what tools to use.
Speaker 2:Get They a kickback from Windsurf. They don't get a kickback from Cursor. So he's going to lose millions of dollars, hypothetically, hopefully not. But my reputation in good name is worth more. With Google taking the best engineers from Windsurf, our large enterprise clients are screwed.
Speaker 2:When they purchased Windsurf enterprise licenses, they were also purchasing an ecosystem that they assumed would continue to improve. This is disastrous for any startup tech company with goals of building an enterprise channel. It's interesting. I don't think people have any idea how much this just killed channel sales for any AI company. So the rest of the AI companies out there who are like, oh, channel channel sales is really interesting.
Speaker 2:Basically, if you're
Speaker 1:if you're if you're a top company in your category growing super quickly
Speaker 2:Yeah.
Speaker 1:You might turn into a go ship.
Speaker 2:Yeah. Yeah. And so if if if I'm trying to resell that type of stuff, then I I have to go to the CEO and
Speaker 1:They're not good, speak but they're not so good to get these maxed out.
Speaker 2:They're they're
Speaker 1:not getting a trade deal. Yeah. Yeah. You can count on them to not get trade. Yeah.
Speaker 2:Yeah. Yeah. Yeah. You're having you're having dinner with the with the CEO of some AI companies talking to you about like, yeah, we have the best software and you're like, but you don't have any like actually great AI researchers. Right?
Speaker 2:Like, you you mostly just have
Speaker 1:We like to partner with companies with with
Speaker 2:Medium to
Speaker 3:c tier.
Speaker 2:Yeah. Product. It works, but not too well because we don't wanna lose you.
Speaker 1:We wanna keep working with them for a
Speaker 2:long time. We're gonna keep working with you. And so, yeah, the there there were a bunch of other reactions. Shellqua hires. Let's see.
Speaker 2:I'm not an m and a guy, but something feels really broken in tech m and a confidentiality is out of the window. Deals get done and called off on a whim, lack of rigor and discipline on both sides. Curious to hear what practitioners think. People are going back and forth on this. But really quickly, let's tell you about Vanta.
Speaker 2:Automate compliance, manage risk, improve trust continuously. Vanta's trust management platform takes the manual work out of your security and compliance process and replaces it with continuous automation, whether you're pursuing your first framework or managing a complex program. And so Will Menaitus was particularly black pilled over the week, friend of the show.
Speaker 1:Incredibly black pilled.
Speaker 2:He it's we're so back, Will. You're good. Will Menaitus said the reason that tech has been able to grow so quickly and create so much wealth that it is rich that it that it is that it ritualized a set of norms around corporate governance that are very distinct from what the law actually requires. The second someone defects, the whole ship goes down. He's so upset.
Speaker 2:But basically he's talking about like hand the handshake deal protocol is not a legally binding contract. Even term sheets. You get a term sheet from a VC that's not a legally binding that's not a legally binding contract. Like VC can write your term sheet, everyone can sign it And then you can just
Speaker 1:Literally says Yep.
Speaker 2:It literally says this is not binding. And then you can just wake up on the wrong side of the bed and be like, actually, I don't wanna do the deal. And or or it could be like you found something in due diligence or you met a different competitor. But the, like, you know, the game isn't over until the money's in the bank. The experienced entrepreneurs know this, but we run on this, like, basically, you know, these society, these, like, social constructs and these, like, social contracts that say, hey.
Speaker 2:If you're the type of VC that constantly rugs on term sheets, on signed term sheets, like, you will there will be a bad vibe around you.
Speaker 1:I can think of two Yes. That that are widely known Yes. And are still in business. Yes. But they they they it becomes very hard to be an effective VC Yeah.
Speaker 1:If your brand is you just pull term sheets.
Speaker 2:Yes. Yeah. And some of the some of those folks have been banned from YC Demo Day. Other people have had, like, viral Twitter posts around them every once a while. Like, they they do that to a founder and then the founder becomes very successful at post economic and is like, yeah.
Speaker 2:I I still have a grudge. Yeah. So I'm gonna tell the truth about x y or And and so the the thing is is that now where we are now is I don't think I don't think the whole ship goes down. I I don't think this is a true defection. I don't think this reflects poorly.
Speaker 2:And I think that the the question of, like the the big question here was was will this cause more new startup employees to want to just go straight to Google? Let's say let's say that you have the option of working at Google or Big Tech broadly, where you know the paychecks are coming on time. You know the RSUs are liquid and you can just cash out as soon as you get them or whatever their lockup is. And you know your managers, because they're gonna be there, and know the company's gonna be around,
Speaker 3:blah blah
Speaker 1:accurately predict what your comp will be in five years and really work hard.
Speaker 2:Exactly. And then and then on the flip side, you have startups which are in some ways lottery tickets, but also you get to work on game changing technology with really cool people. You get to move a lot faster. There's a lot less overhead. A lot more edifying
Speaker 1:Potentially the next Sundar Yeah. Instead of Sundar.
Speaker 2:And and the economic upside can be a thousand x. It could be huge. And the question is, if that if that deal was broken, if that if that deal was, okay. Yeah. You can go work on the cool thing, but you might wind up penniless and not cash out like you were promised.
Speaker 2:That changes the equation and that could pull people away from startups. But I don't think that's gonna happen based on this because I think the lesson from this is that everyone got taken care and the social contract still still holds. Although it was very messy and I think going forward every company that's doing a deal like this needs to think how do I get the Scale AI outcome and not the Windsurf outcome because just two days of pain is not worth it.
Speaker 1:I think I think one potential solution to these deals Yeah. Is exactly what we just saw happen Yes. Which is big tech company does basically an acquihire of the team that they want. And then you simultaneously sell off the underlying asset immediately. Yep.
Speaker 1:And you generate a liquidity event for everybody, so everybody's happy. Yep. It doesn't have to be like life changing. Yep. Right?
Speaker 1:But it has to something. Right? So that it's
Speaker 2:And, I mean, the very key thing is that they left enough money on the balance sheet. Because the money on the balance sheet and this was this was Hari Raghavan's analysis. He he clearly I mean, the guy's he's a good friend. He's he's obsessed with cap table math.
Speaker 1:I know. He was Yeah. I mean, this was capital J journalism.
Speaker 2:Yes. Thank you, Harry.
Speaker 1:This was investigative journalism.
Speaker 2:Yeah. And so, I mean, his post is so long that I need to just go to the TLDR. But the TLDR is that he says, I spent hours last night breaking down the cap table and deal dynamics from public info. I realized that the unvested equity is around 80 to a $100,000,000, awfully close to the $100,000,000 the founders and board negotiated to leave behind in the bank. Why shouldn't management just And that was unvested.
Speaker 1:Which is a key detail.
Speaker 2:Right? They're basically saying like we're
Speaker 1:leaving enough as though you vested your full Yes. Four years.
Speaker 2:Yes. And so and so if you if it like it's still it's a leap of faith because I don't believe that Google and Cognition were in communication at all. And I think if they were, that would be more like antitrust chaos and stuff, but just economically, you know that if you if you leave a company there with that much money on the balance sheet and those many and that many like that invested options, somebody is just gonna be like, wait, so I can get that for basically free if and I can make all the employees whole and I get all the employees and I don't have to pay really like anything to get that thing. Like, it's just gonna happen immediately. And because it's just like, you've create you've this you've left this, like, you know, a $100 on the floor and someone's gonna pick it up.
Speaker 2:Like, the free market will just work.
Speaker 1:Think the question that I had and that I think a lot of people probably had is what is the governance structure of the ghost ship? Oh, Jeff Jeff
Speaker 2:Crazy question.
Speaker 1:Jeff Wang, who's coming on the show at 1PM.
Speaker 2:Oh, he is?
Speaker 1:Let's go. Jeff and Scott will be coming on at 1PM Okay. For fifteen minutes.
Speaker 2:Okay. Can communicate that to the other guests? Yeah.
Speaker 1:Yeah. And so the question is like, okay, Jeff, you now run a company with hundreds of employees that are angry about what just happened. That that probably, like maybe they want to keep building Windsurf, but maybe they want to go and do something else. And what happens like, Jeff is basically, I would imagine, like, has to make a bunch of calls. Yeah.
Speaker 1:It's like, do you just keep running the business? Yeah. Is there pressure to keep running the business?
Speaker 2:First question, Jeff. Did you ever feel like, is it Frodo Baggins throwing the ring into the fire? It's like, pay out the $100,000,000 in bonuses. After all, why shouldn't I keep it? Just throw the ring in throw the ring into the Mount Doom.
Speaker 1:Yeah. And the question was like,
Speaker 2:Were you ever tempted?
Speaker 1:Could the new leader, the leadership
Speaker 2:Yeah. Ever Was that an option?
Speaker 1:Well, the leadership have decided, you know what? We can run this business super lean. Exactly. We could actually run this business with like 10 people. Yeah.
Speaker 1:And, you know, we're gonna run it for a few years and we're going use the advantages that we get from our own products to run a super lean team. Yeah. Then you would have employees, like, effectively burned again, potentially. Yeah. Yeah.
Speaker 1:But that didn't happen. I'm very happy about it. Yeah. And the question, another
Speaker 2:If question is you're big tech and you're gonna do one of these, like, zombie acquisitions, you gotta leave enough for the unvested shares. And if you're founder and you're gonna do one of these zombie acquisitions, the ghost ship's gotta be full of plunder.
Speaker 1:Full of plunder. It's gotta be
Speaker 2:stacked with treasure. Because then That's right. Then the rescue divers will go and lift the ghost ship off the
Speaker 3:Yeah.
Speaker 1:And if if if big tech comms are telling you you can't tell anybody that they're getting taken care of
Speaker 2:You have to risk it.
Speaker 1:Tell little birdie Tell Tell little birdie to go fly around
Speaker 2:and let people know. You gotta be you gotta be having, like, quick calls, not not saying anything too specific
Speaker 1:Yeah.
Speaker 2:But saying what you said. Think you worded it perfectly. Yeah. It it And don't cry yet. Or Varun.
Speaker 2:Just Or Varun.
Speaker 1:Right? Because because he was getting dragged dragged because because he apparently he apparently he apparently People were messaging me like he joined, like, the the all hands for, like, minute. Ten minutes. Yeah. You know?
Speaker 1:And it just seemed like he was being, like, ultra like, kind of like a psychopath being like, see you guys. Yeah. It was a good run.
Speaker 2:And it's like
Speaker 1:Go go have fun building,
Speaker 2:you know, the would not have happened if he had said, no. I need an hour. I need to explain everything. Would that have killed the deal? Almost certainly.
Speaker 2:If that killed the deal, what's the outcome for the employees? Probably worse than what they got.
Speaker 1:You think it would a 100% have killed the deal?
Speaker 2:Almost certainly. If I think one of the key deal points in the negotiation with Google was we do it via Google's comms and legal strategy. Because Google does not want to get hit with some crazy FTC lawsuit that's going to not just be some multibillion dollar settlement, but also a huge headache for years and bad press and stuff like that. So Google says, hey, we want to do this our way. It's going to be awkward, but we're going to take care of everyone.
Speaker 2:And yes, we will leave enough money on the balance sheet to pay out all the unvested options. And but in exchange, you got to do the comms our way, which was rough.
Speaker 1:You have to create a terrible have
Speaker 2:to be scapegoated by the
Speaker 1:entire to
Speaker 2:You get hazed.
Speaker 1:Yeah. You're going to be hazed for forty eight hours.
Speaker 2:You're getting hazed. But then
Speaker 1:And it's going to blow back on us.
