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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 TVBN. Today is Monday, 05/12/2025. We are live from the Temple Of
Speaker 2:Technology, the fortress of finance, the capital of capital. We are wearing white suits. You know what that means. The market is ripping.
Speaker 1:The market is ripping. I never doubted it for a second. Never doubted America for a second. Never doubted the market for a second. We were we were never gone, and yet we are
Speaker 2:so back. Back.
Speaker 1:We are so back.
Speaker 2:We are so back, John.
Speaker 1:And we got a great show for you today. We're diving into we got a bunch of fun stuff. We're talking US China trade deal. We're talking Trump EO on biotech. We have a few biotech folks coming on, talking about drug crisis, talking about Parker himself.
Speaker 1:TJ Parker's coming on. Cremieux is coming on. A couple other folks. We have here. Here's the full breakdown.
Speaker 1:We're gonna dive through everything. We're gonna give you a market recap, break down The US China trade deal, break down the Trump EO on drug prices. Is there a new Air Force one coming in 2025? Polymarket has an analysis. There's a whole bunch of rumors.
Speaker 1:There's a piece in The Wall Street Journal about it. And, of course, Perplexity is raising more money. They're in they've advanced from regular talks to advanced talks. It's big news. Sighs.
Speaker 1:Success. It kind of is with Perplexity. It's a young company. Then we have a whole bunch of guests coming on. Kremutest, Jack, Pippa, Egan, and Gabriel.
Speaker 1:And then I think we got cut off at the end because we have even more people towards the back half of the show. We have maxed out the number of slots on our on our graphic, and we will have to advance and go deeper and get a better graphic of in the future. Anyway, let's kick it off with this post from Joe Wisenthal, the stalwart. He says recession odds are way down from the highs, though still up substantially from the start of the year. So things are looking better than they were a week ago, two weeks ago, three weeks ago.
Speaker 2:Yeah. Think we got up to, what was it, 6060%.
Speaker 1:At one point. But we're pulling through. We're doing okay.
Speaker 2:Now it's down
Speaker 1:42.
Speaker 2:Probably has multiple holes in his wall. That's just slamming slamming him.
Speaker 1:There's a new order coming, but not today. Not today, Ray. Not today, Ray. Yeah. Joe Lisenthal summed it up.
Speaker 1:He said the two biggest losers today are people hoping for a Trump led economic catastrophe.
Speaker 2:Keep going.
Speaker 1:Members of the big chess party who thought the terror announcement was some brilliant strategic plan that would reshape the global That's so good. In a way that was beneficial for The US. And so huge win for the nothing ever happens crew. Yes. Because we essentially round tripped right back where we started.
Speaker 1:The market went down, the market went up, and we're back right where we started. But
Speaker 2:Yeah. The nothing ever the the nothing ever happens on Nothing ever happens party. For the nothing ever happens May poly market is sitting at 80 78% right
Speaker 1:now. If you're joking.
Speaker 2:No. They actually have market.
Speaker 1:That's where nothing ever happens?
Speaker 2:Yeah. I
Speaker 1:was like, how how do they measure whether something happens?
Speaker 2:Well, I think we would know if something happens.
Speaker 1:You know? We would know. Yeah. You'll definitely know if something happens.
Speaker 2:Here. I'm gonna have nothing happen. Have the team pull it up.
Speaker 1:Okay. Pull that up.
Speaker 2:Guys, we have
Speaker 1:a screenshot. These are also macro podcasters. Yeah. Yeah. Yeah.
Speaker 1:That's wild. But you gotta give us credit here. Couple weeks ago when the tariff news hit, we were very cautiously neutral. I guess we were kind of in the camp of nothing ever happens. But I I was saying this feels given the market's off, it feels like COVID.
Speaker 1:It feels like the interest rate hikes. It feels like o eight crisis. We could eventually if this gets really bad, we could see thought leadership pieces from venture capitalists about this. But what did we say? We said that
Speaker 2:Sequoia didn't
Speaker 1:They didn't drop the memo.
Speaker 2:First. They didn't drop the memo.
Speaker 1:Drop the memo because the the nature of this was different because it was self inflicted, and therefore, it could always be pulled back, and that's exactly what we've seen. And so we went we went there and back again, and we're back where we started, basically. But there's some good stuff in there. There's some bad stuff. I think I have some opinions, and Jordy has some opinions, and, we'll we'll break through.
Speaker 1:But Q Cap summed it up nicely, said, come tell us about the US empire collapsing, honey, and Ray Dalio's in the in the attic. Very sad. It's a great great post. Great post. Anyway, the surprise US China trade deal gives global economy reprieve.
Speaker 1:Tariff reductions are bigger than expected, and Besant says neither side wants to decouple. So a few days ago, it would have seemed almost impossible.
Speaker 2:Boys again. We're boys again. Did we just become boys again? Yes. Seems like it.
Speaker 2:Everyone loves to When the announcement went out yesterday, I read it, the the one that was on the White House website. Yes. I read it as very soft. Like nowhere in that announcement was anyone taking any type of real victory lap, if you actually read between the lines.
Speaker 1:Yeah. But it's soft in what way? Like soft like this is not a We
Speaker 2:got some things that we wanted.
Speaker 1:Okay. But not anything specific.
Speaker 2:But, anyways, we can we can go forward and
Speaker 1:That's weird because normally I mean, I I feel like the the the the White House press release is always gonna be different from the from the Trump truth social post, which is probably gonna be claiming victory in, like, the most aggressive fashion. But, yeah, even that, I haven't seen very much aggressive, like, we won from the Trump camp broadly. So I don't know. That's kinda weird. But
Speaker 2:because we're back where?
Speaker 1:We started basically.
Speaker 2:To where we started.
Speaker 3:Yeah.
Speaker 1:And yeah, mean, has anything changed? I don't even know. There's some tariffs that are sticking around, I You,
Speaker 2:offline earlier, you made a good point, which is that even if nothing changed the mindset of the American Yes. CEO executive team is that after this is that generally you can't bet on stability with China forever. Yep. And if you're not willing to think about alternatives.
Speaker 1:We haven't even talked about that hat. Oh. So good. You just dropped the hat.
Speaker 2:Just dropped the hat.
Speaker 1:Just no no comment. Yes. So anyway, my my my my thesis here, I'm not trying to be, like, like, a shill for the the the the the history of the last three weeks. I think it is pretty chaotic. But, the the interesting takeaway is that, in the intervening period, you did see a lot of CEOs Yeah.
Speaker 1:Think seriously about what what it would take to reshor, what it would take to build a new factory in America, shift to a con contract manufacturer in America. Some of those deals probably got signed and will stick just because the the immense pressure of the 45% tariff meant that, okay. Let's work a deal. And then enough of that happens, and then maybe some of those deals stick around where, yeah, sure, it's not as competitive as if we went back. It's not as cheap as if we went back on our move to move we, like, we moved to America.
Speaker 1:We could move back now because the tariff's kinda gone or it's it's dropping, but we always know that there's this risk that the tariff comes back. It made the idea of a really, really bad trade war very, I don't know, real. It like, it felt real. And so this happened at the end of q one. There were a lot of q one board meetings that happened during that era, like the the the Trump trade war era.
Speaker 1:And It was short. It was short, Memorable. But a lot of those a lot of those people probably at least walked through the question of what would it take to decouple.
Speaker 2:And somebody could push back on that and say, Trump could have just said, hey, in 2026, we're gonna be implementing, you know, a 45% tariffs in these industries. You would have a year Yeah. To make changes so that your business survives and we can, you know, reshor Yep. The industries that are strategically
Speaker 1:There would have been the lower volatility option. Yeah. But if you would like volatility Yes, yes, then Yeah. If you're long vol, you you hate that. Yeah.
Speaker 1:But but I mean I mean, seriously, like like, if if that had been the plan, if it had been, hey. There's there's a 45% tariffs coming in a year, do you think that the q one board meetings would have been that serious? Because a lot of people would have said, well, like, yeah, we probably should get started about thinking about finding a co packer in America or think about how we route our supply chain, etcetera, etcetera, as opposed to all hands on deck. Let's go and make this a priority. Let's go and see if there's an option here.
Speaker 1:So I I I don't necessarily think it's, like, a good outcome. I don't really know, but I think there's something here. There's, like, a silver lining where at least most executives went through the mental exercise in the last month of what would it look like if we did decouple with China. And some and some of those CEOs will say, you know what? Let's actually just do that plan now.
Speaker 1:And I don't know that that's gonna be a huge boom in reindustrialization or completely reshape the global economy or world order, but at least American companies are more prepared now. So I think that that's like maybe I would call it a silver lining, not like a this was how I was always planned to be and this is like a good outcome.
Speaker 2:Big chess.
Speaker 1:Yeah. Yeah. I'm not I'm not
Speaker 2:I'm not a member of
Speaker 1:big chess. But remember, we talked to Jordan Schneider at China Talk, and and I was like, Jordan, like, you're you're all doom and gloom right now on these on this trade war. Is it possible that in six years or we're talking about this like we talked about the first trade war during Trump won, which was, like, not great. And all the economists said that one was bad, but, like, we got through it, and it was okay. I was kind of in the nothing ever happens camp.
Speaker 1:And he was like, no. No. No. No. This this one's different.
Speaker 1:It's so much worse. And I was like, but Trump can just roll it back. Right? Like, he could do that. I'm not saying he's predicting that he will, but, like, he could.
Speaker 1:And he was like, oh, but, no, it's like, this is different. This is way worse. And I think I'm right. I think I got them. I don't know.
Speaker 1:We'll have to see. We'll have to roll the tape and and get them back on and actually debate it. But it feels like this this could be a win for a team. Nothing ever happens.
Speaker 2:Yeah. Right now, the market is certainly pricing that in,
Speaker 1:John. But it's also it's also just a ninety day Pause. Pause. And so it's totally possible that things heat back up. Right?
Speaker 1:And then we could be talking about disaster and more trade war. But hopefully not because we're buddies now.
Speaker 2:We're friends. Yeah. Yeah. We're boys again. Yeah.
Speaker 2:We're boys. Benchmark, go forward with your mass investment. Take it all Just
Speaker 1:do it.
Speaker 2:That was crazy. That that kind of came at the end of the week.
Speaker 3:But
Speaker 2:Yeah. The the treasury department is investigating them. Yep. I'm interested to see how that that works out.
Speaker 1:Yeah. You really saved Sonia when I asked her that question.
Speaker 2:Yeah. You really put her on the spot.
Speaker 1:I I don't know. Why not? I I'm like, I have to train myself that not every VC is as loose lipped as Delian. Yeah. And some of them have decorum.
Speaker 2:Yeah. Yeah. Yeah. They don't like to talk about other
Speaker 1:I'm just so used to like, oh, well, yeah. Like, Delian will talk about any deal, any company, any other VC. Most other VCs are diplomatic, but not Delian. So that's why we have him on sometimes. That's why we have diplomatic VCs on sometimes.
Speaker 1:Anyway, let let's go through what actually happened with The US China trade deal. The world's two biggest economy biggest economies unwound for now. Most of the tariffs they had imposed on each other since April in a tit for tat battle that was threatening to stoke US inflation, crash China's export engine, and upend the global economy. Stock markets in The United States and elsewhere surged on the news. The dollar and bond yields rose, reflecting expectations for faster US growth as trade tensions recede.
Speaker 1:Exporters breathe a sigh of relief. I'm sure Ryan Peterson got his first sleep score above 50 in a month.
Speaker 2:He he he deserves it.
Speaker 1:He does. Investors and analysts said the outcome was much better for the global economy than they had expected on Saturday when The US and Chinese negotiators started. Two days of intensive talks at the Geneva residence of the Swiss ambassador to The United States.
Speaker 2:Great setting. Great setting. Probably some type of lake view
Speaker 1:Yes.
Speaker 2:I would have to imagine. Yes. Be hard not to have a lake view in Switzerland, to be honest.
Speaker 1:Yeah. Switzerland's kind of kind of set up to be this like Kind of like Switzerland the negotiation. Yeah. Yeah. Geopolitical.
Speaker 1:Yeah. It's kind of like the Switzerland of
Speaker 2:Of like geopolitical negotiation.
Speaker 1:Yeah. Exactly.
Speaker 2:That's right, John.
Speaker 4:It's pretty sweet.
Speaker 2:The US agreed to lower the base level of tariffs on most Chinese goods to 30% from 145, while China said it would cut its levies on US products to 10% from 125%. Wow. Pretty The 30% rate imposed by The US includes a levy, levy? Levy. Levy.
Speaker 2:Related to China's alleged role in the fentanyl crisis plaguing The US, an issue in the weekend's talks. The US tariff on many Chinese products will be higher than 30%. US duties on steel, aluminum, and autos remain in place as do some earlier tariffs on certain Chinese goods imposed during president Trump's first term in office and that of former president Joe Biden.