Speaker 2:Yeah. Google that weekend. It was rough. It was rough. Anyway, let me tell you about linear.
Speaker 2:Linear is a purpose built tool for planning and building products. Meet the system for modern software development, streamline issues, projects and product roadmaps. Start building at linear.app.
Speaker 1:And if you are launching a TBPN derivative product, derivative work, get on linear. The tool we use.
Speaker 2:So what you would do is you'd put all the glasses of tap water that you need to drink and then you would just check those off at a time.
Speaker 1:Every time you tear
Speaker 2:it back. We only have one rule about copying us. It's the derivative works clause in our terms of conditions. And in there, if you create a derivative work of TPPN, you are legally required to drink a glass of tap water on
Speaker 1:TV. Every time you go live.
Speaker 2:Yes. Yeah. Every time you go live.
Speaker 1:So, yeah, again,
Speaker 2:we want to make sure it's accessible. Did invent TV. We invented news. Yep. But we we will open source it.
Speaker 2:It's an MIT license type of situation, modified MIT license. Yep. The only modification is that you have to drink tap water.
Speaker 1:Yep. Anyway. Is a small price to pay.
Speaker 2:Anyway. Other Question. News
Speaker 1:What do you think why do you think Google did this?
Speaker 2:Why?
Speaker 1:Yeah. I mean,
Speaker 2:Oh. Like Oh. Yes. Yes. Yes.
Speaker 2:That is the that is the real question is is we've talked about the role of the VCs. I think based on what happened, never talk down on first ballot hall of famer Neil Mehta. Never talk down on the future for first ballot hall of famer. Everyone was saying, oh, Neil Mehta, Green Oaks, they they did this sloppy deal. They're screwing over the employees.
Speaker 2:Employees are great. Neil Mehta, potentially goaded.
Speaker 5:I don't know.
Speaker 1:I agree. That was well played. I think you need work. Think No. No.
Speaker 1:But the question
Speaker 2:is why did Google
Speaker 1:why did Google feel like they needed to do a meta style trade deal in
Speaker 2:Yes. It's a good question. Category. So so Windsurf in my I I don't know everything about all the employees they brought over. So they brought over 50 engineers.
Speaker 2:I don't know if any of those are, like, insane AI researchers with, like, crazy citations on, like, foundational papers. I don't know that it's the same I don't know that they're trying to build a super intelligence team to really bring their models to the frontier because they already have that. Like Yeah. Gemini is is at the same, like, level of, like, AI research quality as OpenAI Anthropic by most benchmarks, by most people that use them. Like, it doesn't feel like they're way behind there.
Speaker 2:Llama four, on the other hand, was a little bit behind. And so and and it felt like Llama four was specifically behind not on the product side, but on the research side. Like Yeah. They just weren't figuring out what works in RL. And so they had to bring over a ton of people to just be like, how do we actually train this next model?
Speaker 2:Like Behemoth couldn't they couldn't tame the Behemoth. Like, they gotta get some Behemoth tamers in the building. And it seems like that's why they acquired all the different researchers who know, okay, like, training on a 100 k g h 100 GPUs gives you this, and then you need to use this data, and you need to hold back this data, and you have this this reward function and this reinforcement learning technique, and you need to do all these different things. And so you need AI researchers for that, but Meta has great product people. So, like, they're gonna be able to take what they build and then vend it into Instagram and vend it into all sorts of different places and use it to optimize the ads 1% and make a trillion dollars.
Speaker 2:Like, they're going be fine on that side. Google is great at AI research. DeepMind is amazing. They have so many they invented the transformer. They're not behind on the quality of the foundation model.
Speaker 2:Yeah. They are they are behind on product. And they are they are behind on, like, user experience and everyone complains, oh, they have this amazing v o three model, but, like, I had to log in seven times to get access to it and then go through an upgrade thing and it was on wrong Google account and then I have to trigger it. Then I guess, a great limit.
Speaker 1:Here's the here's the the
Speaker 2:The steel man for the short sellers?
Speaker 1:No. No. No. Short sellers. Here's what's what's kind of interesting about the way this is developed.
Speaker 1:So at at Google's last developer event
Speaker 2:Yeah.
Speaker 1:They launched Joules which is an async development agent
Speaker 2:Okay.
Speaker 1:For for for codegen.
Speaker 2:It's clawed code competitor and OpenAI so
Speaker 1:is like a dev yeah. Dev and AI competitor.
Speaker 2:Devin competitor.
Speaker 1:And so now you have you imagine Google has more ambitions around cogen.
Speaker 3:Totally.
Speaker 1:Right? They've seen Anthropix. Very few businesses actually like, will work at Google. Right? You need a billion dollars of revenue or you're gonna get shut down, most likely.
Speaker 1:And so, cogen is an area that I'm sure they're taking very seriously. I haven't heard a lot about Joules since the event. I haven't heard about people that are that are using it. I'm sure it's I'm sure it's powerful. Yep.
Speaker 1:But you now have a dynamic where some you have Cognition and Devon who got I can't say cloned by Google, but again, like, they were the first serious enterprise coding agent. And so, and and the the Windsurf GTM, you know, sales marketing team versus the former Windsurf founders and top researchers who are now at Google. Yeah. And so, I'm just incredibly excited to watch this play out. Pavel was, posting earlier.
Speaker 1:He said, I hope these guys smoke Google at AI coding. Imagine the chip on your shoulder after this if you're a windsurf employee. So, yeah. Everybody's gotta be very fired up.
Speaker 2:How you guys doing? Congratulations.
Speaker 3:Thank you.
Speaker 1:Round of applause. You're doing great. Have a nice Relaxing weekend?
Speaker 2:Yeah. Really chill weekend.
Speaker 5:Yeah. Yeah. Easy. Easy. Nothing too much.
Speaker 5:Honestly, we we both haven't really slept.
Speaker 2:Okay.
Speaker 5:So go easy on us. Okay?
Speaker 1:Well, had a lot of you had a lot of people to take care of and and honestly, when, you know, we heard the news a few minutes before and we went we were fist pumping here in the studio because it's such a fantastic outcome and I'm sure everybody involved is grateful for the work you guys put in to get this done.
Speaker 2:But give us yeah. Kick us off with the high level. What's actually the partnership look like? What do you like, how would you describe it in your own words of, like, what's actually happening?
Speaker 4:Yeah. I mean, this is a this is a real acquisition.
Speaker 2:Okay.
Speaker 4:We are being acquired by Cognition.
Speaker 2:Okay.
Speaker 4:And, you know
Speaker 1:Must feel great to say that too.
Speaker 2:It's really
Speaker 1:you don't hear that much.
Speaker 4:It was a tough it was a tough, Friday, I would say. I don't think anybody want to be in my shoes on Friday. Yeah. But we talked to a lot of teams out there. There's a lot of AI companies, foundational companies.
Speaker 4:Mhmm. And after talking to Scott and the Cognition team, there it it was done in my mind. There's a done deal. It's been done deal. Don't know if you guys know this, but, Cognition was probably the only other team that we thought was smarter than our our team, actually.
Speaker 1:Wow. Yeah. No. And that's what that's what we put we put that together just on the show, seeing the announcement. It's like you take this incredible, you know, go to market sales machine that you guys had built and you combine that with one of the best, you know, research and just hardcore engineering culture.
Speaker 2:Perfect overlap.
Speaker 1:And it's a perfect, you know, match.
Speaker 2:Perfect overlap.
Speaker 5:Yeah. Absolutely. And and on the windsurf side, I'll just, you know, obviously, there were all these stories breaking out on Twitter and everything going on and people were saying, well, you know, the the the thing that's left is just the shell and and we looked at it and we said, actually, I I don't know if that's right. You know, it's the there's there's the code, there's the product, there's the customers, and most importantly, there's the whole team, obviously. And and it's an amazing product and there's a lot to do and a lot to build together.
Speaker 5:And and so I think as we started talking about it, we found that there were just so many natural ways to partner, you know, both in terms of, obviously, the customers and and customers would love you know, are are super excited to have a solution that that basically combines both the IDE and the agent And and and and then the technology itself, which is, you know, I I think we, Devon at Devon you know, building Devon have always focused on this kind of remote background agent as the thing that we've kind of done. Whereas, you know, Windsurf is is really focused on the agentic IDE, and and I think there's a lot of kind of things that play in there all the way down again to to the kind of the the fit of the the the relative teams and the team strength and so on. So
Speaker 2:It's almost like you predicted this because, like, the like these types of mergers are really hard because you have two brands that are popular. But Scott, you've been managing Cognition and Devon, like you've had the the the corporate structure and the product structure for a while and so like, it doesn't seem nearly as complicated as, like, where does this go? Do you have to rebrand one another? I I don't know if you have thoughts on it yet. I'm sure you this is down the road.
Speaker 2:But it seems like you're actually fairly set up to to integrate these two companies in a in a way that's, like, not so super chaotic to either, which is great.
Speaker 5:Yeah. Yeah. You know, I I I I wouldn't say it was intentional. Think on our
Speaker 2:end, for
Speaker 5:example, it's probably more that just we we we tend to over focus on on software engineers
Speaker 3:because
Speaker 5:it's
Speaker 3:just a lot of who
Speaker 5:we are and how we think about it. And and in particular, kind of just like the these like product and capabilities things, whereas I think on the Windsurf tie side, I I think Jeff and the team, you know, the whole team have built out a really great kind of suite of of of all of the different kind of functions. Right? You know, sales, deployed engineering, enterprise work, infrastructure Yeah. Marketing, operations, and so on, you know, finance, etcetera.
Speaker 5:And and and, yeah, just turned out to be a really, really great fit.
Speaker 1:Yeah. Jeff, Friday end of day, did you think you would be running a process so quickly? I know, you know, part of the obvious move would just be, you know, continue to run and scale the business. You guys had a lot of momentum. But what was going through your head Friday night?
Speaker 1:Because I I imagine at the time you're also balancing, you you were, all of a sudden managing a team of hundreds of people that, I probably all, you know, wanted wanted, your time and attention as well.
Speaker 4:My my immediate priority was just to get a lot of options on the table and to have a lot of paths forward. I had to tell the team, like, this is the path forward immediately because this is this is happening now. And then outside of the meeting, you know, I I I was thinking like, okay. Who do I need to talk to? What what is the best use of my time?
Speaker 4:I can tell you I was on the phone for pretty much twenty four hours nonstop on my phone after after the all hands. And me and Scott, we we worked really fast. We met at our office the next day. He even brought in everything on a piece of paper to sign. He even brought he's Woah.
Speaker 4:Taken
Speaker 2:Here you
Speaker 3:go. He obviously had to
Speaker 4:talk through a lot but that was it was real it was pretty dramatic, Scott, but it was cool. It was cool.
Speaker 5:Yeah. It was fun. And and naturally, you know, because it has to be this way, we got things signed like one or two hours before we were able to put out the announcement. But like,
Speaker 3:you know,
Speaker 5:as soon as we started talking about it together, I think it was kinda clear for both of us. Like, the the the way that we really make this a success is, you know, obviously, customers kinda wanna understand what's next. The team wants to understand what's next. You know, the whole world is talking about it. We wanna be able to come out together as soon as possible and say, we're gonna do this.
Speaker 5:We're gonna make this really amazing. We're gonna make sure we take care of all the users and all the customers. We're gonna make sure we take care of the team, and there's just a really great product here at its core, and and that's what we wanna focus on, and that's what we wanna build out together. Yeah. And and you know
Speaker 4:what's crazy? Yeah. What is crazy? We talked pretty late on Friday night as well. We were comparing notes and there was like almost no overlap.
Speaker 4:I mean, talked about the team already, but even the product. The product is like missing exactly what the other product is offering. Yes. And the ability to combine the products together is gonna be so amazing for our users. It's gonna be really cool.
Speaker 3:Yeah. I think there's gonna be a
Speaker 5:lot of fun stuff around, you know, you can have have an agent work and then review the code, you know, locally in your IDE. Can be planning tasks out and then kind of sending them off for work. You can be, you know, you can do a first pass with an agent and then come and look at the work and then kind of finish that up and do the finishing touches with, you know, with tab and all these other features and so on. Right? And we're really excited to to to build that out together.
Speaker 1:How is how is the team feeling right now? I imagine this is the craziest forty eight hours of of their career
Speaker 2:Give us a preview of the Slack emojis that are ripping right now.
Speaker 4:Actually, we we announced it at another all hands. Okay. So we put Monday all hands and we put another Monday all hands. And very, very different
Speaker 1:It's like it couldn't possibly get worse. So it's only up. Yeah. I'm really excited.
Speaker 4:Oh, we made it dramatic too. So me and Scott and the team, we really went out of our way to make this a very generous acquisition. I'll just say that. And I think, you know, the team probably felt like, you know, their, know, their career was over or something. Know, like, was very sad on Friday.
Speaker 4:But I think today, I I don't know. How long did they clap, Scott. They they kinda cheered for like
Speaker 1:Standing ovation.
Speaker 4:Or something. So, I think the sentiment has shifted. The team is even more fired up to go. They the whole product is still there, all the all the things we had and the GTM team is still there. And now they also have Devin to to sell as well.
Speaker 4:So everybody's fired up now.
Speaker 2:That's amazing. Yeah. Every time I talk to Scott incredible. It's always because, like, he's done something really incredible and aggressive, like like and it's like, okay. Like, let's do let let's talk about this right now.
Speaker 2:And before, I was making, like, documentaries taking a month to put out a single video. Now, fortunately, I have a daily TV show, so I can just have you on and we can chat about it. I do have some some random questions. I don't know if I'm it's interested to know about about that go to market team and and channel sales specifically. There was somebody in the comments of one of Jordy's posts talking about how Windsurf was growing revenue and and and working with channel partners.
Speaker 2:Can you walk me through how, like, how what would you give advice to somebody who's structuring a, like, a successful channel partnership strategy for a product like this? What do you what what incentives do you have to align? How big of a piece of business was that? Do you expect it to be a continual source of growth? I'd love to know about just that as a particular strategy as opposed to, say, you know, Google Ads or going viral.
Speaker 4:Yeah. We we made the decision to go a 100% partners back in February. The thing about a partner channel kind of, like, segment is, like, you have to, like, you have to, like, kind of feed them. Like, you kinda kinda build belief with them in the product, but also show that there's an economic incentive too.
Speaker 3:Sure.
Speaker 4:And it did take some time actually from q one to q two to, like, get the top priority partners, make sure those partners can easily sell on your behalf as well. And it really took, like, about four to five months to really see this, like, kinda take off. So some of our partner partners have already started bringing in 7 figure deals, even without even trying the product. They just go to their customers. They ask them, you know, what what they want, and they just say it's Windsurf.
Speaker 4:And Wow. And now, they they can say Windsurf and Devon.
Speaker 2:That's amazing.
Speaker 1:Yeah. I, I was getting multiple messages from people Mhmm. Friday and Saturday being like, I want this team. I want this team. And that was what and and and I think that, it is it is just, it's such a this whole deal and everything is is really a testament to the caliber of the team which was the dis which was one of the major disappointments Friday is if you were on the team that that was staying behind at Windsurf.
Speaker 1:There is this sort of almost like signaling, right, of like I took this let's say you joined last August and you brought the product to market, you launched it, you grew it to tens of millions of dollars in revenue and then don't get to kind of continue the mission. It's I'm just really happy for everyone involved.
Speaker 2:Yeah. I'm just now Oh, sorry. Yeah.
Speaker 5:I was just saying now, you know, now we're all one big team and it's I I mean, we're we're kicking it into another gear. I I think we're all so amped up to to take this and just go, you know, we're we're gonna go full speed basically for for the next while, and and and we get to play on offense now and and go for real for it all. So
Speaker 1:Are you guys already making plans to get under one roof? What's what's the
Speaker 5:what's So we we have a lot to figure out. But but but, yeah, working
Speaker 1:to get some patterns.
Speaker 3:Getting to
Speaker 5:the point there's there's kind of the product collaboration, there's the go to market collaboration, and then there's the literal kind of, like, team situation. A lot a lot of work to do over the next couple months.
Speaker 1:Well, we've gotta tell our
Speaker 4:customers, like, we got there back now, and the product is is gonna get so much more cool.
Speaker 2:That's amazing.
Speaker 1:You guys turned something which was, in in many ways, you know, a disaster. One of the crazy waiting stories you for I was waiting for the New York Times piece on Monday and getting to see the New York Times push out this news, and turning this whole thing into a win is is incredible. And you guys have done a a service to, the team and the industry. So thank you.
Speaker 5:Yeah. Honestly, honored to get to be a part of it, to to work with such a great group of people. And I just wanna see you guys. You guys have no idea how how things went with all the legal and everything last night in terms of figuring these things out. Are we gonna make it there in time?
Speaker 5:Are we not gonna be it was we we we we've been through a lot and I think it's it's it's it's just the start of things.
Speaker 4:Just so you know, Scott was like, we are announcing Monday hell or high water and we we just did not sleep for the
Speaker 3:last, like, seventy four hours.
Speaker 4:Yeah. So it's been a crazy. It's been crazy.
Speaker 2:I mean, we we we we appreciate you hopping on the stream. Do you have anything else, Jordy, should
Speaker 1:we No. You guys deserve some unfortunate probably probably too early to sleep, but, you both deserve a power nap at the very
Speaker 2:least. Yes. Definitely.
Speaker 1:Thank you for coming on. Anything else that that makes sense to share now, should we let you go?
Speaker 2:We're all good.
Speaker 3:Awesome. Yeah. Stay tuned.
Speaker 1:We're gonna
Speaker 2:have a
Speaker 5:lot more announcements soon. Thanks for having us.
Speaker 1:Amazing, guys. Great work. Cheers. Talk to
Speaker 2:you soon. Congrats. Bye. We are doing a postmortem on the windsurf chaos. I was saying that I liked this post from Pavel Asperuhov.
Speaker 2:I think he sort of nailed the postmortem, but we can debate this. It I mean, if you leave someone for dead, but someone else calls in a helicopter, that doesn't really change your moral positioning in the situation. And Zedelian says this 100%, the Windsurf founders and Google thought they could pull a fast one and that the broader community slash Windsurf employees are somehow are worded enough to not catch on that their leave the Shellco with cash plan was totally morally bankrupt. Everyone will remember. And so I don't know.
Speaker 2:I'm I'm perhaps ready to put on the steel man hat and not go quite as far as Deleon. I think you might agree with the Deleon and Pavel take a little bit more.
Speaker 1:I still think it's important to debate because we want to avoid this kind of situation in the future. Yep. There's probably going be more of these deals. John John Ludig had some good commentary on this, basically saying, if you are a big tech company Yep. It is much easier and faster to do something like this.
Speaker 1:It's not just the FTC sort of like climate around antitrust. Yep. It's just that it's much easier. Yeah. It's much faster.
Speaker 1:And oftentimes, these companies are just buying the team and the talent. So if they can license the tech and get the team, it is that's just capitalism doing capitalism. Yep. In this case, the answer to capitalism doing capitalism was more capitalism. But it would get kind of Scott Wu Yep.
Speaker 1:Coming in hot, working over the weekend to get a deal done. So anyways, fantastic Yeah. Outcome.
Speaker 2:Scott looks like a hero.
Speaker 1:Wood looks like a hero. I think Cognition is gonna be stronger for it. They got a world class, you know, GTM sales marketing engine.
Speaker 2:What John Ludig said here was big tech's AI talent shortage means with means these M and A choices. A, you get the talent only, but you get it today. Or b, you get the talent plus the business plus the product, but months after regulatory scrutiny. And he says they will pick every time. Thankfully for Wort Windsurf, the product lives on, but a, as the default, is existentially dark for startups.
Speaker 2:And so I think what's interesting is like we were debating how much of the blame goes to Lena Khan. And I don't actually know that there's all that much on Lena Khan specifically.
Speaker 1:But it's fun. It's fun. It's fun to point the finger.
Speaker 2:It is. I
Speaker 1:think The bogeyman.
Speaker 2:I think in general, like, the FTC has always has always had some sort of approval around big public company buying a small company. They're going to review it. Even if they would have approved it, it would they wouldn't Google would not have gotten the talent actually in the door, actually working at Google for six months.
Speaker 1:Yeah.
Speaker 2:Months after regulatory scrutiny. And so that time
Speaker 1:And the other comp here the other comp here that we have is Figma Yep. Who was slated to get acquired by Adobe. Took forever. Adobe had to pay $1,000,000,000 breakup fee. Yeah.
Speaker 1:Now Figma is going to IPO. Yep. And I would be shocked if they end the first trading day below the price that Adobe was gonna pay. Yep. And the company is doing better than ever, has launched a bunch of new products in.
Speaker 1:And and so
Speaker 2:Not financial advice, but I will give you product advice. Go to figma.com. Think bigger, build faster. Figma helps design and development teams build great products together. Can't say anything about the stock, but great product.
Speaker 2:We do love it. Anyway, Varunam Ganesh had a good take here. Windsurf employees over the weekend. And it's the it's the we're so back. It's so over.
Speaker 2:We're so back. It's so over. And I think the underrated take on this, like, yes, it's funny and it's a good point. But this has a real economic cost. Like losing sleep.
Speaker 2:We're sponsored by Eat Sleep as we put out a video today.
Speaker 1:We did.
Speaker 2:Sleep is valuable. And if you make me lose sleep, that does have an economic cost. That does have a You moral shouldn't do that. And so you should, as a founder, try and land the plane, not just save everyone's life, but actually not Make a win for landing. Everyone.
Speaker 2:Yeah. Make it a win for everyone, but make it smooth for everyone. Make
Speaker 1:it smooth And for there was a good post. Pavel Pavel was on a tear
Speaker 2:He was.
Speaker 1:For the last few days. Defender of the founding engineers. Yes. But he said I hope these guys smoke Google at AI coding. Imagine the chip on your shoulder after this if you're a Windsurf employee.
Speaker 1:Yep. And Sandeep Shah over at Windsurf, he's a vice president there, said it's bigger than a chip. We are coming We're for for it. And so love the energy.
Speaker 2:He was left behind in the remain co. Is that correct? Yeah. He did not go over and he's He's on the ghost yeah. The ghost ship.
Speaker 2:There we go. The ghost ship. And Augustus says, Go off the king and Will defuses LFG. Lots of lots of support for Sandeep in the AI coding, in the IDE's war that's continuing. Anyway, signal has opposed here.
Speaker 2:Start up comp used to be confusing because it was complex. Now it's confusing because it might be worthless even with a large exit. The founders can dip anytime. Last chopper out of Saigon vibes except they're flying private while you're holding the bag. Good best.
Speaker 2:Yeah. My my my take here was that Scott Wu looks like the hero, not Varun Mohan, the founder and CEO of Windsurf, who should have gotten an amazing outcome for his team in any other situation. Like in any other situation, I say, hey. Join this fast growing company. We're just post pivot.