Speaker 1:Yeah. It's we're getting to the scalpel, not the sledgehammer. Everyone says, oh, you know, the Precision. Doge is too much of a sledgehammer. Should be more of a scalpel.
Speaker 1:There is there are things you need to cut. Same thing with these tariffs. They need to be targeted on specific industries that are, important and strategic. Well, you know, sometimes you gotta use a use a sledgehammer before you get in there with a scalpel and clean things up, I guess.
Speaker 2:Break things up a bit.
Speaker 1:Just just smash it into pieces and
Speaker 2:then Come in with a precision.
Speaker 1:Scalpel to kind of trim around the edges. But Washington and Beijing agreed to keep the new tariff levels in place for ninety days with the goal of working toward a broader deal on tariff on trade in further talks. China said it would cancel or suspend some nontariff trade measures. It had imposed a hit back at The US, potentially excluding including easing export restrictions on critical minerals used in batteries and other high-tech applications. Speaking at a news conference, the treasury secretary said it was seeking a long lasting and durable trade deal.
Speaker 1:So it's just a, you know, a negotiation, and they're renegotiating everything. Neither side wants to decouple, he said. We're a couple. We're couple. We're just a couple of countries.
Speaker 2:Couple maxing.
Speaker 1:We're couple maxing. We're just decouple. Yeah. US said Besson said The US still had grave concerns about its unbalanced trading relationship with China, which is legitimate. He cited issues such as China's management of its currency and subsidies for manufacturing, which Washington believes are a major factor driving factory job losses in The United States.
Speaker 1:Those and other issues will be discussed in talks over the next ninety days. The outcome for the outcome forestall is what for now, what was shaping up to be a destructive clash between the world's two biggest economies with potential ripple effects across the globe. Very interesting.
Speaker 2:Yeah. This was something that, a lot of people in D 2 C were paying attention to, but retailers in The US were warning of empty shelves if they couldn't get Chinese products, and some small businesses were worried they would go under without easy access to China's vast factory floor. Economists warrant higher prices and shortages risked reigniting inflation. For China, an unrestrained trade deal with The US would threaten millions of jobs tied to serving US consumers and potentially worse in trade tensions with other countries wary of a surge in Chinese imports. China was also worried about losing access to some US products it still needs such as Boeing planes, aircraft parts, and certain chips.
Speaker 2:Yeah. The other thing here is this was sort of underreported last week, but the Chinese central bank was cutting rates Yeah. You know, in response to the tariffs. They, you know, clearly
Speaker 1:But interestingly, our Fed did not. So we were kind of ready to buckle down because the market was pretty resilient. Like, if the market had truly been in free fall and there was no buy the dip meme in America, the degens saved us, you think?
Speaker 2:The American investor?
Speaker 1:The American degens were just like, the prices are too low. I got to get in. I got to mortgage my house to go long. And and the Fed and the treasury secretary, the Fed is just like, you know what? Like, we don't need to cut rates.
Speaker 1:Like,
Speaker 2:the Americans
Speaker 5:are simply
Speaker 2:too bullish.
Speaker 1:They'll just never stop buying the ditch. Yeah. It's great. But I I I mean, the one thing that I that I like about this is I I think the I think the fentanyl tariffs should be pretty bipartisan. Like, that seems like something where truly no one wins.
Speaker 1:Like, you you can make the argument about, like, a free market around electric and, like, competition being good for the electric vehicle market. I see a lot of stuff from, Chinese EV companies. And I'm like, yes, I want American companies to win, but also I want those cars to be here so that there's more pressure on American companies to make cooler and cheaper cars. Like, there's that crazy car that has it's a EV, but it has a gas engine that just charges the battery. So it has, like on a single tank, can go, 800 miles.
Speaker 1:It's, like, insane. There's a Chinese car that floats. There's those Chinese cars that have like the the LED screens on the back so you can talk to the person behind you. Say like, hey. Stop tailgating me, basically.
Speaker 1:Yeah. There's like all these cool features.
Speaker 2:All these insane features. That you Some of which are silly. Some of which are actually Yeah.
Speaker 1:I like I like competition in the market. I like free markets generally, and I'd love to get there. I don't feel that way about fentanyl. Like, I I I do think fentanyl is so bad that it should just be banned and, like, China should do everything they can to stop exporting it. And so the Wall Street Journal writes through, though the sides didn't come to an agreement over the fentanyl tariffs, The US, The US made clear in private meetings its views on the importance of combating the deadly drug.
Speaker 1:Trump has accused China of playing a role in the illicit fentanyl trade, something Beijing denies. In a private meeting on Saturday, Besson picked up a bit of sugar out of a dish on the table and told Chinese officials that the amount he was holding could kill a person if it were fentanyl, said a person with direct knowledge of the exchange. That's pretty dramatic.
Speaker 2:Love it.
Speaker 1:He picked up a little more sugar and said that amount could kill people across Geneva. Then he picked up more and said that could kill people across Switzerland. So dramatic. It's good though.
Speaker 2:He's cooking.
Speaker 1:He's cooking. He's a showman. Trump likes a a yapper, a talker, somebody who can present.
Speaker 2:Yeah. Show. It's huge. Showbiz, baby.
Speaker 1:Big. In a briefing with a small group of reporters, Besson said that although fentanyl wasn't the main focus of the trade talks, the Chinese delegation included a senior Chinese official who was able to discuss the issue in detail with The US Officials. Such an official who at later press conference Besson identified as deputy minister isn't usually part of the trade team, Besson said, and that shows their responsiveness to our concerns. So China actually sent someone, a deputy minister, to say, hey. We're not admitting guilt, but we're in the conversation.
Speaker 1:We're we're gonna send somebody who's who's who who can actually speak to this particular issue, which I think is good because it's way harder to steal, man. Yes, they should be able to just send as many drugs. They should be responsible for that. And it's like our DEA can't The United States goes into Mexico and hunts down drug traffickers, right? A lot harder to do that in China.
Speaker 1:They do not want us sending our DEA guys kicking down doors in Beijing if they are doing fentanyl.
Speaker 2:Well, to be clear, the cartels are the ones that are basically distributors for the fentanyl. And their position is, we wouldn't do this if there wasn't a buyer in America, right? Yeah. And so naturally I think you need to go
Speaker 1:But normally, yes.
Speaker 2:Upstream and put pressure
Speaker 1:on Yeah, the question is like how much pressure, right? Yeah. Because that does have a cost. Like America has been waging a war on drugs. There are negative externalities of that.
Speaker 1:There's a cost, Right? We have to pay for DEA agent salaries. We have to do a lot of different things. We wind up locking people up in jails that cost money. We have court systems that cost money.
Speaker 1:Like, it all it all is a tax on America when we fight the drug trafficking that happens in The United States.
Speaker 2:Yep.
Speaker 1:We don't really have the ability or authority to do that abroad. So we have to ask China to say, hey. Invest in preventing fentanyl. You you certainly invest in the local dissemination of it and you have drug policies there, but we want you to take that as seriously even if they are just leaving your border. So potentially a strong step forward.
Speaker 1:I'm optimistic about it. Anyway, let's move on to the prescription drug executive order from Donald Trump. He posted on
Speaker 2:He was like True. He's like yesterday, he's like, it's feeling like a slow news day. Slow news day. Okay. We only we only announced a Yes.
Speaker 2:Potential trade deal. Yep. Let's fast follow, you know, with with, you know, a little sundae
Speaker 1:Yeah.
Speaker 2:To just shake up the biotech.
Speaker 1:So I'll read a little bit about what Trump actually said. He said, for many years, the world, capital w, has wondered why prescription drugs capitalized and pharmaceuticals in The United States Of America were, all caps, so much higher in price than they were in any other nation, sometimes being five to 10 times more expensive than the same drug manufactured in the exact same laboratory or plant by the same company, question mark, question mark, question mark. It is a good question. I think a lot of people have asked this both on the left and the right, and we'll go into Bernie Sanders' plan and how that maps to Trump's plan. And then we'll talk to some experts about is this are we should we be cautiously optimistic here?
Speaker 1:Is this great? Is this terrible? Price controls, usually pretty bad from an economics perspective, but, this is something different with this most favored nation, strategy. So it was always difficult to explain and very embarrassing because, in fact, there were no correct or rightful answer. The pharmaceutical drug companies would say for years that it was the research and development costs, and that all of these costs were and would be for no reason whatsoever borne by the suckers of America alone.
Speaker 1:Campaign contributions can do wonders, but not with me, not with the Republican Party. We are going to do the right thing, something that the Democrats have fought for many years. Therefore, I am pleased to announce this that tomorrow morning, will be signing one of the most consequential executive orders in our company's history. Prescription drug and pharmaceutical prices will be reduced almost immediately by 30 to 80%. They will rise throughout the world.
Speaker 1:Of course, that's a prediction. We need to figure out if that's actually gonna happen because the way this is structured, they don't actually have to reduce prices. They might just raise prices elsewhere. But, of course, this question
Speaker 2:The NASDAQ biotech index
Speaker 6:is Went up.
Speaker 2:Up 4% today.
Speaker 1:Insane. No one was expecting this. And and we can go through some of these, some of these posts. But Delian, said biotech markets are gonna be a bloodbath on Monday, kicking the dog when it's already down. I thought this was a good take.
Speaker 1:I liked it. I posted something similar. I wound up deleting my post because I was like, look stupid now. And sharp shark on the next post says, has the Grim Reaver going from door to door just killing biotech over and over and over again because biotech's had a hard go and seems to can't seems that they can't catch a break. And then Sheel, friend of the show, says, this is a policy this this is policy that was proposed by Bernie Sanders in 2018.
Speaker 1:Horseshoe theory, again, Bernie Sanders' new plan to bring down drug prices briefly explained the plan from Sanders and Rep. Rokana.
Speaker 2:You see, Bernie and Trump love PJs. Bernie was getting flak And more common. Because he was using a PJ on the campaign trail. And he said, you really expect me to sit at a United terminal? What I'm gonna Yeah.
Speaker 1:He said That's crazy. So
Speaker 2:Bernie and Trump have have, you know, far more in common in many ways than at least many people would think.
Speaker 1:Yeah. They're more alike than they are different.
Speaker 2:They're both Americans. They're both Americans.
Speaker 1:So TJ Parker who's coming on the show later today summed it up. He said, my initial take on the Trump drug pricing announcement, I could probably be convinced that a global most favored nation is a reasonable approach. The problem is even the federal government doesn't always know the actual net price of these drugs today. That's why I've always argued that you have to kill rebates first. It's the necessary precursor.
Speaker 1:The optimistic take, forget rebates, forget margin buried in GPOs, just mandate a global MFN on list price, and pharma will be forced to unwind the entire web of rebates, fees, and other unnecessary complexity. My guess is that's the rough logic given the failed rebate repeal attempt in Trump one point o. It will be nearly impossible to implement cleanly, but if it worked, it could be a brilliant end run around the current system. Now his pessimistic take. I still believe that the best long term strategy is to let market forces do their jobs, put power in the hands of consumers, and let competition drive down price like every other retail category.
Speaker 1:That's more consistent with our capitalist instincts and more American. But so far, that hasn't worked. It's been a disaster, so maybe I'm wrong. And so we'll have him unpack his his takes a little bit more. And we're also bringing on Cremieux in about twenty minutes at 11:45 to talk about, answer this question.
Speaker 1:Like, does The US actually overpay for drugs? He says common knowledge says yes, but the real data says no because The US gets favorable prices for generic drugs, and it primarily consumes generic drugs. In fact, they're 91% of prescriptions. So I'm excited to talk to Cremieux about some of his analysis here. He's a great, accountant and author on X.
Speaker 1:So let's go through some of the Wall Street Journal, analysis of the EO aimed at lowering drug prices and break it down for you all. The executive order seeks to institute a policy known as most favored nation. You guys probably know about that.
Speaker 2:Safe note.
Speaker 1:That's the first time anyone's interacting with an MFN. When you're in founder mode, deal with MFNs and the safes. Well, now biotech companies will be dealing with the same clause globally.
Speaker 2:It was a big moment when YC added the MFN clause.
Speaker 3:You remember that?
Speaker 1:Yeah. Maybe that's maybe JD got in there and was like, Hey, I've heard about these things. MFN clauses. They're working really well in Silicon Valley.
Speaker 2:Could be a thing.
Speaker 1:Could be a thing.
Speaker 2:Could be a thing.
Speaker 1:So the US government pays prices for drugs that are tied to the prices paid by other countries. Many other countries pay lower prices for medications because their single payer health care systems negotiate for deals. Basically, what we're doing is equalizing, Trump said Monday before signing the order at the White House. He also said it was unfair for The US to shoulder the cost of research and development for pharmaceutical companies. American patients were effectively subsidizing socialist health care systems.