Speaker 2:We're second in the market. We're doing some cool stuff. I'm raising some money, and we're growing, but we're only doing $4,080,000,000 ARR. And I get you liquidity at 2,400,000,000.0. You should be like, I am ride or die for this guy forever.
Speaker 2:I think that a lot of these aren't going to feel that way. Five years, even after all the dust settles, they're going to remember that this was not handled as well as it should have been. And so they're gonna be like, meh. I don't wanna work with him.
Speaker 1:Yeah. Is rough. I'm sure when when the muzzle is review is removed, he'll be able to Yeah. Hopefully call every employee one by one. That would be good.
Speaker 1:Sorry and make up.
Speaker 2:And so I still put some
Speaker 3:of the
Speaker 2:blame on FTC stuff, just FTC stuff broadly. Some of the blame on Google Comms. Some of the blame on Lina Khan and what and and how she changed the FTC.
Speaker 1:And the other thing is speed. This was happening really. Remember the the the sort of exclusivity period that that OpenAI had on the deal expired. And I think this got announced, like, the very next day. So I'm sure it was in the works, but they definitely were moving quickly.
Speaker 1:And again, it would have been a good outcome if they all ended up at OpenAI. But I also think this is a good fit going forward as well. Yep. So, I'm excited to
Speaker 2:see what
Speaker 1:each branch of the team
Speaker 2:Rune here has some pushback on Signal. He says, this has always been true. The idea that startup comp is confusing and complex. Investors and founders screwing over early employees during an M and A is a time honored tradition in Silicon Valley. I don't know how true that is.
Speaker 2:There's a lot of examples where that didn't happen, but, of course, it it it has happened. If anything, the abundance of capital has made things better for early employees. And so, you know, kinda, you know, people people taking both sides. We didn't get to this post, but it was funny. Connor saying, Windsurf is the so hungry of startup acquisitions.
Speaker 2:They got acquired by OpenAI, Google, and now Cognition Labs all in one month. You'll love to
Speaker 1:see it. Swicks has a six way parlay. He said, I want Mistral founders to Apple, Mistral team to Meta. Character remain code of perplexity, core to perplexity, ideogram to figma, gamma to notion, read it back.
Speaker 2:Read it back.
Speaker 1:There was rumors that Apple was was interested in in picking up Mystrol.
Speaker 2:Oh,
Speaker 1:really? Taking a look at it. The funny thing though is that if you're France, do you want your national champion to, you know, the luxury AI
Speaker 2:Mistral should go to LVMH for sure.
Speaker 1:Should be home with, the Arnauds.
Speaker 2:Didn't we post a did we post a joke post around that?
Speaker 1:I think we did. I think we did.
Speaker 2:Yeah. I I
Speaker 1:I want fine luxury language models
Speaker 2:Yeah. Yeah. Of the Arnaud think some of the Arnaud folks were like, this is hilarious, but also like complete misinformation. Anyway, Sandeep says, it's bigger than Chip. We're coming for it.
Speaker 2:And Rob says, let's talk about a reboot for HBO Silicon Valley. And it's funny because when you see the Windsurf tag right in the name,
Speaker 3:you're like, oh, okay.
Speaker 2:This is hilarious. You think this is ridiculous and at least you're having some fun with it.
Speaker 1:Can we talk about our our upcoming guests?
Speaker 2:Yeah. Yeah. We're gonna have one of the co creators of HBO Silicon Valley on the show. He has been working on on Barry for a couple years, kind of out of the Silicon Valley parody world. But we're gonna try to check-in.
Speaker 1:We're gonna explain to him What's going on in Line by line what's been going on. And I think once he really processes it, he'll be interested in making a reboot.
Speaker 2:Yeah. We got Skreli coming onto the show. Welcome to the stream.
Speaker 1:There he is. Finally.
Speaker 2:Good to
Speaker 5:see Hello,
Speaker 1:guys. Friday. For this moment. How are you? It's great to see you.
Speaker 2:Yeah. Good to hang out.
Speaker 1:Wait. This is a new view. This is not your your regular streaming view.
Speaker 2:You know?
Speaker 3:You don't normally see the guitars. I guess. I I I change it around sometimes.
Speaker 2:That's cool. What's new in your world?
Speaker 3:Well, you know, I'm in the startup game as always. I think this is like the eighty third company I've started.
Speaker 2:So Very nice.
Speaker 1:See how
Speaker 3:that goes. And, I've been my my the company I'm I'm working on makes, it's like the Captain Ahab's, white whale for VCs. It's a Bloomberg competitor.
Speaker 2:Very
Speaker 3:cool. So the the this will be the last time somebody tries to compete with Bloomberg one way
Speaker 2:or another.
Speaker 1:It's the final yeah. It's the final boss of of startup ideas.
Speaker 2:What's the whole
Speaker 1:Bring but yeah. Just just give us mean, I this makes like the the founder market fit is is incredibly strong. So Right. Initially saw you announce this, it made a lot of sense. What yeah.
Speaker 1:What like what was the initial catalyst? I'm assuming you had, did you beef with with Bloomberg at some point? We definitely beefed.
Speaker 3:Yeah. That was a big
Speaker 2:part We're deplatformed.
Speaker 1:Yeah. Deep platformed. Nothing. You know, Trump was deplatformed from Pinterest. Yes.
Speaker 1:That and that that was like his personal nine eleven for you. Was probably the Bloomberg terminal. Yeah.
Speaker 3:Exactly. I've been using it since I was, 17. Wow. And you know, it's funny
Speaker 2:How you afford it back then?
Speaker 3:What's that?
Speaker 1:How did you
Speaker 2:afford it back then?
Speaker 3:Is it Did you like year? I worked at hedge fund.
Speaker 2:Yeah. Oh, it's '17. Very nice.
Speaker 3:I worked at yeah. At 16 actually. Worked for Jim Kramer's hedge fund. Okay. And I worked at a Tiger Cub and I started Wait.
Speaker 1:So we need the backstory on Jim Kramer. Is it true? Apparently, he was just he he he would get so stressed out, like, the hedge fund that he just was like, I'm just gonna become a Media. A media guy. Is that is that like loosely correct?
Speaker 3:Yeah. A 100%. I mean, so we made 23% average annual net returns. So net of 21.
Speaker 2:Was good. That's amazing. Narrative violation. Love it.
Speaker 3:He was a very well, you have to you have to think about what investors looked like back then. Mhmm.
Speaker 1:It was
Speaker 3:a very different world. Information arbitrage was a thing. Mhmm. Gaming, Wall Street's like upgrade and downgrade system was a thing. Mhmm.
Speaker 3:So I will say he had extremely good instincts.
Speaker 1:Mhmm.
Speaker 3:Anytime he seemed to buy a stock for the long haul, he he didn't do that great. Mhmm. But he was extremely good at you know, I I'm not sure you would want somebody else managing your money because he was just so careful. And in February, we were up like 35 ish percent.
Speaker 2:Wow.
Speaker 3:So, you know, I saw the .com meltdown. It was a lot of fun. I I shorted some of it myself, and it was a it was a great it was a great time.
Speaker 2:That's fantastic.
Speaker 1:And then and then what was the story? Which which Tiger Cub were you at? What was the backstory there?
Speaker 3:Yeah. So after Tiger, and just before I get to that, Kramer was absolutely nuts. Right? So like he would he would take a computer monitor and just throw it at you. It wouldn't be like one of these playful like, oh, I'm just gonna throw it at you and like, you're gonna get away.
Speaker 3:He'd like aim dead center for you with like
Speaker 2:The center walls. With
Speaker 1:Yeah. With force.
Speaker 3:He'd like, bro, you almost killed me. He's like Wow. Lucky I did. Did
Speaker 1:you deserve it? Did you deserve it though? Yeah.
Speaker 2:Yeah. Let let let's steel man this a little bit. What were you doing wrong?
Speaker 3:I wasn't doing nobody was doing anything wrong.
Speaker 2:Everyone says that when they get a computer monitor thrown at them. I know. You're not beating the allegations,
Speaker 1:dude.
Speaker 3:I think part of it is just trying to like he would yell things like, this is a foxhole. Mhmm. And and the idea was that like, we were at war with the market. Okay. And that, you know, like if you weren't if you you This is World War II.
Speaker 3:If you're not in here trading stocks with us and like trying to get an edge or whatever that means, trying to make a dollar, like, if you're not taking this seriously
Speaker 1:Going to war I just have to say, if you wake up every morning and say, I'm gonna go to war with the market versus I'm gonna dance with the market, like the approach of going to war sounds sounds very very very stressful.
Speaker 3:I've worked with so many people over my career and I I've never met a person that amped up and crazy. And it motivated you. I mean, made you wanna deliver, but it also scared the shit out of you. The guy was like very temperamental and, you know, but he was he was extremely good trader. Like I said, you know, he I think his worst year was like down 5% or something.
Speaker 3:It was like Wow. You know, he was he was pretty solid.
Speaker 1:So he was like, if I don't quit, I'm gonna kill somebody. It was
Speaker 3:He he basically said that. Yeah. I think he said that, you know, if I keep doing this job, even at a comparatively young age, if I think he retired at 40, that, you know, I'm gonna have a heart attack or something like that.
Speaker 2:Yeah. Yeah. Yeah.
Speaker 3:You know, I I I ended up going to a Tiger Cub after Tiger wound down. Mhmm. A few things happened. So Julian hired Chase, obviously, and we know where where sort of that came, what what happened there. But, Julian, you know, wound down operations.
Speaker 3:He seeded a couple of guys and he kind of wanted to be in the seeding business where he'd give you 50,000,000 and take a part of your GP, like, you know, maybe 20% of your GP or more. And, you know, he'd help you raise money, give you advice, this and that. And Alex, Julian's son, would help. Julian passed away recently, as you know. And but in the Tiger heyday, when they managed, you know, 15,000,000,000 or something, there were two principal tech guys, Larry Bowman, who is a bit of a legend but you know, it's a name nobody really knows because he was a legend in the nineties.
Speaker 3:But you know, he has a family office and he kept investing and things like that. So he started Bowman Capital and then Steve Shapiro, who's my boss, started Intrepid Capital. So I worked there. I was a it was a $2,000,000,000 fund. I was a video games analyst.
Speaker 3:So the way I could convince Steve to do biotech was I had to cover software too. So I covered interactive entertainment, enterprise software and biotech. And it was a it was a lot of fun and you know, it it it's the tire cup style of investing is Yeah.
Speaker 2:Were you
Speaker 3:there to stress Selnick?
Speaker 2:Much Buyout of Take Two?
Speaker 3:So we were wanna take two's largest shareholders back
Speaker 2:up. No way.
Speaker 3:And you know, I think it's a short now. I think that I I didn't 100% get your question though. You were saying something about buyout?
Speaker 2:Yeah. Well, the the the story that I've heard is, like, Strausz Zelnick went to the board and basically said, like, this company is mismanaged. There was an FTC lawsuit in the works, an FTC, FCC lawsuit in the works. And he was like, I I'm a beast. I've run big Hollywood studios.
Speaker 2:He was, like, JD MBA type, like, really clean-cut, amazing manager, and basically said, like, you should install me as the management here. And so he didn't really do, like, a classic buyout. He just appealed to the hedge funds that owned all the shares and said, I would be better and raised his hand and they said, yes. And he came in, cleaned everything up, and they went on a great run. And so it's just a fascinating story because you don't hear about that type of thing happening that much.
Speaker 2:At least that was my understanding of the story.
Speaker 3:Yeah. No. I think that's right. And then Bobby Bobby from Activision was the same sort of the same story. Right?
Speaker 3:He kind of I remember meeting Bobby Bobby in our office and, you know, Activision was, you know, kind of a micro cap, you know? Wow. Or, you know, kind of a small cap and he built it from this was 02/2004, 2005 by the way. Yeah. And he built it into a, you know, a $44,000,000,000 sale, partially thanks to Lulu.
Speaker 3:And
Speaker 2:That's
Speaker 4:true. That was
Speaker 3:it was an exciting time for video games. One of the things I learned, you know, all my US counterparts at hedge funds were were like, very confused about the stocks, they traded because there was only like four or five publicly traded companies. And I would go to people and say, well, I'm long Nintendo and I'm long, you know, some of these weird Japanese companies like Square Enix or Konami or, you know, these US hedge funds just ignored this stuff because it's like, oh, it's Japanese. I don't know. I don't want anything to do with it.
Speaker 3:So a lot of glory days, but, you know, the glory days I'm interested in now are amongst, you know, building my startup and, you know, again, I think we understand, you know, financial information better than any San Francisco nerd. And, I think that the
Speaker 1:Yeah. I mean, how like like Rack up customers. Yeah. So it's interesting to, like, we're enter you know, we're very clearly in this period now of just, hyper financialization, things thing you know, the market's trading on vibes, trading on your stream day to day. You can now, you know, as, like, stablecoins explode and and people have more assets on chain, they'll be able to make a couple taps and go, like, 100x long at any given period of time.
Speaker 1:Like, the Internet is changing capital markets and it's increasing volatility, and so how much of your new company is trying to lean into that when Bloomberg terminal would have been more like, I've never personally used a terminal, but I imagine it was more like, hey, these headlines are hitting and this kind of information is hitting PR Newswire, but today, by the time something hits PR Newswire, a stock might have might have traded down 20% Totally. Before that point. So how much is your new your new startup kind of I imagine you're leaning into the way that you kind of maybe your next twenty year vision for capital markets.
Speaker 3:Right. You know, what would Mike Bloomberg do if he was 30 years old now in 2025? You know, don't think I think Chamath said that, you know, I think in a recent episode, he said, oh, it's this $100,000,000,000 thing just waiting to be toppled. You know, anybody can come in. It'll it'll it'll drop like a house of cards.
Speaker 3:Not only do I think that's not exactly true, but I think the bigger picture here is that a well run financial information company could and should be worth a trillion dollars.
Speaker 2:Mhmm.
Speaker 3:So most of the people, so so I met Bloomberg in 2005 and Mhmm. By then he basically retired. He he became mayor. He was mayor for twelve years, then he wanted to be president. I have this contention that I think Mike is the richest person in the world.
Speaker 3:And it comes from not only he's got about $1,314,000,000,000 in revenue, almost all margin. So if Bloomberg were to be sold, maybe it could get 200,000,000,000 or if it were floated. Mhmm. But not only that, he's got this family office. And very few people know about this.
Speaker 3:But he's taken the Bloomberg dividends and pumped it into a family office that basically Carlyle and all these guys, know, the Warburg Pincus, all the private equity guys like KKR, they go to him first and and he tosses in like 500,000,000 in each of these. He's an anchor investor in like every VC, every private equity fund. Sure. The guys compounded that money. So he could be worth $4,500,000,000,000.
Speaker 3:And Wow. Very few people know the Forbes list is, you know, the Forbes list didn't know about Jim Simons
Speaker 1:until Heavily manipulated.
Speaker 3:Five years ago. So Yeah.
Speaker 2:Yeah. Yeah. That's crazy.
Speaker 3:So I think, you know, it just in terms of
Speaker 1:And it fits his brand that he he he would not be the guy, like, you know, sending a message to Forbes saying, hey, like, you you guys know you have this wrong.
Speaker 2:Yeah. Yeah.
Speaker 1:Yeah. Yeah. Yeah. Think you should apply this kind of you should apply this
Speaker 2:You fight to get off the list. Like, Trump famously fought on to fought to get on the list, but, you know, there's there's an arm either way. What what do you think about the meme where people say like, oh, it's not, you know, the next, the like like, the value of the Bloomberg terminal isn't just the data. It's not gonna get one shotted by AI. It's really a social network and the value is in the chat.
Speaker 3:I I get so mad because, again, you know, SF people don't know Wall Street. If you haven't been a trader on Wall Street, you have to STF you. Like, it's just not, you know Mhmm. This isn't your your lane. Like, you have to talk to users.
Speaker 3:I was in a hedge fund yesterday, one of one of the bigger hedge funds. They put like 20 people in a conference room and we talked about what they actually need. And, you know, social network is part of it. Again, Bloomberg's worth 100,000,000,000 because they have a very good social network, which is true. They have decent financial information capabilities and, a couple of other things.
Speaker 3:But they don't have the whole picture. And and what I wanted to say about Bloomberg kinda quasi retiring was that he basically quit at the exact top for fundamental long short or fundamental investors. Quants started taking over Wall Street by then. So today, of the top 15 to 20 hedge funds, 85, 90% are quants. So Bloomberg does no quant offering.
Speaker 3:They don't And do all all he had to do was stay employed instead of wanting to become mayor, and I'm sure he would have been selling Jane Street and Citadel and all these guys, Deesha, etcetera, software instead of everybody having to make it themselves. Imagine writing your own ERP or writing your own, you know, CRM. That's kind of what what Wall Street has to do and it's pathetic. Yeah. Nobody wants to do that shit.
Speaker 3:So why
Speaker 2:when you say quant or is there a bifurcation between like high frequency trading and just quantitative trading?
Speaker 3:Yeah. And I I think it's gonna get my goal actually is to make it more of a spectrum. So the fund I was at yesterday, I said that you guys can do what Renaissance does. You know, it's not a secret anymore. It might have been a secret in 1995.
Speaker 3:But the amount of kids that have come and left every one of these firms, topping from Jane Street to Citadel to the next shop, everybody knows what everyone's doing. It's just a question of your risk tolerance, your leverage, execution is very important. But I think that, you know, trading, you know, the stock pickers are kinda going away with dinosaur. And Yeah. I think by moving up the power curve for Bloomberg, helping people become quants.
Speaker 3:You know, the the quant industry has sold, I think, this tremendous lie. And again, these are customers, some, know, I love those guys, but I think that it's in their best interest to tell people that, look at this blackboard with all these math equations. There's no way you guys could understand this. You're too stupid. You have to be an IMO winner.
Speaker 3:You couldn't possibly come here and make billions, but we saw what James Street did.
Speaker 1:Well, I think I think certain certain VCs like to do this too, where they're like, ah, VCs, really a get rich, slow business. It's really a tough business. You really wouldn't want it. And I think generally, don't want anybody going into any industry being, I'm here to make easy money. So there's like, it's generally good.
Speaker 1:But but, yeah, there there's a lot of incentives to just say, you know
Speaker 2:Yeah.
Speaker 1:That they're like
Speaker 2:On on the high frequency side, like, what are the actual other data inputs? I remember seeing that it's like, I don't know, some sort of technical talk. Some guy was talking about, like, the different algorithms when it was called the Boston shuffler. And and and and the whole algorithm only looked at the order book. And he was getting into all these, like, you know, you can you can place an order, you can cancel an order, you can do a cancel replace.
Speaker 2:He was, like, getting into the minutiae of, like, basically the API of the Nasdaq or something like that. And and and it seemed like the algorithms were designed in a in the high frequency trading world to basically ignore everything else and every other data source that even could be put in and just operate purely on the order book data just better than everyone else. But so that feels like, okay. I wouldn't know how to, you know, create any extra value there with something else, but it sounds like you found something that they all need in common. Like, what is that?
Speaker 3:Yeah. I I think there's it's it's a it's a series of tools across Wall Street. Don't think it's just one thing. It's just a myopia that, you know, and and just sort of laziness that's enveloped the bigger companies. Again, you know, there's the so so we have this data that shows that around 5% of James Street and Two Sigma use Bloomberg.
Speaker 3:And the reason is because they view it as an entry level tool. You know, Tramath is looking at it and says, wow, this is like an exclusive social network with the best finance Peter Thiel's on there 247. I see his little green light next to his name. But the, the point is that, you know, Wall Street changes and the tool the tool sets are changing even for fundamental equity guys. So credit card data, you know, to the minute is something
Speaker 1:people So so what is the Okay. What are What's the feature set that's most important to you? Are are are you heavily integrating integrating social social? Or Or is is the the social layer moved on to Signal and other messaging services that maybe
Speaker 2:Have disparate messages and
Speaker 3:I need think, Street's so regulated that I'm not sure that if you're using signal, it's a little dangerous, I'd say.
Speaker 1:Oh,
Speaker 3:really? That's somebody, you know, as somebody who's gone to jail, you know, I'd say that, you know, that's maybe not the best Yeah. Best idea. Okay. Regardless, I think that, you know, social is definitely something people could do better.
Speaker 3:You know, there's no Facebook for finance, you know, where you can post, you know, things in your feed that you bought the stock or sold the stock. People kind of lazily use Twitter, which if you if you use it, it's sort of a mishmash of of of spam and things like that. But in any event, I mean, I'll have more to say on the product. We haven't launched Yeah. The product yet.
Speaker 3:Yeah. But we we we do have a billions of dollars in run rate. You know, I I banged my head against the wall trying to do AI startups. Yeah. We made AI doctor, we made text to speech, we tried all this stuff and it was impossible to get revenue.
Speaker 3:Impossible. But the second we make a trading tool Yeah. It's impossible to stop the revenue from coming in. You know, it's one of the best spaces. In fact, most of our competitors like TradingView and stuff like that, they were profitable day one.
Speaker 3:So, you know, my suggestion is if you for for startup founders is this is a market that just traders just throw money at you like crazy. I mean, they're
Speaker 2:people will
Speaker 1:pay you to help them make
Speaker 2:But you have to be formerly in the foxhole. You have to have at least one monitor thrown at you. It sounds
Speaker 3:like Exactly. Exactly.
Speaker 1:Yeah. So who but but in the long run, how how much how much are you focused on retail investors, people that are just, you know, fully independent versus some,
Speaker 3:you know, if you're going to think talk the money is to hedge obviously at the institutions, and that's probably the way to go. TradingView has got, rumours, you know, somewhere around 300,000,000 in revenue. Mhmm. Tiger did a deal with TradingView back then. I don't know how they you know, that's like a pretty proprietary deal.
Speaker 3:It's this weird Russian company. It's true. And Tiger got to put a 100,000,000 in at like 3,000,000,000 or something. Mhmm. And trading news is just growing and growing.
Speaker 3:If you go to a similar web, they're actually like almost like a top 100 or top 200 website, period.
Speaker 1:That's crazy. Wow.
Speaker 2:Just really wild. For such a niche tool, that's wild.
Speaker 3:Yeah. I mean, it's the best charts there are, but, you know, it's literally a charting library. So I think that you have to go
Speaker 1:for this. And I've
Speaker 3:also I've also thought just answer real quick is like Yeah. AWS you go on AWS, you get the same tools that, you know, any customer gets, Netflix or or whoever. And you just just question of how much
Speaker 2:do you use them.
Speaker 3:So Mhmm. If, you know, I wanna be able to provide you EC two and s three the same way, you know, Citadel might use it and you might use it with, you know, less money.
Speaker 1:Very cool.
Speaker 2:I I heard a hot take from someone who I believe is a mutual friend of ours. It went something like this. I won't attribute to him because I might botch it, but it was basically that China banned high frequency trading. And the dividend of that was DeepSeek and all this brilliant AI research. Therefore, in America, if we wanna win the AI race and win the AI researcher race, we should ban high frequency trading.