Speaker 1:American Americans often pay higher sticker prices for drugs than people of other countries. For example, the list price of diabetes medication Jardiance, I'm probably mispronouncing that, was $611 for a thirty day supply last year according to health research nonprofit KFF compared with $70 in Switzerland and $35 in Japan. That's a pretty big delta. You can see why it's an issue. So the EO directs The US Trade Representatives and commerce department to take any appropriate action against unreasonable and discriminatory policies in foreign countries that suppress drug prices.
Speaker 1:It also gives RFK junior thirty days to work with pharmaceutical companies on how to lower prices. If the drug companies don't lower prices within a hundred and eighty days, the order gives Kennedy and others authority to propose rules and restrictions on drug companies and imports. The order doesn't specify whether pricing changes would apply to Medicare or Medicaid, suggesting that its impact could be broad and apply to commercial insurance. A White House official said that lowering the prices of drugs for those who use Medicare Part d would be a strong focus but didn't specify which medications. Hopefully, it's trend, DBAL, ANNOVAR.
Speaker 1:Just testosterone.
Speaker 2:Just the essentials.
Speaker 1:Just the essentials. Just the basics. We are paying Cremio actually posted like a post from the from a bodybuilder saying that like he's actually the bodybuilder's actually fine with the current structure because where is this? Let me find this.
Speaker 2:It's getting imported.
Speaker 1:Is it I really like the status quo with pharmaceuticals where people with good insurance and lot or lots of money get built hard to fund new research so that high agency people like me can buy cutting edge experimental drugs from a from gray market websites for a fraction of the price. Bro, bodybuilding.
Speaker 2:The bro science always ahead of the curve. It is. Yeah. One one analysis I got that I don't think is public at this point,
Speaker 5:but
Speaker 2:I think a number of people have had this reaction is that MFN pricing in general will likely face lawsuits on constitutional and administrative law grounds. If Congress can pass a new law, this would change, but an MFN like benchmark could be folded into legislation as part of some type of like Medicare price negotiation, Which happens frequently, or international reference pricing. And people are kind of theorizing that you could roll this idea into legislation in the reconciliation bill in the House, but then that's just gonna be another factor that could potentially get that not passed
Speaker 1:Yeah. Yeah.
Speaker 2:In the first place. Yeah. So, I think people were posting yesterday when this news rolled out like drug prices are gonna drop tomorrow Yep. And I don't see that happening. But I'm interested to to talk to TJ later and just get a sense of of how real price drops are going to be, if they're gonna happen, if they are, what is the actual schedule, things like that.
Speaker 1:Well, you're trying to save money, switch your business to Ramp.com. Time is money.
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Speaker 1:It is I mean, it is a controversial decision because it is government price setting. The Wall Street Journal has this quote from, Alex Schribner, the senior vice president of pharmaceutical research for and manufacturers of America trade association representing major drug drug companies. Government price setting in any form is bad for American patients at a time when we are facing growing competition from China. Policymakers should focus on fixing the flaws in The US system, not importing failed policies from abroad.
Speaker 2:Yeah. So an example here is rent controls. So rent control in many cities have, if anything, been detrimental to the poor. A meta analysis of over 100 studies showed that rent control often leads to reduced supply of rental housing as it discourages new construction and investment. So the the, comp here would be if pharmaceuticals can't charge what they want to charge, they will invest less in R and D.
Speaker 2:Whether or not that that ends up being true, I'm sure it could be debated as well. But a 2017 study by Stanford economists found that after rent control was expanded in San Francisco, Landlords removed 30% of the newly controlled units from the rental market leading to a 15% decrease in the city's total rent housing stocks. Property owners are more likely to neglect maintenance of their apartments. Yep. And a National Apartment Association study in 2024 found that doubling the number of rent controlled units in a in a metropolitan area correlated with a 16% increase in severely inadequate housing units indicating a decline in housing quality.
Speaker 2:So again, just a good kind of reference when thinking about price controls.
Speaker 1:Yeah. I mean, one option is that they'd lower prices in America, but the other option is that they just raise prices everywhere else. Yeah. And if they do that, they might sell less drugs overall because people can't afford them in other countries. Although the examples of like Switzerland and Japan, I feel like if Americans can afford $611 for a diabetes medication, like the Japanese should be able to as well because they have similar cost of living and similar GG per So I wonder, would they really see a drop off in consumption or would they just see higher overall revenues and ultimately higher profits?
Speaker 1:It's possible.
Speaker 2:I mean, there's so many different factors, but one scenario is that there are alternative drugs in those countries that you can get that are generic that are very inexpensive. Yep. And so the only way these American drugs can compete that aren't generic is to just have massively reduced prices. And so if you're a pharmaceutical company, you're going to say, well, we're making this for the American market. And then as a bonus, we'll sell it over here.
Speaker 2:Because even at $35 a dose, we still have amazing margins.
Speaker 1:Yeah. Right? It does it is always odd when you run into something where it's like, you yeah. Like, you buy a car, you know, it's a big vehicle. It has a lot of metal, so you kind of expect it to be like tens of thousands of dollars.
Speaker 1:You go to the gas station, like, the gas costs money. And it's very obvious that it's like, well, it costs money to pump it out of the ground, deliver it to you, so it costs a certain amount of money. But people always said this with Facebook where it's like, why don't they charge you? Like, if you're not being charged, like, you are the product. And with healthcare, it feels like sometimes it's the opposite where it's like, did it really cost $10,000 to drive me in the ambulance two miles?
Speaker 1:Like, how did that happen? And I get that my insurance paid for it, but, like, something weird is going on here because like it just doesn't track at all. Whereas with many other things that you buy, you're like
Speaker 2:would basically be like,
Speaker 1:people
Speaker 2:costs
Speaker 1:this much for this reason.
Speaker 2:People were paying out of pocket, they would be like, wow, I'm getting scammed by this company.
Speaker 1:Exactly. But they
Speaker 2:get the bill and the insurance coverage And insurance pays for So they're like, oh, strange, but
Speaker 1:It is very odd. There's a lot of R and D that goes into the iPhone, and you buy it and it's $1,000 and you're like, okay, yeah, that actually kind of makes sense that like
Speaker 2:Checks out.
Speaker 1:Yeah. Like, sure, can manufacture these for 300 and they're charging 900, but that margin goes into the R and D. And I get that. But it's weird when when it's like, you know, something that's that costs 2¢ to make and they charge $10,000 for it. So Yeah.
Speaker 1:I mean, health care's always been, like, an odd quagmire. And clearly, I mean, everyone seems to agree on both sides of the aisle that, like, something's off in America and that it's not particularly working well. And and maybe that's, you know, hey. We need to just be healthier and eat healthier. Maybe it's we need different drug prices or different insurance policies.
Speaker 1:But I'm sure there'll be an a a lively discussion this week all about it. But if you are long biotech, you're short biotech, you gotta express your views on public.com investing for those who take it seriously. They got multi asset investing, industry leading yields, trusted by millions. Let's hear it. .Com.
Speaker 1:Anyway
Speaker 2:Let's go. They have a big launch this week, which I'm excited for.
Speaker 1:Let's go into another Trump story. There's so many. This has been a busy weekend. Trump administration in talks to accept new Air Force one as gift from Qatar. The Qatari government says possible transfer of plane for temporary use is under consideration.
Speaker 1:Obviously, this is burning up the timeline. People very, very, very confused about this because apparently America has two brand new seven forty sevens that they're actively retrofitting. Did you see this take? Yeah. That they're like actively working on getting up to par.
Speaker 1:And the plane is like the least expensive part of Air Force one. It's like all the military equipment and stuff on So this feels like it was designed just to cause chaos basically or something, but it's like of all the different things. But, anyway, the the the article here is, they're in talks with the Qatari government in into about accepting a luxury Qatari plane for his use as president and potentially beyond according to people familiar with the matter. Under the potential arrangement, which is raising legal and ethical concerns, the plane owned by the Qatari royal family would be used as Air Force one while Trump is in office after being retrofitted by a US Defense Contractor. The US wouldn't pay for a luxury seven forty seven style jumbo jet.
Speaker 1:It might then be gifted to the Trump presidential library for Trump to use after he leaves office. And so, obviously, people are very, are very up in arms about this. Sean Maguire said the mainstream media has been wrong about so many things over the last few years, so I hope this is just more fake news. But if it is accurate, it would be the first of Trump's actions in this term I find unequivocally wrong. Qatar uses money to silence people and buy favor.
Speaker 1:And Josh Wolfe is quote tweeting Sean saying, Qatar played imperfectly. We will get you the American hostage. We will get you a new shiny plane, the best plane bigger than any other presidential plane, not just Air Force One, Air Force One mega supreme, And then you will retire to
Speaker 7:your to
Speaker 2:your library.
Speaker 1:No president will ever afford such a beautiful, huge plane. We will help you bring peace to the Mideast and help you win a NOAA peace. A lot that sounds good. Want peace
Speaker 2:to the East. The the Obama book deal, they could have gotten a private jet, but it would have been probably Yeah. You know, in the
Speaker 1:This one's complicated
Speaker 2:for flying international.
Speaker 1:Yeah. It's complicated for me because Definitely
Speaker 2:flying through regional airports.
Speaker 1:Obviously, I think like foreign governments should not be trying to curry favor with our elected officials period. Yes. But I'm a huge, huge fan of giving your friends planes.
Speaker 2:Totally. Totally.
Speaker 1:And we've actually put planes on our gift guides before. I realized that. So we're kind of to blame here because we advocated for this. I believe a seven forty seven BBJ was on our Christmas gift guide.
Speaker 2:Probably. What's a better gift
Speaker 1:I know.
Speaker 2:To the right person?
Speaker 1:I know. And so we kind of laid the playbook for this, and then the Qataris just picked it up. And they were like, oh, well, you know, TV VPN's saying this. Like, we should give it a try. But we'll see.
Speaker 1:Yeah. I mean, the the the good news here is like
Speaker 2:Yeah. When you think about the scale, right, it's like, well, this would be like me getting you like a a a Red Bull. You know? It's like, literally like, hey, John, are you thirsty? Yeah.
Speaker 2:You want a little pick me up? Do want a Red Bull? Right? It's like
Speaker 1:Currying favor.
Speaker 2:A balance sheet standpoint.
Speaker 1:I'll do anything. From a Now that you got me the Red Bull, I'm I'm in your pocket.
Speaker 2:Value of the gift in con Totally.
Speaker 3:In the
Speaker 2:context of the balance sheet.
Speaker 1:Yeah. It also is just so funny because it's not like, it would be one thing if like, I've seen some supercars that have been made in like foreign countries that don't typically produce, they don't have like large auto manufacturing segments. And they look very cool. And it almost makes sense if you made a plane to gift one to America to be like, hey. Like, there's a there's a there's a Kenyan supercar company that looks very cool.
Speaker 1:I was like, this is interesting. It's mostly like a retrofitted Lambo. But it has like a very unique design and it's and it has like, you know, all the like, the colorway is designed to like mimic like I think it's from Morocco. And Cool. It's very, very cool.
Speaker 1:And gifting something like that to America would be cool just to say like, hey. We appreciate you, America. You can put this in one of your museums. We're we're entering this industry, and we're excited to partner with you. Hopefully, we can distribute these in your country.
Speaker 1:We can make these. That would be one thing, but it's really just like, it's an American company, Boeing, that makes the seven forty seven.
Speaker 2:We've lost a plane.
Speaker 1:Then We're gonna give it back to the president. And then America has to retrofit it because Boeing has a contract for 3,900,000,000.0, to deliver a bunch of planes to Air Force one. And then l three Harris is a smaller defense contractor, an American company that has to overhaul the Boeing seven forty seven that was formerly used by the carrier. So it's
Speaker 2:like I mean, the big the big thing here
Speaker 1:Guitar is just like in the middle being like, hey. We put some nice leather seats in here.
Speaker 2:Yeah. I mean, the the where the plane gets retired to is a big question. Sure. It was given to the White House and it was gonna be effectively Yeah. You know, a presidential plane on an ongoing basis.
Speaker 2:Yep. There would not be a lot of issues with it. You could argue, okay, Trump's getting it when it's brand new or whatever. But, yeah, we'll see how this one plays out.
Speaker 1:The other downstream thing about this is like, as we're talking about, okay, maybe we shouldn't accept this plane. Is it time to give back the Statue Of Liberty to France? I think
Speaker 2:France has had It's such an amazing monument.
Speaker 1:But every time you have to ask like, are we making shrewd decisions with regard to France?
Speaker 2:Totally.
Speaker 1:Are we being too nice to them because they've curried favor with us by sending us that monument? Yeah. And so if we send it back and say, hey. We're done. Yeah.
Speaker 1:It's gonna be it's gonna be a clean relationship by the numbers from here on out.
Speaker 2:Yeah. It's surprising you'd think that that Trump would maybe try to draw attention towards that. Give the the Statue Of Liberty back to France. Build one that's, you know Yeah. Potentially five, ten times as big in its place.
Speaker 1:I like that idea. Honestly, I mean And it's actually just from holding
Speaker 2:an American flag.