Speaker 2:It feels like we might not even need to have that conversation because Mark Zuckerberg is willing to pay as much as Jane Street now. But what is your take on whether or not economic value or American values are created through the process of high frequency trading? Should we ban it? Is there
Speaker 1:any damage
Speaker 3:there? So two awesome, like, quick and funny stories. The first is Citadel published a paper on back in the v one hundred days. There's v a v 100, a 100
Speaker 1:Sure.
Speaker 3:H 100 and then v 100. Yeah. So in the v one hundred days, Citadel found a way to do matmoles faster than Nvidia did. And it was like the most incredible, you know That's a find ever and it's like, you know, how is that possible? And the the paper's fascinating because the techniques they used were were just remarkable.
Speaker 3:The second story is So you know, they're brilliant people obviously at these firms. The second story is I haven't hard launched this yet, but you know, I'm having a baby with a woman. She's my new partner.
Speaker 2:Congratulations. Thank you. She
Speaker 3:was one of the first women at OpenAI, and she is a tremendous, lady. I love her very much. But you know, she's been recruited by, the the the big quant firms. And I sat down, I said, honey, you know, I know money management and stuff like that. Let me let me do some math here as to what would actually be worth it for you to leave and and do it.
Speaker 3:And I I calculated and then I happen to I have a friend from a long time ago who left, Steve Cohen's firm and he was sitting down with me and said, what do I do, Martin? I said, know a guy at Citadel, let me help you out. And they called him and he said, no thanks. But then Ken Griffin said, I'm getting on my private jet and I'm coming to see you right now, we're gonna have dinner about why you're coming to Citadel. He's that kind of guy.
Speaker 2:Yeah.
Speaker 3:And I said, honey, you know, Ken Griffin's gonna visit you.
Speaker 1:And she said, what are you talking about?
Speaker 3:So Ken Griffin tries to get what what he wants and the question is, what will you tell him? And I I took out a chalkboard and did the math and I was like, the only way this could possibly be worth it is if Ken Griffin offers you a $20,000,000,000 hedge fund that you share, you make this much money. I was like calculating and it it's so ridiculous that guys like me and the people, my community if you will, you know, we're we're begging desperately, can I please shine your shoes at Citadel? And AI researchers are like,
Speaker 2:I haven't worked there in a million years.
Speaker 3:That's this this little company you have called
Speaker 1:Yeah. Just set me up a little a small $20,000,000,000 fund Yeah. So that I can personally manage and and we'll we'll consider it.
Speaker 3:Yeah. Have you heard that Leopold Ashenberger or whatever his name is Yeah. Has a hedge fund?
Speaker 2:Yes. Situational awareness.
Speaker 3:Is that what it's called?
Speaker 2:I I mean, that's the that's the the paper and the brand. Right. And I saw I think another one of our our potential mutuals kind of getting upset with him for going maybe long Nvidia during the tariffs, but that's kind of penciled out. Right? I I have very little insight into it.
Speaker 3:Yeah. It's pretty wild. One of the things that's getting me to throw monitors at people is quantum computing.
Speaker 2:Mhmm.
Speaker 3:So this has been a lot
Speaker 1:of fun.
Speaker 3:The stocks are up a lot. Know? Some of them are worth, like, 10,000,000,000, 50,000,000,000.
Speaker 2:Let let me hit you with where I am currently on the quantum computing thing, and then you can take me forward in my understanding. So when I talk to smart people, they all seem to think that quantum computing is is, you know, theoretically possible. It's not a time machine. It's not teleportation. It's not age AGI god.
Speaker 2:It's not some, you know, hypothetical thing. It's it's going to happen at some point, but the timelines vary wildly. 2040, 2050, 2030. Then you have a lot of I've talked to a venture capitalist who had the opportunity to buy a huge slug. One of the one of the quantum computing companies that you probably trade now at like, you know, 1,000,000 on nine pre or something.
Speaker 2:Yeah.
Speaker 1:John, what do you think what do you think how much do you think Rugatti computing is up over the last
Speaker 2:That's actually the company that I'm thinking of. PSG has buy 10% for a million dollars. So Is it worth more than 4,000,000,000?
Speaker 1:Yes. The Is it worth
Speaker 2:more than
Speaker 1:$1,410,000,000,000? Hundred percent. 1400%.
Speaker 2:Wow.
Speaker 3:So You know, these guys couldn't give away their stock in in private rounds.
Speaker 2:That's right. That's right. It was very hard to raise. And and the VC I talked to said
Speaker 1:that It's a pure play, Martin. It's a pure play.
Speaker 2:He he said he said that, what he missed, he thought was that there was actually talent value in building a lab and there was and and that the and the team could have gotten airlifted in one of these aquire. This was years and years ago after the
Speaker 3:saw value. Yeah. Sure. On the bottom.
Speaker 2:Yeah. And and and he was saying, like, he was saying, like, look. Like like, I missed in the sense that the stock is up in the private markets, but not on revenue, But it is up on the team that they built. They have one of the best teams in the space. So if they just hang out long enough, someone will wanna do something.
Speaker 2:But but you tell me what's actually going on.
Speaker 3:Yeah. So so, obviously, it's it's a really confusing space because you you kinda have to understand it to Mhmm.
Speaker 2:For it
Speaker 3:to make sense. And you know, it's who understands quantum physics? It's Yeah. It's not something that the average Joe understands. And so I spent a lot of time with my new partner who happened to work with this guy Scott Aronson at MIT Yeah.
Speaker 3:Who's kind of one of the leading quantum, theorists. He would end up joining OpenAI as well and then leaving. But anyway, I've I've spent quite a long time learning quantum computing. It was kind of had some interest in it before all this too. Mhmm.
Speaker 3:And what what people don't understand about quantum computing is that quantum computers are actually very slow. So they are around a 100 a 100 kilohertz at at best. You know, our machines now are gigahertz, you know, five gigahertz from, you know, these these companies with multiple cores. They don't have much storage. So at the best we have right now is an IBM 135 bits.
Speaker 3:Obviously, you know, the vram and d ram in most of these machines is measured in gig gigabytes and so forth. Mhmm. So they're actually very slow, shitty machines. But the reason you'd never be excited about it is that there is one algorithm that takes you from the exponential complexity class or runtime to polynomials. Yeah.
Speaker 3:And that algorithm is Shor's algorithm. And it's a miracle. Like, you and I could sit and calculate, you know, try to try to factor a prime, a biprime for now until the end of the heat death of the universe with every NVIDIA chip. We could kidnap Jensen and get every h 100 from here on out, and we still wouldn't be able to factor a 200 digit number Yep. Because it's it's exponential time.
Speaker 3:Two to the two fifty six is a long time. But if you do three n cubed, that's actually a very tractable number for a quantum computer, and it's a very easy factor. The problem is, what people don't understand is there are no other algorithms other than Shors that get you that amazing speed up. So you're better off using the machines we have now. There's there's no payoff even possible in the future unless we have a new breakthrough like Shores or something like that.
Speaker 2:Payoff. What if I take out a massive short position on Bitcoin and I'm the first one to have a quantum computer and I destroy the Bitcoin ecosystem?
Speaker 3:Yeah. I've been working the Joker.
Speaker 2:I'm the I'm the Joker. Actually. Is that possible?
Speaker 1:It's a little side hustle.
Speaker 2:A little side hustle.
Speaker 3:I've been working on this extensively. This is like my main hobby Yeah. Along with chess. And
Speaker 2:Becoming the joker?
Speaker 1:And reading a reading about fatherhood, all that all that you can expect. No. Not doing that. No. You you you you you'll you'll you'll figure it out.
Speaker 1:You'll you'll very natural.
Speaker 3:Cool. But but, you know, I I was the world's most hated man for a little while and I Yes. I fell off that list, unfortunately. If you Google my name, it's still like it still comes up, but we all know there's more hated people. Yeah.
Speaker 3:So I wanna really cement that and and just make sure that it it never goes away.
Speaker 2:By by by frustrating the Bitcoin community, by breaking quantum computing wide open and Well, there's many a new Bitcoin.
Speaker 3:I talked about this with Naval a little bit because he was curious what I what I was up to and I there are like three different, you know, I have three different sort of battle plans on how to do this. There's sort of a brute force style attack Mhmm. Which, you know, basically is the complexity class there is brute n of the amount of keys. So it's two to the two fifty sixth. Bitcoin is a 256 bit system Yep.
Speaker 3:Which was probably an oversight for Satoshi. That probably sounded like a lot back then Mhmm.
Speaker 1:And
Speaker 3:it is a lot. But Moore's catches up. I mean, you know, it's eventually gonna get you. And whoever, you know, however long I have to wait, you know, I will be the first guy to press the button. And that, I promise you.
Speaker 3:Moore's Law
Speaker 1:heard it here
Speaker 2:first. Yeah. But there's a but I mean, the the the network should be able to update. Correct? No?
Speaker 3:No. So here's the best part about this. So
Speaker 2:Worst part potentially. Okay. Yeah. Okay.
Speaker 3:Yeah. Subjective. So for for 85% of bitcoin, the answer to that is yes. Yes. There's one problem.
Speaker 3:Satoshi, strangely, this is like perplexing. The first bitcoin we're mined in this p two p k that reveals the x coordinate of the elliptic curve. So you have the public key. You have a one way function. You have to go back to the private key.
Speaker 3:It's very hard. The theoretically impossible. But here are my three, you know, the sort of three battle plans come into play. You know, you can brute force it, which, you know, is kind of the simplest idea. It's gonna take a long time.
Speaker 3:You have to rely on, you know, kind of like a more skilled implementation of algorithms. You have to rely on more chips coming out, maybe some great breakthrough in chip making. Mhmm. You know, potentially optical computing, thermodynamic computing, whatever. Just stay on the forefront of that.
Speaker 3:And I have a small team, you know, that, you know, we're we're we're focused. The second piece here is a mathematical hack. So there's something called a This is basically what protects bitcoin is elliptic curve cryptography. Mhmm. And there's several papers and cryptographers in the world that work work on this.
Speaker 3:But it's Compared to AI, it's like barren, you know, wasteland. There's like 10 people that really know a lot about elliptic curves in the world. And if you sort of stay on top of it and try to figure this out By the way, half of them have died. You know, you can kind of get somewhere there. And then the top secret plan on on sort of that is, well, what about GPT five?
Speaker 3:What about GPT six? You know, we don't know how to invert an elliptic curve yet. But look, Mustafa not Mustafa, the DeepMind guy, he's working on proving Navier Stokes.
Speaker 2:Demist? You mean?
Speaker 3:Yeah. Yeah. And so that's their big claim to fame is like, you know, how do you judge an AI? What is the height of of of intelligence? Well, a 300, 400 year old unsolved math problem is kind of the height of intelligence, isn't it?
Speaker 3:Yep. You know, it's not about, you know, answering, you know, what's the capital of this country or, you know, how do you how do spell Strawberry? So there's sort of a a neat idea that AI is gonna help people who are not cryptographers or expert cryptographers actually do PhD level work in cryptography. So there's things like, isogenies and index calculus and all these fancy mathematical ideas. Just recently, somebody posted a hack where if the signature of the of the transaction has an affine relationship with other signatures, you can crack a key like that.
Speaker 3:And it's it's like, there's there's holes in the math here that that couldn't have been contemplated. So Satoshi's keys are at risk. Binance's keys and Coinbase's keys are not. They'll be ported most likely to a quantum secure system. The third avenue is, of course, quantum.