Speaker 1:I would be way more down for Qatar to give America a monument, like the Statue Of Liberty. Like, we could have a Statue Of Liberty all over the place.
Speaker 2:There could
Speaker 1:be one in Florida. There could be one in Alcatraz. We've talked about this. Catalina Island.
Speaker 2:Put a ramp put a ramp card in the Grand Canyon. A ramp card swiping the Grand Canyon.
Speaker 1:The Grand Canyon. That's a good idea. That's that's actually genius. Lifted by blimps just cruising, swiping the entire Grand Canyon.
Speaker 2:That's great. America runs on ramp.
Speaker 1:That's that's a very that's a very American thing.
Speaker 2:There's something there. If Qatar could help finance that, so Ram doesn't need I'm so to raise. That. Yeah. Growth equity for Yeah.
Speaker 1:That feels like something that it wouldn't be like, oh, Trump would have paid for that anyway. Because the whole thing with this plane is takes something off of his personal balance sheet. Right? Because he gets a free plane.
Speaker 2:Yeah.
Speaker 1:But he was never going to buy a ramp card that swipes the Grand Canyon.
Speaker 2:Yeah. Even if he should.
Speaker 1:He should.
Speaker 2:He should. Objectively should.
Speaker 1:So, yeah. I mean, I I I think that's a great idea. Anyway, speaking of sponsors, Linear is a purpose built tool for planning and building products. Meet the system for modern software development, streamline issues, projects, and product road maps. Also, put your sales tax on autopilot.
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Speaker 2:Sales tax. AGI. Benchmark series a. Thank you to numeral. Numeral's you know, all these
Speaker 1:Oh, yeah. They're on the hat.
Speaker 2:They're getting there. Not not on the V1 hat. This one
Speaker 1:But we got ramp on there.
Speaker 2:We got the complex one.
Speaker 1:We got wander, bezel, adquix on there.
Speaker 2:Even even Roar right here. Roar. It's always in in my vision.
Speaker 1:Yeah. You can see it. Right?
Speaker 2:Yeah. It's
Speaker 1:kinda crazy. Anyway, speaking of news, AI startup Perplexity's valuation surges to $14,000,000,000 in new funding round. You'd think this is from, r for rock, but it's in the Wall Street Journal. Berber Gin got the scoop.
Speaker 2:Yep. And, to be clear, are in advanced talks for a new funding round.
Speaker 1:They've advanced from talks to advanced talks.
Speaker 2:So it's hard to know if this means they've signed a term sheet
Speaker 1:Let's see.
Speaker 2:If they've done any type of handshake deal. But venture capital firm Excel is set to lead the new round which is expected to total 500,000,000. People familiar with the matter said, the raise underscores investor enthusiasm for general artificial intelligence companies, some of which have begun to challenge Google's long standing dominance over search. Perplexity was valued at 9,000,000,000 last November, its fourth round that year. That was crazy.
Speaker 2:That's insane. Is one of a set of AI startups that have grown quickly after the launch of ChatGPT three years ago. The San Francisco based company sells an AI powered search tool provides summarized answer using information gathered
Speaker 1:in the Perplexity is launching its own web browser called Comet.
Speaker 2:Yep. That is that is what got we we were talking about Comet Yeah. With Arvind on the show. And he answered your hypothetical and got a hit piece out of TechCrunch for it. So
Speaker 1:It's not a hit piece unless it comes from the hit piece region
Speaker 8:of the New
Speaker 1:York Times print edition. But Yeah. And it's
Speaker 2:not a docs. It comes from the Docs Region.
Speaker 1:The Docs
Speaker 2:Region. The Washington Post. Yeah.
Speaker 1:But Eddie Q last week made news at Apple when he said that Google searches over Safari web browser fell over the past two months for the first time in more than twenty years, and he attributed that drop to more people using generative AI services such as ChatGPT and Perplexity. And so Q said Apple has held conversations with Perplexity, OpenAI, and Anthropic about adding AI search features into Safari. And so that would be a big deal if the iPhone kinda migrated away from from Google. But it's interesting to see where this goes. I'm excited that they have so much money.
Speaker 1:I like Arvind. It seems like a really, really tough market to compete with. Even in this narrative of like the application layer will be what's valuable, it's like, that's true, but you still have to aggregate enough demand to drive so much traffic to your application and have a flywheel there. And when you're in consumer search, it's not the same as, oh, like the bull case for Harvey is that they hire a bunch of great SDRs who can go sell into law firms. That's something that they can just scale up, I feel like, versus changing consumer habits from google.com or Google is my auto complete, right?
Speaker 1:So huge challenge in a huge market.
Speaker 2:Interesting hear Yeah, stuff that's interesting to me is they're doing these live earnings transcripts, which are cool.
Speaker 1:I saw that.
Speaker 2:But is that a $14,000,000,000 business? Right? Know, sort of subscale providing the sort of type of information that that's not necessarily hyper
Speaker 1:Well, we'll have
Speaker 2:to get to the average.
Speaker 1:We'll have to get Sameer Gandhi from Excel on the show because he's joining the board. And we will see what he has to say about the deal once it closes hopefully. And hopefully, the rest of it goes smoothly. But we have Kermu in the studio here to break down drug prices. Welcome to the stream.
Speaker 1:How are you? Can you hear us again?
Speaker 9:Can hear it.
Speaker 1:Oh, wow. Voice changer too. Okay. Let's go.
Speaker 2:We're honored. We're honored.
Speaker 1:What's new?
Speaker 9:Oh, I I think I'm using a voice changer.
Speaker 1:We can't hear you at all with that thing. Is there any way we could turn this off?
Speaker 9:Yeah. Let me just check if I can use a pitch change or things.
Speaker 1:It's it's strong. It's It's a little too powerful. It's a little too powerful.
Speaker 2:Overpowered by the AI.
Speaker 1:Yeah. We wanted to read through some of your posts, see if there's anything that we could, break down.
Speaker 2:That sounded a bit better. Let's hear
Speaker 7:Gotcha. Can you hear me?
Speaker 1:This is amazing. This is way better.
Speaker 2:Sound amazing.
Speaker 1:Thank you so much.
Speaker 7:Tremendous.
Speaker 1:Okay. Great. So, yes. What has been your take Yes.
Speaker 2:Absolutely shocking there.
Speaker 1:Anyway it's great, Danny. Thanks so much for joining. Can you break down the news, the Trump executive order? How are you interpreting the news? How would you explain it to a layperson?
Speaker 7:So the idea behind the executive order is that we are getting ripped off because other countries are paying far, far less for the same drugs that we buy in The US for huge amounts. We pay a thousand dollars for Ozempic and Denmark pays $40 and that's just not fair. So the idea behind this is that we're banning geographic price discrimination. We're making it so you can only sell at, you know, the lowest rate that another developed country is willing to pay for a drug.
Speaker 1:Mhmm. And how how real is that? Like and and what what drives that? Like, with the Ozempic example, that's developed by Novo, a Denmark company. Are they just doing their friends a solid by discounting it in their home country, or does this apply to American companies selling abroad?
Speaker 1:And is it just, like, trying to capture any possible market at at at whatever price the local market will bear, or is there something else going on with the the dynamics of, like, insurance companies?
Speaker 7:Bladder is exactly right. It is a group of largely American companies that are maximizing profits by selling at prices that allow them to, as I said, maximize profits. Yep. They're just selling at whatever the market will bear. Mhmm.
Speaker 7:And if a country will not bear American level prices, then they aren't going to be selling at those prices there just for the simple reason of supply and
Speaker 1:Why does America what like, why can America bear such high prices? We were looking at the Wall Street Journal article, and they were saying that, for a particular drug for diabetes, Americans were paying $611. In Switzerland, it was $60. And in Japan, it was 35. But Japan has a similar, similar, you know, economy to America on a GDP per capita basis.
Speaker 1:They should be able to pay $600 in theory. What's going on there?
Speaker 7:So the thing is that GDP per capita is actually not a very great way of getting at consumption. The Japanese save more. They actually are quite unproductive in the service industry. Mhmm. Other countries tend to have far, far lower levels of consumption relative to GDP.
Speaker 7:And this is especially true if they're a country like Ireland or Singapore for which a lot of their GDP, their exceptionally high GDP, seems to be driven by profit shifting, where companies bring money over and doesn't actually affect the income as much of the people who live there. So you'll see that Ireland, for example, has very, relatively low gross national product relative to their GDP. They are able to consume considerably less than their GDP might indicate. But The US, on the other hand, cons consumes a lot more than you might expect because everybody else's GDP is kind of out of whack compared to ours. We are the world's consumers, and as such, we consume a lot more.
Speaker 7:And we are actual our the prices we pay are actually quite in line with what you would predict given our consumption. Just to say that prices grow a little slower than household income growth, and The US has exceptionally high household income. Mhmm. The high prices and the fact that they are relatively low, both are facts that stem from America just being really, really rich.
Speaker 1:Can you
Speaker 3:talk Why do
Speaker 2:you think the market the Nasdaq biotech index is up over 4% today? Why do you think that is?
Speaker 7:I was actually just about to do a differencing exercise with that to see if the biotechs were up more or less than the rest of the market because they are benefiting from Yeah. The fact that the tariff barriers are actually going down as well today, which is wonderful news for them.
Speaker 1:Yeah.
Speaker 7:They, however, might not be benefiting as much as the rest of the market, so I'll have to go check that afterwards. Another thing is, there is a considerable expectation that this will fail. This Yeah. Was attempted. There's actually a CFR entry for this from 2020, and it was shot down by courts, and then the Biden admin came in, and they ended the whole thing.
Speaker 7:And there are a lot of people who believe that this will not be able to go anywhere because it'll run into some sort of issue. I'm Sure. Going to tell them, no, the opposite. It will actually succeed and it will have pernicious effects
Speaker 5:Can you talk
Speaker 7:because this is totally legal.
Speaker 1:Yeah. Interesting. Can you talk a little bit about The US as an early adopter and how that shapes drug pricing?
Speaker 7:Oh, yes. So a large portion of the reason that The US pays so much for drugs is because our launch lag, the lag between, you know, getting the drug developed and getting the drug to market is so, so much smaller than elsewhere. To take an extreme example, The US's launch lag for new drugs is about six months versus The UK's, which is about six years. Wow. Which means that if you're if there's some new therapeutic that you really need, they'll probably approve that one pretty soon.
Speaker 7:But if there's a thing that's like an improvement on insulin, it'll probably take them many many years to actually get that drug to market because they're just not willing to pay for it. They have considerable cost controls because they are a more managed care system. They provide a lot less care. And if there's something new that like rules, but it's like a slight improvement on something else, they're gonna go for the thing that is less expensive. They're just gonna we are aiming to maximize our tech adoption, whereas they are aiming to maximize to, you know, constrain their prices and do as well as they can under a certain set of a certain budget.
Speaker 2:You talked about potential pernicious effects if this goes through. Are you using what happens when rent control is implemented in cities as a comp here? Do you think there's just gonna be less r and d spend, less investment? What what does that look like to you?
Speaker 7:So two things. We actually have wonderful models of this now, and we know how this played out in 1991. I'll talk about the models first. The models suggest that this naive expectation that we're going to lower our drug spending by 50 to 80% just cannot happen and because we're gonna dynamically adjust prices. Prices are determined in equilibrium and we're probably gonna get about a 10% reduction in The US.
Speaker 7:But we're going to see a very, very large increase in a bunch of our allied So for example, Canada should be expected to see something like a 90% increase. They're a smart market, and they're gonna be facing a lot higher prices. Mhmm. That's not gonna be very good for them at all. The total pharma revenues as a result of this will fall considerably because the this forces them in order to comply with the regulation to price above the profit maximizing level in most other countries.
Speaker 1:Yep.
Speaker 7:This is bad for their returns, and it's bad for the health of those countries. Now, this was attempted in 1991 with a most favorite consumer model for firms, the prices didn't change for drugs that were under patent with no generic competition because everybody's already paying those. And it's just that the reason that we pay more for those is because we're the ones actually buying them, the other countries aren't really buying them very much at all. They don't do new drugs as quickly as we do. We do it way, way faster.
Speaker 7:Like sometimes it's an order of magnitude faster. There also was no change for just generic drugs in general, but there was a backfiring effect. And prices rose about 4%, which is not huge, but it's something, for drugs facing generic competition with because of the uniform pricing under MFN. The compliance costs were really bad. And there was an m there was an IRR shock such that the returns for the firms went down as a result.
Speaker 7:It was just not good for anybody. No winners. There are okay. Some winners. I should say that back.
Speaker 7:There are some people who do win from this. They're a minority and
Speaker 1:Yeah. Who wins?
Speaker 7:The future loses out because the returns to r and d go down. They're already very low. And if you get less r and d, then you get less improvement in the future.