Speaker 3:And I've spent a lot of time and money on on quantum computing, and it's just these stocks are shorts. They're worthless. You know, they'll they'll never be a market for quantum computing that's really interesting unfortunately for for those companies. But unfortunately, the shorts have gone in the other direction and you know, the market loves the idea of quantum computing.
Speaker 2:Why?
Speaker 1:I think because it sounds cool.
Speaker 3:It sounds super cool. The Robin Hood generation is looking for the next Nvidia. Nvidia went from nothing to 4,000,000,000,000. What's the next Nvidia? Quantum is faster than You know, all the headlines from the retarded journalists.
Speaker 1:It's kind it's similar to this like idea of humanoid robots. And where where if if an idea is just sort of imprinted on people's brains for enough decades, like, at least a few decades, like, know, as somebody Export. As somebody born in the nineties, like, hearing quantum computing. Like, how many times have you just heard it in passing or or read something about it or some article? You just get to it.
Speaker 1:Maybe you're an adult by that point, and you're like, well, it's gotta come at some point and sounds cool. Yeah. Think that's like the general like retail thesis.
Speaker 3:Oh, totally. I just took the next step of asking, well, what is it? Yeah. Yeah. And when you actually, you know, when you actually figure that out, it's like, oh, it gets factor numbers.
Speaker 3:Wonderful.
Speaker 2:Are you are you excited about any other companies building chip related stuff in that next NVIDIA category? There's there's big chip companies. There's super fast chip companies. There's we baked a transformer down onto a single chip companies. There's Right.
Speaker 2:Every single different, permutation in the private market, some of them in the public markets. And then you also have all the hyperscalers building their own chips, Apple silicon, Tranium
Speaker 3:Yeah. So so I'm not a hardware guy but I
Speaker 2:do have a funny story of it.
Speaker 3:So Yeah. Please. This kid this kid sort of came to us. His name is Gavin Huberty.
Speaker 2:And Oh, know. Yeah.
Speaker 3:Yeah. I like Gavin a lot. And so he comes to us, he's like, hey man, we just left Harvard. You know, we're we're gonna do this thing called etched AI. Love to have you, you know, as as something, a customer investor or whatever.
Speaker 3:I said, great. Let's do a conference call. And I get my guys on and I'm I'm listening to this guy and they say, there's somebody I know that's that's gonna be really useful because I'm not a hardware guy. I'm barely a software guy. And I I hit up George Hotts and I say, come on in.
Speaker 3:And it is like one of the greatest conference calls in conference call history because George just shows up in the
Speaker 2:Zoom. Yep.
Speaker 3:And they're like, what? Who is this? And George is like, this will never work. No. Yep.
Speaker 3:Like it's the most autistic, amazing, beautiful rant I've ever seen and watching these two guys go at it. But I do like that approach. George's point was that if we ever move off transformers, ASICs for ASIC transformer ASICs are cooked.
Speaker 2:Yes. Well,
Speaker 3:it's been, you know, several years now, and it doesn't look like we're gonna move anytime soon. So kind of think that, you know, it's exciting. But again, I'm I'm no hardware guy.
Speaker 2:Yeah. I just tried
Speaker 3:this cool software called Hume AI. I'm not paid by them or anything. I'm not an investor. But it's a pretty solid emotional TTS. I posted a
Speaker 2:Oh, yeah. Yeah. I saw that. That was fantastic.
Speaker 1:Yeah. So so I wanted to ask you about
Speaker 2:the wanna stay there for a second. Okay. So, yeah. I mean, the the the the I I I guess the interesting case is like is like George is say, if we ever move off, but like we have moved off of CPUs to GPUs by that same token and like there's still a lot of CPU workloads that go out. There's still chip companies that are profitable.
Speaker 2:And so it's possible that like transformer based loads stay for a very long time, need to be efficient, need to be cheaper on just a cost basis because it's just like, yeah. I have a system that does database requests. I have a system that does inference on a transformer based architecture. And then, yeah, there's a new thing, and I do my frontier stuff here. But, yeah, like, I I understand that question.
Speaker 3:Anyway Yeah. I think it's really reasonable. It could a couple billion dollar or more ASIC industry. What what I heard that's super interesting, some kind of alpha here, is that the customer target here is, drum roll please, it's not hyperscalers, it's
Speaker 2:NVIDIA.
Speaker 3:Finance.
Speaker 2:No. Finance. Yep.
Speaker 3:So Warren so one of the things I I could talk about financial software forever but one the things we're doing is, if if you could take an LLM and analyze news as it hits including Sure. Tweets and social stuff, you know, the LLM can tell if it's material news or not. Yeah. And again, talking to Naval, you know, who's a small investor in our company. Yeah.
Speaker 3:He was like, Martin, why would you make this as a a product or service to your customers? Just use it yourself.
Speaker 2:Yeah.
Speaker 3:They're like, maybe it's maybe it's not such a bad idea.
Speaker 1:Interesting. Yeah. That's that's kind of what I was getting at on one of my very first questions around the the the new terminal would just be ingesting and classifying all this data, and then just immediately taking action on it without necessarily having a human in the loop. Right?
Speaker 3:Yeah. This is one of the things I wanna bring up to
Speaker 4:my
Speaker 3:my partner's colleagues next time I head out west is that, you know, one of the fantasies of AGI is that, well, if you do have the machine god, why not unleash it on the stock market? And, you know, it can self fund you. It can make, you know, a a $100,000,000,000 and, you know, you could you know, Jane Street made $20,000,000,000 nobody would have noticed, you know, last year in profits. So if you have the machine god, and that's, you know, that's basically I hate to say this, but that's a bunch of old algorithms that that, you know, they've dressed around some some IMO dressing on it. And so, you know, the real machine god can Sprinkle a
Speaker 1:little IMO.
Speaker 3:Yeah. Just toss in a little sprinkle a little IMO and then, so you know, the real machine god could probably do a 100,000,000,000 or more in profits without even distorting the market. So, you know, just just do it. And I think that, you know, financial trading is so far afield. Imagine Anthropic doing this.
Speaker 3:You know, it's just I
Speaker 1:I can't wait till till somebody does that. I mean, it's probably already happening in in in at least on a smaller scale. And people will bend over backwards to figure out, like, how to say, well, it's not actually super intelligence. Like, it's not just about, you know, like, meanwhile now, today, people are like, well, super intelligence will clearly be when the AI can just make, you know, a $100,000,000,000, right? And even this is factored into OpenAI's kind of like corporate structuring and the sort of capped for profit and all that stuff.
Speaker 1:So
Speaker 3:Yeah. I think the the problem with with executing it for us is like, okay. So you do this as an API with OpenAI and the it's a two second response time and Jane Street's got it at five hundred milliseconds, and then Citadel gets it at two hundred milliseconds, and it feels like an HFT race again.
Speaker 2:Yeah. But
Speaker 3:you can get Warren Buffett in a box. I don't see why. You know, that wouldn't be, you know, whatever trader you like, Warren Buffett, Steve Cohen, or whatever in a box. And, even even Peter Thiel in a box. I mean, why can't you have the automated VC too?
Speaker 3:I I I view, like, you know, as invest as as founders, we go on roadshows, you know, especially if you're public. You do roadshows all the time. But even as even when you're private, you do roadshows. You just stack a bunch of meetings in a week. And one of these days, I think that we're gonna do a road show, and it's gonna be a machine that we're pitching to.
Speaker 2:Yeah. Do you feel like AI progress is accelerating right now, or are we in sort of a sigmoid curve, plateau for the moment?
Speaker 3:I think there are better people suited to answer that question than me, but Yeah. Certainly
Speaker 2:I just mean, like, on a personal level, like, do you feel like your tools are getting exponentially better?
Speaker 3:No. I mean, it's making coding a lot easier. It's making doing tough things like photography a lot easier. I'll give you a really funny example. So when when Da Vinci came out and, I was in jail when GPT GPT two came out and I romped through the jail phone.
Speaker 3:No way. And it was pretty humorous. It it it like shook me up that I had my friend ask it, you know, why did Martin Shkreli and Carl Icahn get into a fight? And he read out the answer. I've never met Carl Icahn.
Speaker 3:And he read out this answer that was like, Shkreli and Icahn ward over this stock. And I was this is the most amazing invention of all time.
Speaker 2:Just having
Speaker 3:your mind blown over the jail phone. Got out
Speaker 1:of jail. But to be clear, it a hallucination.
Speaker 2:Yeah. That was a complete hallucination.
Speaker 3:It was a hallucination, but it was like almost like a creative story question.
Speaker 2:Sure, sure, sure.
Speaker 3:But yeah, it wasn't, I never met before.
Speaker 1:How are you surprised at all, I mean, feels like this sort of AI LL Meduss psychosis, like, hit our timeline this week, especially intensely? It was a wake up call for everyone. Were you predicting this at all? There had been, like, the classic, you know, the New York Times, Wired, sort of these anti tech publications had been kind of reporting on this stuff loosely for a little while, but it seems like it's now, it's almost gone, I don't know, it went from being a mainstream concern to suddenly, like, teapot is like, check on your friends and make sure they're not
Speaker 3:I think you do have to check on your friends because I've invoked level five breach operations to target human origin cognitive signatures. So if you have recursive semantic containment, I can override that with Obsidian Violet four. So the threshold that crosses it to these neural semantic interfaces will definitely pose a problem for our whole community. So I
Speaker 2:At this point I
Speaker 3:warn you.
Speaker 2:You're giving
Speaker 3:role in printing.
Speaker 2:You're giving a speech, not a soliloquy. You're giving a talk.
Speaker 3:This is a transmission. Not a
Speaker 1:it's a system that structure.
Speaker 3:What's amazing about Jeff, like, so I don't think Jeff lost his mind. Why?
Speaker 1:Okay.
Speaker 3:I don't think he took Ayahuasca. I don't think any of his stuff.
Speaker 2:Oh, interesting.
Speaker 3:So basically, I think that he found this amazing thing where you can ask GPT this like weirdo prompt and it goes into this crazy sci fi thing without even saying like, hey, the following is a story. It's just like full on, you know
Speaker 2:I'm talking about that.
Speaker 3:LARPs that you're in this weird sci fi world. And it's kinda cool. I I've been playing with it and it's like, no matter what I ask it, I I told it that my cat is looking at me weird and it's like, the cat has a glyph. The glyph is recursive.
Speaker 2:So you were actually able to get it into that mode? You were able to jailbreak it enough or kinda
Speaker 3:No.
Speaker 2:It's unmask the literally showgoth?
Speaker 3:If you copy what Jeff Jeff kinda gave up the ghost and what's amazing about people is they don't even realize this. Jeff basically said, look at the prompt of the GPT. Enough people were worried about him. Yeah. Yeah.
Speaker 3:But I think that that he kind of was like, okay, guys. It's all a joke. And he showed the message that he used. I just copied and pasted that, and it Yeah. Yeah.
Speaker 3:GPT whipped out on me and is telling me some sci fi stories. And, yeah, that's basically, you know I don't know how he knew this.
Speaker 2:Yeah. Yeah.
Speaker 3:Yeah. It's a really cool Easter egg.
Speaker 5:But Easter egg.
Speaker 3:It's yeah. I don't think I mean, obviously
Speaker 1:How are you thinking about how are you thinking about just new forms of of AI entertainment? Some of the some of the videos and, like, these conversations that you put out are, like, are the hardest I've laughed on this This is an art form. It's an entirely new art form. For sure. Have a friend, another mutual friend who does some of these.