Speaker 1:Can you can you dive deeper into R and D? As I understand it, there's basic science research that's done at universities. Kind of the foundational research on DNA might come out of a academic lab that's funded as a nonprofit. Maybe there's NIH grants that go in there. Then at a certain point, a biotech company raises essentially venture capital, maybe gets acquired or IPOs and rolled into one of the big pharmaceutical companies.
Speaker 1:There's losses and losses and losses for years and years and years. And then at the last second, there's a blockbuster drug that makes a billion dollars, and the math works out. But on a ten year, twenty year time horizon, is that in a good place? Should that change over time? Like, what is your view on on how we as, like, humanity are paying for drug development right now?
Speaker 7:We are paying way too much for drug development. We are paying out the nose for something that is not nearly as efficient as it could be. Mhmm. And we know it could be a lot more efficient and a lot better targeted and everything else because we know that other countries are doing it well. Mhmm.
Speaker 7:For example, China in 2016 introduced wonderful trial reforms that we should have had. I don't know why we never even had this, where you can recruit people from across the country to participate in your trial. In The US, if you want to do that, you're gonna be constrained to one center. And if you are constrained to like one hospital, you are probably gonna be flying people in. That adds a lot of extra cost.
Speaker 7:You are going to probably be constraining your sample as much as you can.
Speaker 1:Yeah.
Speaker 7:That adds a lot of uncertainty. That makes your trials less reliable. So you're more likely to have a trial that produces a false positive or a false negative. We have these reforms have been implemented in China and they've worked wonders. China's actually ahead of us as of this year in terms of the number of trials they have going and the beyond that, they have a higher number and they have a higher number of people in each individual trial.
Speaker 7:They are beating the hell out of The US because of some simple reforms that the FDA could actually implement right now. They could go in, they could have a direct final rule on a bunch of these things and change this overnight to make stuff less expensive. They can also reform GMP, the good manufacturing practices in ways that take off a lot of the costs from, for example, gene therapies. Like having to produce tons of placebo ahead of time is a very silly rule. We could actually mimic countries like Australia or we could do follow the WHO's g the World Health Organization's GMP guidelines and cut costs right away.
Speaker 7:The wonderful thing about The US though when it comes to r and d is that we have a good way of directing r and d funding. We have lots of connections between the public sector and well, I should say, the sort of quasi public private r and d drive. Like we have universities with a of industry directive, lot of industry grants, lot of knowledge of where they should be focusing and whatnot. And this leads to a situation where even our publicly public funds are able to, be allocated to things that have good returns. That's why it's going to be very difficult to replace whatever happens here with public funds because it's you're going to have to just figure out how are you going to distribute that money.
Speaker 7:How are you going to do what the industry does, which is to find areas with pretty good returns pretty reliably. When we the elasticity of research funding to the returns is very, very high. It is very considerable. So we're going to see a very stark reduction in r and d, and that's going to have pretty major effects in the future. It's also going to lead to r and d outsourcing.
Speaker 7:It's going to move to other countries because of the cost angle. It'll very likely move to China because they have the best r and d environment right now for pharmaceuticals and because The US is doing this. Additionally, the manufacturing is likely moved there too.
Speaker 1:As you work through the the effects of this executive order, if it goes through, is that good for America? Is it good for humanity? Are we closer to a cure for cancer? Does this, like, accelerate or decelerate overall biotechnology progress in one way or another in your in your opinion?
Speaker 7:Unfortunately, this is very likely to massively decelerate things. This is likely to be something that causes a lot of harm to research for many years to come. The IRR for biotech is or for pharma is already below the average cost of capital. And we've recently had a little bit of rebounding, but people were expecting it for many years to go basically to zero. A little bit of rebounding due to COVID.
Speaker 7:There was a blip, and that that was okay. There's a lot of funding going into biotech for COVID reasons. And then there's been a GLP led boom in returns as well, and that's been tremendous. But that has an expiration date because we know what's going to happen with the patents. And we know that people are very likely going to go for cheap generic Ozempic when it comes about in 2033 or whatever.
Speaker 7:Rather than the better tirzepatide or reticrutide based products just because it's gonna be so cheap. And at that point, the GLP boom will be over, and we'll have to return to the state of what's going on with pharma. And what's going on is very, very low IRRs that are going to go even lower due to this regulation. So it's unclear if pharmaceutical research can actually survive in The US given this because we're already teetering on the brink and moving even lower is well, it imperils the whole
Speaker 1:thing.
Speaker 2:Mhmm. Brutal. How much did you read into the timing of all of this? It felt initially felt a little bit random because so much conversation had been on on trade issues. But then once I sat with it a little bit, it felt conveniently timed given where where, you know, Trump has been polling and and things happening, you know, in congress that that, you know, they would like to get through.
Speaker 7:Yeah. I actually don't know when I expected this to come out, but I did expect it to come out because it was an old thing. And they are trying to introduce a lot of the things they try to run near the end of their previous admin. And this was just up there. They're basically gonna redo the same thing.
Speaker 7:They're going to fight the legal battles and then implement this. And I don't know if there's anything in particular that prompted this right now, but I knew that it was coming and I didn't know exactly when, but I expected it like within a few months of the admin actually coming in.
Speaker 1:Anything else, Jordy?
Speaker 2:Brutal. I was hoping for a white pill in there somewhere, but didn't get I do
Speaker 7:have a white pill.
Speaker 2:Please. Please. Just one, sir. Yes.
Speaker 7:I'll I'll give you a few actually. So there are a lot of efforts going on right now with the FDA and at HHS more generally to promote price transparency, which will help with the PBM based delta and price. They are looking to accelerate manufacturing and approvals for nearly genericable drugs. They are going to be participating in generic drug user fee amendment reform, which is massive. I can go into that.
Speaker 7:The g m there's GMP reform happening. And there are people looking to actually lower the costs of some of our most expensive drugs in a way that is not bad for innovation by implementing Louisiana's purchasing model across the whole country. There are a lot of really great things happening and it's likely the situation will be better in the long run, not because of this, but because of everything else that's going on.
Speaker 1:What would the Louisiana plan look like? I'm not familiar with that.
Speaker 7:Ah, so Louisiana did an amazing thing a few years ago. They basically went to every manufacturer of Epclusa, this wonderful drug for hepatitis c that is a cure. And it's it was super high cost. I think the cost is actually around $27,000 right now for twenty eight days. So it's not able to be done for Medicaid meaningfully.
Speaker 7:So what they did is they negotiated with a producer of it. And they said, you're gonna be the exclusive provider for as much as we want. We're gonna give you $30,000,000 and you just give us as much as we want. And they they looked for people and they said, okay. You look like you're going to produce it all.
Speaker 7:They agreed. And they just produced as much as they want, they could wanted. If the state demanded more, they would get more. That was part of the deal. Mhmm.
Speaker 7:So they started screening prisons. They started screening Medicaid patients. They started screening everyone in order to get as many people as possible this prescription for a formerly very high cost drug that had to them zero marginal cost because of the deal. Yeah. Lots of pharma companies are actually willing to engage in this deal.
Speaker 7:They're willing to provide zero marginal cost drugs if you give them just one big contract and exclusivity. Sure. And this seems to be amazing. It worked really really well. They reduced the rate of hep c in the state, the hep c death rate actually, by about a sixth in about a year, which is incredible.
Speaker 7:Yeah. They actually saved a ton of money on it. They reduced the number of organ transplants people needed. They did just lots of really really wonderful things and all they had to do was ask a manufacturer, hey, will you provide as much as we want if we pay you a set amount and give you exclusive rights in our state?
Speaker 1:Yeah. Yeah. Love predictability.
Speaker 3:What's that?
Speaker 1:Yeah. Businesses love predictability. Like it's predictable revenue. And so even if it's at a lower margin, it's more guaranteed and higher volume and so all the all the math works out and the IRR increases.
Speaker 7:Yeah. And when that model goes national, it's going to basically make our high priced drug problem a thing of the past if there's a generic.
Speaker 1:That's fantastic. Well, that's a great white pill. Thank you.
Speaker 2:Thank you for that.
Speaker 1:This is great. We'd love to have you back. This is a fantastic I'm so I'm I'm so glad you were able to join really quickly.
Speaker 2:Yeah. Thank you for making the time.
Speaker 1:A lot. Thanks so much. Well and we'll talk to you soon.
Speaker 7:Alright. Have a good one, guys. Bye.
Speaker 1:Cheers. Bye. We have our next guest hopping in the studio. But quickly, let me tell you about Vanta, automate compliance, manage risk, improve trust continuously. Vanta's trust management platform makes the manual work takes the manual work out of your security and compliance process and replaces it with continuous automation whether you're using your first framework or managing a complex program.
Speaker 1:Go to Vanta.com. Anyway, thank
Speaker 2:you so
Speaker 1:much. And welcome to the stream, Tess. We'd love to chat with you. If you're here, let's bring you in. Can you hear us?
Speaker 9:I sure can. Can you guys hear me okay?
Speaker 1:Yeah. You sound great.
Speaker 2:Welcome to the show. Great to meet you.
Speaker 1:Thanks so much for hopping on on short notice. We're trying to make heads or tails out of the news. We were just talking to one guest about, the the latest executive order around drug pricing, and we'd love to just get your a little bit of your introduction and then how you are processing the news today and what's going on in the market and just kind of your high level take.
Speaker 9:Absolutely. So thanks so much for having me on. So my name is Tess Cameron. I'm a principal at RA Capital Management, and RA is a leading life sciences investment fund. We make investments across all stages from seeding and building new companies all the way through to investing in later stage companies in the public markets.
Speaker 4:Mhmm.
Speaker 9:And I think, this whole concept of most favored nation for, you know, drug pricing, it is not something new. It is something that we saw in the first Trump administration actually several times in 2018, it came back in 2020. It first in one executive order, then in another executive order, and then in a rule from the Center for Medicare and Medicaid, a rule that ultimately did not get implemented because the rule was actually knocked down in court because they didn't follow certain procedures that were required from an Administrative Procedures Act standpoint in order to get the rule through. So I think that broadly, there'd been some rumors among the, you know, biotech investment community that this is something that was coming back. Right?
Speaker 9:Trump had made some statements about it's not fair that we are paying, you know, so much more than these other countries. And so I think investors were, you know, anticipating that there might be something.
Speaker 2:Was it
Speaker 8:And Do you think it was
Speaker 9:break out oh, sorry. Please jump in.
Speaker 2:Do think it was priced in in some way? Because the so right now, the the Nasdaq biotech index is following the overall Nasdaq.
Speaker 1:Yeah. And ever Perfectly. Last night, at least the peanut gallery, myself included, were predicting bloodbath in the biotech markets I know. Didn't happen. Are we just really stupid, or do we get something wrong?
Speaker 9:I am totally with you. Yeah. So, yeah, I think this just shows the value of predictions in this kind of market where, but I I think it's I I think it's for fundamental reasons that, you know, biotech stocks were like biotech and pharma stocks were like actually up this morning. So like my goodness, like why the heck is that? And I think the reason is because the executive order and particularly the administration's language around the executive order was actually much more positive than I think people were anticipating.
Speaker 9:This doesn't necessarily mean that it will be positive. Right? But I think it's being interpreted positively. And I say that for a couple of reasons. One is that, you know, I think the you know, Trump made it very clear, like, the focus is on other countries that aren't paying.
Speaker 9:Right? And the focus is more on those countries than the companies. And I have to say as a biotech investor, you know, I think all of us are, like, totally behind that statement. Right? Like, you know, the fact that The UK and, you know, a lot of Europe benefit from these, like, super low drug prices.
Speaker 9:Like that isn't, you know, they should be paying a lot more. There's actually a study that came out just a couple days ago that looks at the ways that a lot of these European countries set price, which is through these health technology assessments where they basically, you know, say that patients lives aren't worth particularly much and they very narrowly value, you know, the benefits of these drugs in a way that, you know, undervalues the societal benefit of medicines by like more than 90%. Right? So these are not you know, I think I think what was really positive to hear is, you know, hey. The focus on getting other countries to pay more, you know, someone said I I can't I I think it was Trump actually who said, you know, hey.
Speaker 9:If you wanna sell your cars here, you have to buy, you know, our medicines at a you know, at, like, market price. Right? And in The US, like, we do have a competitive market. I think also as a biotech investor, key thing is, like, we wanna keep that market competition going in The US. That is what drives drug prices down over time is like generic entry.
Speaker 9:It's like more branded competition, much, much, much better than like importing foreign price controls that essentially are based on math that, like, undervalues human life. Right? So Yeah. Good trade stuff, but, like, bad if it results in, like, importing foreign price controls.
Speaker 2:Are those And
Speaker 9:think the weight of those changed based on the language that we heard this morning.
Speaker 1:Sure, sure. Let me
Speaker 2:Are those effectively the price controls that they have already, are those happening at the EU level or country by country?
Speaker 9:It is country by country. And it's a very nuanced and very complicated process. But essentially, like when a drug gets approved, US is almost always the first launch, right? So 85% of new medicines launched anywhere in the world, those are available in The US. And then it's a question of what other markets do you go to?
Speaker 9:And it's really complicated because all of these different, many of the different countries, they reference price each other, right? So you don't want to like start in a country that like is reference pricing another country and it's like, oh, no. Like, now, like, you know, our pricing is all, you know, messed up. So typically, what companies do is they start with Germany. Right?
Speaker 9:Maybe they consider Japan. And then, you know, after they get pricing in one of those markets, then they go to these other markets. So this is why, like, countries are so staggered, and they don't get the benefit of these medicines, like nearly as soon as The US does. They're usually delayed several years. But it's a very country by country, you know, decision making process.
Speaker 9:And it's not really a decision making process. It's kind of a take it or leave it, right? Like drug company, do you want to launch in this market or not? If you do, like, here's your price, take it or leave it. And so actually having the US government step in and say like, hey, you're not just negotiating with the drug company, you're negotiating with the US government now.
Speaker 9:And like, if you want to sell your cars in our country, you're gonna have to pay the price that I want you to pay. Like that becomes a more powerful statement where like now companies can actually be in a position where they can, you know, start, you know, seeing the benefit of, you know, more, you know, more deliberate, you know, trade negotiation by The US in favor of, you know, getting other countries to pay their share of research and development. US has been 75% of, like, you know, drug, biopharma research and development is is what The US funds, which is just incredible. It's like defense. Right?
Speaker 9:It's like it's similar to the NATO similar to the NATO issue.
Speaker 1:Yeah. Interesting. Is there is there something at the political level that the biotech community broadly, both the large pharma companies and maybe even the the the more startup focused companies, agree on in terms of changing regulation or how the government interfaces with the biotech community? Like, for example, we I mean, we cover tech a lot, and there's been a lot of rumblings about the the government blocking acquisitions. In general, big tech companies want to acquire startups.
Speaker 1:Startups wanna sell themselves to big tech, and so tech as a whole has been pretty against the blocking of acquisitions. But is there an analogy there to, how the biotech community broadly thinks about their list of priorities in Washington? And is this anywhere on that list?
Speaker 9:I would say, like, across the board, for, you know, big pharma companies and, like, little biotechs alike, it is all about, like, let us compete. Right? Like, market competition is, like, such a great force for access and innovation and, you know, bringing prices down in The US, like, Us compete and, you know, enable that. And I think we have, know, I I think we see it in our access to medicines. It is because of the dynamic US market and market competition that we have so much access.
Speaker 9:Is because of US market competition that when generics come in, you know, prices will go down sometimes like 98%. Right? Like Medicare pays 30¢ for like, you know, or even less, I think it's 3¢ actually for like each like Lipitor pill. And so that's great. Right?
Speaker 9:And so let us compete. Let us compete. You know, there should be government mechanisms, you know, we think for drugs to actually go generic on time. Right? So like, yeah, you don't want like drugs hanging out for twenty years, like on patent that isn't really, you know, part of the deal.
Speaker 9:Right? But when we think about like, you know, what makes The US so dynamic and what brings patients a lot of benefit, it's like it's having that innovation and ensuring that that innovation is driven by market competition rather than government price controls actually helps, like, instill more natural mechanisms for prices coming down, more branded competition, more generic competition. If the US government just comes in and sets price, guess what's gonna happen? You're not gonna have, you know, a second to market branded products that's launching three years later, you know, coming to market and, you know, competing against this price set one because they're like, I'm not gonna compete against the US government. Right?
Speaker 9:Like US government is gonna get, you know, gonna get what it wants. So I think that is somewhere where, you know, biopharma as a whole, big company, small company, I think all aligned on that. We had the inflation reduction act, right, which is essentially instituted price controls in the Medicare market. And, you know, the big inefficiency there was setting price for small molecule drugs at nine years. Biologics are at thirteen years.
Speaker 9:Usually, as investors, we're counting on like fourteen years of exclusivity before a drug goes generic and drops off, obviously dependent on the quality of that patent. That's a price control that we don't want, you know, that's that's already had an impact unfortunately on small molecule innovation. So pills instead of shots. And we don't think that's good for Medicare beneficiaries. And we don't want to see more price controls coming into this market because it could really cause something very special where America leads, which is biomedical innovation, to have a lot more challenges and less investment.
Speaker 2:So generally, the our last guess was was sort of disappointed with with the the EO. He thought it was gonna have, you know, negative implications, but generally felt fair. You know, he seemed somewhat unfazed. Can you talk about investor sentiment in biotech right now? The industry has had, you know, a rough few years and in many ways, know, you could kind of just shrug this off and just say, all right, you know, we just got to get through it.
Speaker 2:But I'm curious, you know, from your point of view, there, what are the sort of positive outlooks right now from your standpoint? And what should people be paying attention to outside of this EO?
Speaker 9:Yeah. Absolutely. So, I mean, I think the reaction, you see it in the stocks. Right? I think that, you know, there's there's optimism that the impact of this policy may be a lot lower than people thought.
Speaker 9:And indeed, I think some of that is just, hey, it looks like this is gonna happen through rulemaking instead of through, you know, some other kind of implementation that might be more top down. And that, you know, may impact the probability of actually getting something that is, like, super broad based and, like, bringing pharma, you know, prices down across the board that that may lower the probability. So I think that's kind of what we're seeing in stocks. You know, I think in terms of just the sector, there's a lot of, like, amazing stuff happening fundamentally. Right?
Speaker 9:And that's why as investors, when we see periods of volatility like this, it's very exciting from an opportunity set perspective because you have companies that have made incredible scientific progress. You have companies that have, you know, that are launching, you know, transformative medicines that are making really good progress. And we're seeing some real disconnects, you know, across the board for many, you know, for many companies. And that that, you know, that's a great set of opportunities for investors. And, you know, ultimately, I think America does really value biomedical innovation and, you know, will will be rewarded for, you know, companies that make fundamental progress.
Speaker 1:Can you talk a little bit about the life cycle of a new drug or new biotech company? Comparing it to tech again, it feels like there's companies older than us that are still private because the nature of the tech market is that there are venture capital firms that are set up to do $5,000,000,000 injections at a hundred billion dollar valuation. And yet it feels like in biotech, there's been a long history of going public at a much lower, market cap. The the stock moving based on FDA trials very early before revenue, years on the market pre revenue. Is there some sort of fundamental reason why companies and biotech go public earlier or is that life cycle changing?
Speaker 1:Do I even have that that characterization?
Speaker 9:You are so right. No, you were absolutely right. So it is a very different life cycle. I mean, it, you know, it can take like, you know, ten years for a drug to get to market. Like, you know, even when you've gotten into the clinic, 90% or more of, you know, what you're working on is gonna fail.
Speaker 9:So it is a really, it is a really tough sector. You know, we're talking numbers in the billions, you know, on a probability adjusted basis, it's like, you know, over 2 and a half billion to actually get a drug to market. So we're talking big investment, very high risk. And as a result, yeah, think you're like, why is anyone doing this?
Speaker 1:You would think it'd be the opposite. But You would you would think high burn, high CapEx, high risk, leave that in the private markets. But then Stripe, which has been making tons of revenue for a decade, get them in the public markets. And yet it's the opposite in America.
Speaker 2:I'm curious I'm curious if there's any type of disconnect between the public and the private markets in the sense that, hey, can buy shares of a private company that has $0 in revenue at x valuation. Or you can buy shares of a company that's public that has drugs and that are in market that has revenue. Can you talk about that? Is that correct? Incorrect?
Speaker 9:Typically, we see is that it's very unusual for any drug company that has a commercial product that is like marketed. Very rare for those companies to be private. Right? It exists in a few spaces, but like very, very unusual. They're almost always public.
Speaker 9:And the reason that biotech companies tend to go public so early is because, you know, it takes so long to develop these drugs and the depths of the, you know, capital markets for the, you know, biotech market, it's just deeper on the public side. Right? There's a lot of investors who are like, hey, we do, like, public market investing, and maybe they do, like, a little tiny bit of, like, private market investing, but, like, the pools of capital on the public side are just much larger. And so you see a lot of these companies going public very early. And the private company valuations, they tend to, on a lagged basis, follow the public market somewhat, you know, curious if that also happens in tech.
Speaker 9:But it might be that after you see, like, a real drawdown in the XPI, like, six months later, if the XPI is still low, private companies will be like, you know, maybe that step up isn't gonna be as big or, like, maybe I have to be, like, a little more flexible on, like, valuation. Sure. So it usually takes some time, but, like, everyone is usually looking at that because that is the exit typically before an m and a. There is, you know, certainly, you know, strategic m and a activity that happens for private companies. But usually, it's after they've raised enough money to get to a point that, a strategic is like, cool.
Speaker 9:Like, I think this drug is gonna work. I'm gonna take that risk now. And usually, the company would like to be public to be able to raise the money to get to that point where they can be bought. So, know, it's a it's an interesting dynamic and and certainly different, I think, than than the tech world.
Speaker 2:Can you talk about the longevity market from your point of view? In in our world, single once somebody has at least a billion dollars of paper returns, they become very obsessed with longevity living forever. And so in tech, the companies that get attention, we had one of the co founders of New Limit on last week, was an exciting conversation. But I'm curious from your point of view, more at a high level, you know, give us kind of a broad overview of the longevity market, which I'm sure is just one area that you guys invest.
Speaker 9:Absolutely, yeah. So the longevity market can mean many, many different things. Oh, yeah. Every drug. Every drug.
Speaker 1:Every drug. Every drug if you're
Speaker 2:To some degree. Threatening.
Speaker 1:Right? Yeah.
Speaker 9:Exactly. And also with many different levels of scientific validation. Sure. So RA Capital, we are a very data driven organization. Right?
Speaker 9:A lot of the people who work at RA Capital are like PhDs or, you know, former physicians or sometimes even current physicians. And so very scientifically rigorous. But, you know, I think we're developing and, you know, have developed a lot of like really, really interesting research on, you know, scientifically oriented ways of extending, like not just lifespan, but health span, right? So when we think about longevity, we tend to think about it not in terms of like, hey, do you want to be like, you know, hanging out on a couch, like not really able to move, but you're like, I'm alive. I'm alive.
Speaker 9:Like, you
Speaker 2:know, ideally As long as my Neuralink
Speaker 1:plugs in, I'm good. Well, I can use the Internet at a 50 as a vegetable. I'm good.
Speaker 9:You're like you're like, that's probably not my jam. Just being able to, use a I mean, using a computer with your eyes at a 50 would still be pretty cool. Yeah. Like, if you could do more, that would be even more fantastic. Right?
Speaker 9:And so our focus has actually been more on like the health span side of things. Mhmm. I'm really thinking through like, you know, we actually think that there's a lot of like existing technologies and existing, you know, it's not it's also not just about like treatment, it's about, you know, prevention and how do you identify, how do you diagnose, how do you kind of manage risk factors like very, very early. And so a lot of that involves having like algorithms for identification, having algorithms for like, you know, disease prevention and identifying where there's a lot of like existing stuff that you can put to work in combination with like, you know, novel, you know, novel agents to really improve health span. So that is an area that we're very excited about and and certainly doing, you know, certainly doing a lot of work in.
Speaker 1:Is deal flow look like for you? I know a lot of the best biotech companies, it seems like they there's some tech transfer point out of a university lab. And then, I've seen, like, Flagship Pioneering is, like, incubating stuff, and Moderna came out of that. And there's just so many
Speaker 2:different And RA has an incubation arm too.
Speaker 1:Yeah. Yeah. There's so many different formats. Yeah. You don't you don't see a lot of, like, oh, you know, kid in the garage said, you know what?
Speaker 1:I have a problem and I'm going to solve it myself. It's a very different pattern of entrepreneurship. So what does the life cycle look like for you these It
Speaker 9:is very different. I will tell you, I would actually love to see more like garage biotechs because I think like there's, you know, some more like, I think that there's actually, you know, in some ways, like the entrepreneurial process for biotech has been a little too, like, institutionalized.
Speaker 1:Sure.
Speaker 9:Right? But let's let's talk about it because, you know, the deal flow for biotech and like how companies get formed can be in a number of different ways. Academia, right, ideas coming out of academia is like a big one. Ideas coming out of, you know, venture funds is another big one. Right?
Speaker 9:And then you have like, you know, business people, often people who've like, you know, they've worked for a company, that company got sold, and they're like, hey, I wanna come back and do another one. Here is, like, these other areas and other problems to solve. Right? Or maybe someone's coming out of big pharma with, an idea that they couldn't prosecute in their big pharma company because they were too risk averse, and they wanna start something new. But because biotech is, like, so high risk and requires so much capital, that process for, like, getting a company started is often, you know, I'd say there's, like, a bit more, like, institutional, like, process around that than I think you see in tech because it just like takes a lot of money to like go from, hey, I have this idea to like, oh, I even want to like test this in animal models and like try and get a drug out of this.