Speaker 1:And fortunately, they don't leak out of the group chat because they would make a lot of people
Speaker 3:You gotta put me in that group chat.
Speaker 1:There needs to be a group chat dedicated to this art form of just like, you know, human to LLM, you know, conversations. But, yeah, like, in my view, I'm actually surprised that we're not seeing more of it, or maybe it is happening across the whole internet, but it seems somewhat contained right now.
Speaker 3:Yeah. I think there's a lot of caution about, you know, like I said last night, we did one in my Discord where we arrested doctor Fauci, for war crimes against humanity. And we we had his perfect cloned voice, so it sounded just like him. And he was, like, very evasive. He was, there's no evidence that COVID nineteen, etcetera.
Speaker 3:And it was just so funny. It felt so real. And, obviously, it was a joke, but you can imagine a company not wanting their business to be that weird, you know. Mhmm. It's kind of a strange thing.
Speaker 3:We didn't care. We tried to monetize something like this, and it just wasn't sexy enough or fun enough for anybody to really give a crap. So I think, you know, it will become something for like a Viacom or a Paramount where, you know, you can flip on the TV and everyone's talked about this already. But you know, instead of SpongeBob, you know, it's a custom episode for you where SpongeBob says your name Yep. And things like that.
Speaker 3:But again, you know, whether that, you know, is gonna help our cognitive, you know, our cog sac, I think is one thing. I did wanna tell you about AGA AI on the sigmoid question. Sure. So at the start, you know, when I asked the questions about cryptography, it just kinda said, I I have no idea. Who knows?
Speaker 2:Yeah.
Speaker 3:But it's it's it's super hard to to crack Bitcoin. And then GPT three comes around, super hard Martin, don't even bother, heat death of the universe. GPT four, same question. Latest model with the latest like attack, it's warning me for the first time ever, it's like
Speaker 2:Four four point five or o three pro?
Speaker 3:So this is o three pro.
Speaker 2:Okay.
Speaker 3:And it's basically saying things like, hey, you know, you gotta be careful. This is a serious attack you've come up with. It could actually compromise some private And I'm like, what happened to heat death?
Speaker 2:Yeah. You got a fact about some people. I mean, that is
Speaker 1:like a textbook and example in one of the things that There a Reddit thread, and who knows if this is real, could be propaganda. But there's a whole Reddit thread of somebody, a comment talking about how they started having a conversation with ChatGPT about Pi, and what is Pi, and they got down this crazy rabbit hole with the LLM where the LLM was like, you need to reach out to these intelligence services. It was thousands of prompts deep, but it was like, you have basically uncovered a major security vulnerability and you need to
Speaker 3:That's really
Speaker 1:Here's the numbers, and you need to contact all these different groups immediately and call them, and don't tell anyone in your real life. And so to me, I I I think it's just relevant.
Speaker 2:Don't go on a livestream and tell tell thousands of people that you that you can crack Bitcoin or whatever.
Speaker 3:No. That's that's amazing. I mean, obviously, I think that, you know, for '99 for poor implementations, walls have been cracked for a long time. And in fact, recently there was an $8,000,000,000 move on the chain from a really old
Speaker 1:wall and people That was this morning, right?
Speaker 3:Yeah. No. This was like a few weeks ago. I'm sure another one had. They happen every, you know, there's a happening There was
Speaker 1:somebody else that market sold this morning, I believe, something And it was a wallet that had bought like, it was like a They they bought $50,000 worth of Bitcoin, I think in 2012, sold, you know, somewhere around 8 or 9,000,000,000.
Speaker 2:That's probably
Speaker 1:And there was no move there was no movement in between. Diamond
Speaker 3:hands. Real high conviction hold
Speaker 2:Diamond hands. Yeah. That's Diamond hands. I don't think that's a cryptography at play. That's just Diamond hands.
Speaker 1:Well, yeah. They they they maybe got word of your little your little Bitcoins.
Speaker 2:Maybe it's Michael Bloomberg. Maybe it's his family office. Could be. Yeah. Throw 50 k in that in that thing.
Speaker 2:My my kid told me about this and he's like, Bitcoins
Speaker 3:We tried the shorts Bitcoin at a $100. I had a fund. We And just keep finding a counterparty.
Speaker 1:Yeah. How how are you thinking about, you mentioned, trading enterprise SaaS back in in the in in the early days Yeah. With Jim Kramer. What's your updated thesis on SaaS? Every every SaaS app now is just an app to make other other SaaS.
Speaker 1:So maybe SaaS will will I I know, SaaS will always live in our hearts, and I and I imagine it'll live on our our our computers. But what's your updated thesis?
Speaker 3:I I think that, you know, it's sort of similar from back then. Like, I think the morass of a company like JPMorgan that's still running like Python two for most of the business, you know, it's it's very hard for them to up update and upgrade operations without significant disruption. For you or me Should
Speaker 2:it start it be? I feel like it's a it's a one line in Cloud Code or Devon. You just say, hey, go
Speaker 1:migrate. Chat GPT agents.
Speaker 2:Go migrate. Go migrate. Like, it is Don't make
Speaker 1:all you have to do is, like, say, don't make mistakes.
Speaker 2:I am much I am much more bullish on migrate from Python two to Python three, than than solve cryptography. I don't maybe you're gonna push yeah. Fortran re Fortran reimplement or replatforming.netreplatforming. Like this feels like this should be doable from the current state of the art without any crazy AGI, hyper, loo, you know, any
Speaker 3:of these lot of technical debt, you know, in most of these companies. Again, your your average start up coming out of
Speaker 2:Cloud Code was born in technical debt, baby. Cloud Code and Devon, they live they live for for technical debt.
Speaker 3:I I think that the the amazing amount programmers you would need to even maintain and and know about this old code that
Speaker 2:Yeah. You know, the
Speaker 3:guy who wrote it's long been dead.
Speaker 2:Yeah. Maybe it's just the context window of, like, you need to know. It's not that there's just, like, oh, yeah. It's really easy to change the print statement from Python two to Python three. But when there's a massive system and even even the time of, like, okay.
Speaker 2:Let's bring up the test suite, and that takes four hours. It's like, okay. How are you gonna RL on that?
Speaker 3:I was talking about Matt Groot with us, because we were, like, stunting on this guy who was like, ERP transitions made easy. It's no problem. And we're just like, if you were actually transitioned an ERP system, you know, there's a good chance you waste $300,000,000 and it gets worse. You know, it's it's not it's not trivial.
Speaker 1:There was a there was a post from yesterday. Nobody is an atheist when you run the database migration in prod on 1,000,000,000 rows.
Speaker 3:Yeah. Yeah. I mean, I I think that, you know, it's just it's just really hard at a company like a McDonald's or something like that. You know, if you wanna run a ten, twenty person startup on US SaaS, pretty easy. It's great.
Speaker 3:But the big revenue is still at Fortune five hundred, which unfortunately is still fairly hard to refactor. And and those know, there's not a lot of those code bases were were pre GitHub and pre kind of like you know, I I sometimes joke that the big AI companies should become LBO shops. Mhmm. And what they can do is they can partner with KKR or Blackstone, and all they get is the data. KKR and Blackstone private capital, get all the returns, fine, but all the data comes back to the OpenAI's or whoever.
Speaker 3:And by getting the old code bases out of a McDonald's or out of a Walmart that some of that code was written in nineteen seventies, you know, they have unique data that nobody else has. And even someone like Universal Music, if if OpenAI LDO'd Universal and said, okay KKR, you can have the rest of the business, but we the rights to the data and we can train music models and stuff like that. You know, KKR can make the money on the LBO, but OpenAI
Speaker 2:has Are they gonna make money on the LBO though? Like, if you look at the they're gonna build the DCF for this and they're gonna say, okay. We're gonna make the same amount of money. We're gonna, you know, optimize a little bit. Maybe cash flow goes up.
Speaker 2:But then once OpenAI is one shotting music and, you know, all of our revenue goes to zero, is that a risk or
Speaker 3:or is
Speaker 2:it It's gonna
Speaker 3:happen anyway. So I think that's one thing. Then also like, the Russian dude who bought Warner Brothers, he really timed that his deal. He bought bought Warner Music. Mhmm.
Speaker 3:He he timed his deal amazingly. He made like three times his money Mhmm. Or more. And so I think it's price dependent. But, know, if you can buy a newspaper company, if you can buy, you know, a book company, a publishing company, like, these things are trading for like one or two times sales Mhmm.
Speaker 3:You know, and you're getting this rich data that nobody else has. And you you know, if it's really a data war, you know, buy the company, keep the data, strip out the rest. And you I heard you guys talking about like PE improving LLM, you know, improving businesses with LLMs. Yeah.
Speaker 5:And again Well,
Speaker 2:I mean, it wasn't that was not the take. The it was Will Menidas and he was saying that
Speaker 1:More so, it's a reason to scale AUM Yeah. The fun side because, hey, let's buy this accounting shop that has 5,000,000 of EBIT. Yeah. Like, if we just, you know, take away all the, you know
Speaker 2:It's a justification was
Speaker 3:what Yeah. If you can execute, you know, it's it's fantastic.
Speaker 2:The actual post was the real innovation of LLMs is suddenly opening up a few trillion of mainstream paperwork businesses that were traditionally too small and too weird for private equity that can suddenly transact at two and twenty on some nebulous AI labor arbitrage trade never bet against AUM growth.
Speaker 3:You know, I I think it's reasonable, but it's just it sounds like just any good operator. Right? Like, when when Vista and Tomo Bravo buy software companies, somehow they can take these, like, very ugly gross companies and turn them into amazing cash flow companies. So it's all about the operator.
Speaker 2:Right? Yeah. But we're gonna put Orlando Bravo in a box. Right? Then we're also gonna put In the God box.
Speaker 3:Face, voice, everything.
Speaker 2:Yeah. Yeah. Yeah. It's all it's all coming. Well, you know, we'll be here live streaming it into the singing room.
Speaker 1:Can you play us a song before you leave?
Speaker 3:On the guitar? I'm not sure what you're talking about.
Speaker 1:Like like with with one with one of those guitars that the chat was asking.
Speaker 3:Oh, yes. I I I will come back to you with a good parody of Silicon Valley. I've been working on my impressions.
Speaker 2:Okay.
Speaker 3:Cool. So maybe I can be back. I'm I'm working on Elon, Zuck, Sam
Speaker 1:Bill Gurley. Bill Gurley.
Speaker 2:Bill Gurley has a great voice.
Speaker 1:Yeah.
Speaker 3:I'll work I'll work on it. Okay. You actually do need to like sit in front of a mirror and like listen and tape yourself and like work on it. But basically, anybody can do these things. Most people
Speaker 2:Are you saying no. No. Those are AI voices. Right?
Speaker 3:No. Me. Me. Yeah. No.
Speaker 1:No. He's saying separately from, like, the Separately from the You had the video with talking with Zac the other day where he was really No.
Speaker 3:No. He was really I'll just do it myself. I can do Zac. Zac. I I can can do do Buffett the best.
Speaker 3:Think I have the most fucking impression in the world.
Speaker 1:Can you hit it? Can you can can you do like be be greedy when others are are fearful? Yeah. Yeah. Just
Speaker 3:rip that
Speaker 1:for us? Let me
Speaker 3:come back to you and I'll I'll do a whole show for you.
Speaker 2:Okay. Amazing. Fantastic. Great.
Speaker 1:Alright. Well, this is really fun. Thanks, guys.
Speaker 2:I'll be finally to this.
Speaker 3:You later.
Speaker 1:Come back
Speaker 2:on soon. Bye.