Speaker 9:Like that is like millions of dollars. So I think that is something that is actually a real challenge for the and that we at RA think is like a real challenge for like the biopharma ecosystem is, you know, look, like we have to, you know, find ways that we can be more, you know, be more efficient and, like, try and get to some of these answers more quickly. Because when, you know, when you when you look at, you know, when you look at the pace of of innovation that is coming out of China, which is really, you know, pretty astonishing for biomedical innovation, it's like that is a fundamentally different cost base and fundamentally different pace of iteration. And we you know, there's a lot of work that I think we need to consider for our biotech ecosystem here to adapt.
Speaker 1:Can we do a quick round of, like, overrated, underrated? I'd love to know. Artificial intelligence broadly, is it speeding up drug development? Is it overhyped? In Silicon Valley, everyone says, oh, we're just gonna, you know, ask ChatGPT to cure cancer.
Speaker 1:It's gonna happen next year.
Speaker 2:It's a convenient line if you need to raise 30,000,000,000 yourself.
Speaker 1:But but but what what is the mood in the real industry from the folks who
Speaker 9:know what they're AI is like, it's overhyped in the sense that like AI itself is like not like discovering and developing drugs. It is under hyped in the sense that like, oh my gosh, like what a powerful tool. Like, absolutely use it. Every single company worth their salt is using AI in their drug discovery process. Right?
Speaker 9:So it's a little bit of both. Usually when someone is talking about themselves as an AI company, you should approach with like, how different is this really? Like, but if a company is like, no, we don't use AI for anything. I would also be like, That's nonsense.
Speaker 1:What about mRNA broadly, Moderna? Stefan Bissell was on a TED Talk saying before COVID saying mRNA is gonna be a cancer cure. The stock's kinda gone up, gone back down. Is mRNA a technology that we're gonna be seeing more of in the future in different applications, or should we be thinking about Moderna really just as like a pandemic frontline defense firm?
Speaker 9:So let me talk about RNA therapeutics more broadly because actually mRNA therapeutics are like one flavor RNA And I would say like RNA therapeutics overall, like huge, huge potential, right? Huge opportunity. I think that the challenge has been delivery, right? How do you actually get these to the right biological target? And there's a lot of really awesome work being done that can hopefully improve on that.
Speaker 1:Yeah, That makes a ton of sense. What about GLP-1s? I feel like everyone has heralded them as like a cure for everything from diabetes to obesity to gambling to just anything being lazy, I guess. Cures it seems to cure everything. Overhyped, underhyped, an overrated, underrated, or kind of
Speaker 9:Underhyped. Underhyped. Okay. Phenomenal drugs. Phenomenal drugs.
Speaker 9:Lots of problems to solve. Right? The market isn't rewarding a lot of that now, but I think the market will in future. So lots of problems to solve need to improve on accessibility, right? So how do we get like pills and patches instead of needles?
Speaker 9:And how do we improve tolerability, right? So that people are actually staying on these drugs. And a big part of that is insurance coverage as well.
Speaker 2:Last one for me. Are you worried pharma IRRs on average have been low? Our last guest was talking about how if you look at average returns, they're below the cost of capital today. Are you worried about net new investment in early stage biotech funds? Obviously, if there's less investment, you could imagine the returns actually going up because there's less competition for deals, maybe.
Speaker 2:But what's your kind of high level take on incremental investment in early stage biotech?
Speaker 9:You know, my take is that there is a lot of, you know, there's a lot of great work to be done from a fundamental standpoint, but we need the incentives in place. Right? So we've got to have a functioning market. We've got to have, you know, you know, competition in order to incentivize that. So, you know, I think that's the best that's the best thing that the government can do is ensure that there's, you know, strong market competition for pharmaceuticals.
Speaker 9:And, you know, loved hearing this morning that there's a real appetite for trying to get other countries to incentivize that innovation as well.
Speaker 1:Yeah. Do you think biotechnology process is overall accelerating, or are we heading into a period of kind of rebuilding and stagnation? What's your overall optimism on industry broadly?
Speaker 9:My view is accelerating because we have to, right? Have to and we have better tools too. The thing that causes biotech to take such an enormous amount of time is clinical trials. And like, the clinical trial system in The US is just like clogged. Right?
Speaker 9:Everyone's trying to recruit the same patients at the same hospitals. So I think we need different ways of doing things. But I think that we have a lot of the tools to actually accelerate some of that innovation.
Speaker 1:That's exciting.
Speaker 2:Awesome. Well, thank you so much Got out
Speaker 1:of here with white Thank you.
Speaker 2:Yeah. Yeah. White on a high note.
Speaker 1:Thank you so much.
Speaker 2:This was really enjoyable. Thank you. Yeah. Thank you, Tess.
Speaker 1:Well, the market's up, so we have to celebrate.
Speaker 9:Yeah. It's a
Speaker 3:white suit day.
Speaker 9:Great to see you both.
Speaker 2:Yeah. Thanks for coming on. Cheers.
Speaker 1:Thanks so much. That was great. I I feel like I'm learning a ton from these interviews.
Speaker 2:We've been meaning to have a biotech day.
Speaker 1:This is kind of the informal biotech Yeah. Kinda triggered it. But I'd love to go deeper here because there's it it it's such a every answer is something where I'm like, I've never heard this particular take before. I'm learning a lot.
Speaker 2:So I've met a lot of people. It's interesting that Cremud didn't bring up the price controls in the European market. Right? Because that does feel like factor. He was saying that
Speaker 1:Yeah.
Speaker 2:You know, European country or that the pharma companies are selling at the rate in which the profit maximizing rate. And it sounds like there might be some other factors at play.
Speaker 1:Yep.
Speaker 2:We have Jack
Speaker 1:Let's bring him in.
Speaker 2:The waiting room. Let's bring him in.
Speaker 1:Welcome to the stream, Jack. How you doing?
Speaker 2:There he is. There he is.
Speaker 8:I changed my shirt when I saw that you guys
Speaker 1:White.
Speaker 8:Went light. When when you went light today, I had a a dark shirt on. I just
Speaker 1:Can we get some sound effects?
Speaker 2:No suit, though. Hey.
Speaker 1:No suit, though, but he's in the studio. Welcome to
Speaker 2:the stream. Let's go.
Speaker 1:Get the Ashton Hall.
Speaker 2:Yeah. One more. Let's go.
Speaker 8:We got Jack.
Speaker 2:He's got news today.
Speaker 1:He's got news.
Speaker 2:He's got news. What do you what news do you have? What's going on?
Speaker 1:What you got for
Speaker 5:us?
Speaker 8:This is you guys are getting the first look at this. It's a it's a pleasure to do it here. We are announcing impatient ventures fun one.
Speaker 2:Let's go. Let's go. Another horn. Let's go. Another air horn.
Speaker 1:How big is it?
Speaker 8:So we we set out to do 20,000,000.
Speaker 1:Right on.
Speaker 8:We set out to do 20,000,000. We ended up over subscribing and doing 23 and a half million.
Speaker 1:So Congratulations.
Speaker 8:You know, it's a it's it was a tough market to start in February 2023. It was basically the rock stone cold bottom adventure.
Speaker 3:Stone cold bottom. Raising the money. Out.
Speaker 1:Have you thought of concentrating the entire fund into a single foundation model company? Just putting all 23,000,000 in one deal?
Speaker 8:I basically was was hoping that that would be the case. I was just waiting to yolo in with Josh Kushner and decide.
Speaker 1:There you go.
Speaker 6:You know, I Next I never found it.
Speaker 2:Next fund. Yeah.
Speaker 1:I mean, seriously, break down the
Speaker 2:Maybe talk about a why don't you give people a little background? Yeah. Talk about, AUM too because I don't think the first fund tells the whole story.
Speaker 8:Mhmm. Yeah. So I was lucky enough to to start investing. Honestly, during ZERP when it was a little bit easier to raise capital, and and so we did a series of SPVs while I was a founder Mhmm. In 2020, '20 '1, and '22.
Speaker 8:First deal we did ended up being a CPG company. It might be the first and last CPG company, but it's my best investment, which is a high protein oatmeal brand called Oats Overnight. I met the the founder. He was a pro poker player. I was a very serious poker player once in my life, which I think is an amazing skill set to have as a founder is that sort of decision tree between luck and what you actually did to impact an outcome.
Speaker 8:But, yeah, we did about $30,000,000 of SPPs before the first fund. And then along the fund, we've done probably another 50 or 60,000,000. So AUM is is north of 9 figures, but we're we're definitely Sounds good. We're we're definitely, as they like to say in the industry, just getting started.
Speaker 2:Just getting started. That's great.
Speaker 1:Portfolio construction for the new fund, what's the average check size? How many deals are you trying to do? Are you leaving some on the table for pro rata and follow ons? Will there be a growth fund, an IPO, a special situations fund, debt fund? Are you getting into structured, structured credit, private credit at some point?
Speaker 1:What's going on?
Speaker 8:I mean, I'm you know, import export. Export. You know? It's like Same. You know when you have those friends where you ask them what their parents do and they don't know and they say import export and you're just left wondering.
Speaker 8:But, like, everything's import export. It's something import. Support.
Speaker 1:They import the capital, export it to the founders.
Speaker 8:Yeah. Exactly. So we're we're a concentrated fund. We're we're gonna do probably about 20 to 22. We're actually at 20 right now, and so we're just deciding kinda the last few.
Speaker 8:The the nice part about being a first fund is you can not only make a lot of mistakes. You you don't have to be as kinda like letter to the law of how how it's done, I think, you scale AUM and you have institutional investors. We are fortunate to have, an institutional investor. As a as a top and down, then I need permission to say publicly. Unfortunately, I don't have that permission.
Speaker 8:But as I've been told, I can say it's a Boston based, endowment, that's in the and it's in the top quartile of, investing. But, so we, we we have a a generalist approach. How I think about it is I was reading somewhere the other day that somebody talked about how specialist funds actually outperform generalist funds for only fund one. But then as soon as you escape fund one, you start just getting decimated. And and, basically, the articulation was if you're focused, it's because you're investing in whatever's of the time.
Speaker 8:Right? Right now at the time, it's, it's foundational models, and and and deep tech. So everything from AI to to robots. But, you know, three years ago, I saw a lot of people saying, we're web three focused, and then they kinda, like, branded everything that way and then slowly walked off stage and pivoted as that industry changed from where it was three years ago. So I like to think of us as a generalist fund that dynamically invests in what the best categories, you know, of today is.
Speaker 8:And so right now that is, you know, robotics, is deep tech, that is advanced manufacturing and defense, but we're also doing consumer. I think consumer is permanent. It's a permanent category. You know, I think we have yet to do a web three deal. I don't wanna write it off.
Speaker 8:We did some pre fund stable coins that that that we're excited about, but, you know, I think it's still sort of to be determined, you know, what's gonna work in Web three because it's still just tokens with not a lot of value. But How do
Speaker 2:you find there's there's been a number full disclosure, I'm an LP and impatient. But how how do you how do you think about investing in companies before there's any heat on the deal? I can think of a few companies in the fund that couldn't have been less hot at the time of investment, and then a year later, you've got tier ones you know, leading and they become super competitive. But what what's your kind of What are you looking for in a founder to get a sense of their abilities oftentimes before there's any, you know, revenue or or sometimes not even, an actual product yet.
Speaker 8:Yep. Yeah. I mean, that's, that basically is kind of where I think our edge is is in what we invest in, which is I think you always hear it. It's about the people, but my line is I can't underwrite a business if I can't underwrite the founder. And so it's those characteristics of that founder that I feel like are a winning, you know, sort of, profile.
Speaker 8:Because, you know, comically, the word pivot is so often used in startups because the beginning life cycle of a company is one continuous pivot. And so I love the Mike Maples quote. 80% of his best investments were pivots. Mike Maples being the, you know, the Floodgate founder, and and and I think that that couldn't be true about so many of our best deals versus sort of the business change later. And so what I'm really looking for is that the founder has there's a line that I like to use, which is never uncertain, often wrong.
Speaker 8:And so whatever they believe to be true at that point, they believe it with a 10%. But as soon as new information enters their their head that that might change the way they, you know, go to market, that might require them to need to shift their team, I'm looking for a founder's ability to be dynamic at as the sort of, the information changes. We're making cigar. Break
Speaker 2:it out, John. Let's do it. Let's do mean, don't mind I don't mind taking the suits the dry cleaner after this.
Speaker 1:Yeah. In the next studio, I think we will be
Speaker 8:a I wish I bet. Mean, you remember you guys remember there's, like, at least two or three COVID startups that were like I think there's still one that does it where you can get, like, ten minute delivery or something like that.
Speaker 1:The cigars?
Speaker 8:I mean, I mean, ten minute that might the next great consumer business.
Speaker 1:Maybe. Maybe.
Speaker 2:Yeah. Go puff for cigars.
Speaker 1:What is your take on these, like, on these new zoomer companies, these these young entrepreneurs who seem to be really good at, like, going viral on day one, vibe reels, take over the Internet, and then they kinda gotta build the plane after they're already flying versus, you know, the Dylan Field story of, like, Teal Fellow in kind of private beta for, like, three years raising money, then launches Figma and goes on this, like, generational run. The fear and, like, the vibe is like, hey, guys. Like, you're taking the marketing a little bit too seriously. Maybe you're too good at going viral before you you really have any product, but are we just being, like, boomers if we're like, hey. You know, get in the get in the garage and start coding.
Speaker 8:I I love that question. One of the companies that, you know, Jordy knows is in our portfolio and we're we're all big fans of, in fact, I think you both have the fish, is Shinkei.
Speaker 1:Oh, yeah. Yeah.
Speaker 8:Yeah. Yep. So I think that they're out of they're they're they're they're at 40 Michelin stars of of sort of their fish being distributed to restaurants.
Speaker 1:I thought they only went up to three Michelin stars, but they got 40 Michelin stars. 40.
Speaker 2:They're hogging all the stars.
Speaker 1:That's incredible.
Speaker 8:Really blew it off the surface. One of the things I really appreciate about the CEO is quite young and and, you know, we backed him, you know, when he had two roommates from college working on the idea with him. And, actually, the original idea, he wanted to make autonomous fishing boats and he wanted to build the fish processing robots that kinda Interesting. You know, execute the fish when it's caught and then get it ready.
Speaker 2:The narrative the the the narrative violation there is that Shinke is a YC company
Speaker 1:that Oh, really?
Speaker 2:Graduated YC and still had and this is this just goes to show how not hot robotics were in any type of sort of more antiquated industries Yes. That they could that a founder of SAFE's category could get out of YC and just be out in the free market building in relative obscurity Yep. For I don't know how long it was exactly, but
Speaker 3:if if I remember correctly, was It was a few years.
Speaker 8:But but just to even finish, John, your question, one of the things I like about the CEO is there's a lot of pressure for him now that he is a, you know, tier one backed startup and has, you know, some of the best from SpaceX and Android working there to really scale revenue. The thing that he's focused on is quality revenue. And I think in the age of AI being able to pump numbers up quickly, don't know what that company was. I don't wanna say the wrong one. It was 11 x or 11 labs or something that had, like, 10,000,000
Speaker 1:or whatever. Companies.
Speaker 2:But There
Speaker 7:were widely different there
Speaker 8:was one that basically had, like, 10,000,000 in revenue in, like, three weeks or something crazy. And it was just turns out it was, like, all turned over, like, 90% churn. And so I think demos. Yeah. I think in this age of of of being able to scale as fast as we've ever been able to, quality revenue is really the most important thing I look for.
Speaker 8:And does that founder understand what that means?
Speaker 1:Yeah.
Speaker 8:So understanding you can act economics are still in right now. And I think the founders that don't understand
Speaker 2:Hot take.
Speaker 8:Yeah. I mean, hot take, you know, margin profile, basic finance one zero one stuff in conjunction with a market insight and the ability to scale and execute. That's an important thing that we underwrite is I don't know what your ultimate business is gonna be, but will you know it when you see it?
Speaker 2:Mhmm. Last question I have. Are you a long or short Burning Man? You've been a a vocal, proponent of Burning Man over the years. Every year that I've known you, you've gone.
Speaker 2:I I'm short. I gotta say, I'm short. I think it peaked a couple years ago. But but
Speaker 8:what's your I got bad news for Burning Man. I This will be my first year in which I do my hot VC summer in Europe. Oh. And not at Burning
Speaker 1:Okay.
Speaker 8:And so this is my first year taking off.
Speaker 1:Could be a definite off.
Speaker 8:I think I will be back. I will say I have gotten deals and LPs out of Burning Man every year I've been there. So, you know, I I have a good batting average and the productivity, but it definitely feels Actions. What's that?
Speaker 2:The actions are speaking louder than words here. You're short.
Speaker 1:Yeah. The revealed preference is mega short.
Speaker 8:I'm currently I'd say I'm I'm currently I'm currently at I'm staying in cash. I'm not lost
Speaker 1:in cash. Staying in cash.
Speaker 2:Awesome. Well, it's great to have you on. Congrats on the milestone. And
Speaker 1:Good luck
Speaker 2:to I'm looking forward to fun two announcement. I'm sure it'll be not too long.
Speaker 8:Around the corner. Not too far It'll be sometime after Burnham, man, which is awesome.
Speaker 2:Great. Anyway, great seeing you.
Speaker 1:We'll talk to you soon.
Speaker 3:Alright, fellas.
Speaker 5:Thank you.
Speaker 2:Thanks, Jack.
Speaker 5:See
Speaker 1:you. Let's talk about Eight Sleep. Go to 8Sleep.com.
Speaker 2:Get a pod for all trial.
Speaker 1:Five year warranty, thirty night race free trial, free returns, free shipping.
Speaker 2:It's clinically back.
Speaker 1:I got a 90. I'm back. Wow. You're back, John. Ranks.
Speaker 2:I'm I'm coming through. Actually put up a 90 too.
Speaker 1:Nine or 90 on the dot. What you got?
Speaker 2:Actually, a 90.
Speaker 1:Because we got Pippa from Sweet Capital coming in the studio in just a minute. Let me also tell you about AdQuick. Out of home advertising made easy and measurable. Say goodbye to the headaches of out of home advertising. Only AdQuick combines technology, out of home expertise, and data to enable efficient seamless ad buying across the globe.
Speaker 1:Pippa, are you here?
Speaker 4:Welcome to the show. Hey, John. How's it going?
Speaker 1:It's good. Would you mind kicking us off with a little bit of an introduction on yourself for those who don't know you?
Speaker 4:Absolutely. It's great to be with you guys. Know we've been wanting to do this a little for a little while, so it's great to be with you.
Speaker 1:Yes. Somehow we missed you at Hill and Valley. It was a crazy day, but it was good seeing
Speaker 4:you there nonetheless. You guys were overrun.
Speaker 1:We were.
Speaker 4:The the hottest spot at the at the conference. So
Speaker 1:Yeah. A tiny room in the corner. Everyone was beating down the air to. It was good.
Speaker 4:It was it was a crazy day. Those guys did a great a great job. But Fantastic. Yeah. So my name is Pippa Lam.
Speaker 4:I'm a partner at Suite Capital. We are a private investment fund, clue is in the name, Suite Capital. My colleague started gaming company Mhmm. Handy Crush, most famously kingking.com, which they sold to Activision, and then subsequently Microsoft. I run a huge game.
Speaker 4:I run the private investment fund for those founders. And we sit between The US and Europe and invest sort of broadly multistage. Again, we're private capital so we can sort of, invest across a whole wide range of sectors. And I'd say we're about 70%, US allocation at this point.
Speaker 1:Got it.
Speaker 4:My background, I actually started my career working for the British government on trade relations between the West, UK, US, and China, which obviously quite topical today. And I then sort of moved into equity research, covered large cap, China tech, US tech, JPMorgan for five years. So pretty much just doing publics, covered a lot of macro, which obviously is now, you know, increasingly relevant to sort of the tech world and and private investing now. Been in venture and and private investing for about five, six years now. So, yeah, great to be here with you guys.
Speaker 1:Yeah. How are the founders thinking about investing in gaming technology? I feel like every successful founder, they sell their company, and they're either like, I'm never doing that industry again. I know too much about what can go wrong, so I wanna stay away from it. Or they're like, I'm an expert, I'm gonna dominate the next generation of of generational companies that that that come up in the industry I know so much about.
Speaker 1:Obviously, there's a lot of value add there. So what's their what's their what's their feeling on gaming startups right now? And are you doing any deals in that area broadly?
Speaker 4:So I'd say I'd say it goes both ways. So there are five founders of King. So I'd say a couple of the founders are like, get me back in. I'm ready for more gaming. In fact, one of our colleagues is actually started started a new company as soon as his long compete pretty much ended with Activision and Microsoft last year.
Speaker 4:So he's straight straight back in it. He's he's operating sort of in stealth at the moment, but he's kind of straight back into operating, so very much bullish on gaming. And I'd say on the other side, it's a little bit of a range between wanting to invest alongside more the gaming ecosystem, not so much pure purely on publishers. I think that, obviously, King and Candy Crush were such an incredible zeitgeist and and breakout success. I think match three and sort of casual gaming really rode the the kind of mobile transition that we saw be so large for them and when they were coming up.
Speaker 4:I think, obviously, the gaming industry has moved a lot. And, of course, you know, my colleagues are still, you know, very interested in what's happening. I think a a lot of what's happening, obviously, around AI and sort of the broader broader ecosystem, you know, it's still extremely tapped in. So we do look at gaming deals. Yeah.
Speaker 4:But I'd say that, you know, it was partly the thing that you alluded to about having you know, knowing too much that has meant that we've you know, with the private investment we do on the side, we've really moved out of purely doing gaming. Yeah. We did also also have a non compete for quite a long time with Activision, so we were sort of forced in my earlier years to do sort of the gamification of adjacent sectors versus, you know, competing immediately with with their former company.
Speaker 2:Yep. How did you guys react to the to the news last week around the App Store and the changes to the App Store's payment or the forced changes to the App Store's payment policies?
Speaker 4:Look, I think that, you know, I don't wanna speak for them, but they certainly had, yeah, an ongoing very interesting relationship with Apple throughout the course of of, I guess, the as Candy Crush was coming up, I think also, you know, they really began at a time of sort of the Internet portal. You know, they really had to deal with how, you know, they were dealing with, you know, Facebook at the time matter and also Apple. So I think that, you know, broadly, you know, we're we're hopeful around changes coming out. But I think that certainly the the issues that we faced, you know, as operators suddenly are yeah. The world is drastically different now.
Speaker 4:We're we're no longer really at the fight to try and win mobile, which is really, you know, how they were having to come up at the time. So so I think it I think it's too early to say, but it's certainly something that, you know, my colleagues are tracking very closely. And, certainly, Sebastian Knutson, who I mentioned has has started his own new company, is is actually facing now directly as as they launch their first game. So so let's see.
Speaker 1:Yeah. Gaming is such an interesting venture category because I feel like over the last, like, five years, there's been a ton of breakout games, like but they none very few of them were, like, true venture backed, like, seed series A from main funds. Like, Fortnite came out of Epic Games. It's, a thirty year old company. Roblox had this venture story, but all the early backers, they became rich off of Roblox, and Roblox was kind of, like, their main win.
Speaker 1:Then Among Us and Belatro were these huge successes, but they were kind of just, like, random indie developers who just kind of
Speaker 4:Exactly.
Speaker 1:Got lucky and weren't really like financialized in like the, oh, we bet we're building a team. Mhmm. And then a lot of the game companies like pivoted. Like Slack was originally a game company and stuff.
Speaker 4:Right.
Speaker 1:If you go into Silicon Valley, they eventually
Speaker 4:push you
Speaker 1:into B2B SaaS if you're a gaming company. But, anyway, I mean, we could talk about gaming all day. But I I wanna hear your take on The UK, US trade deal. That was the first one to fall last week. You had a great breakdown on x about it.
Speaker 1:I'd love you to take me through kind of, like, what was your expectation? How'd you process the news? And and what do you see going forward with that particular trade deal?
Speaker 2:And maybe before you dive into that, even kind of the on on the ground opinion in The UK, how how UK citizens have viewed this whole trade debacle given that they they have a we have a The US has a trade surplus with The UK.
Speaker 4:Right. Yeah. Yeah. It's it's funny. I know I know a friend Ryan from Flag Sport tweeted, you know, The UK is the only country to have a trade surplus or The US have a trade surplus with The UK.
Speaker 4:So, yeah, it doesn't bode well for other countries. Right? If we manage to, like you know, that is that is the beginning point, but I think, yeah, of the top 10 countries that The US has a trading partner with, The UK is is the only one that they don't have a trade deficit with. So so let's see. Yeah.
Speaker 4:Look. I think it's a I I sort of find myself putting back my macro hat on again these days so much because we had, finally this trade first trade agreement between The US and UK announced last week. And, of course, this morning with the news coming under Geneva of how The US and China are hopefully going to move towards closer bilateral trade dialogue. So I think first on The UK piece, I know that sort of from behind the scenes that this has really been something that has been in the minds of the UK government ever since sort of mid February when we had or February when we had that very sort of, you know, very productive and and positive meeting between, prime minister Kyr Stalmer and president Trump at the White House. I think that there has been, on both sides, a real determination to work towards a some sort of, bilateral trade agreement that, you know, went beyond the Liberation Day board where I think we were, you know, at 10% with with some of the lowest countries.
Speaker 4:So this has been in the works for for weeks, certainly, guess, yeah, a few months, since then.
Speaker 9:And I
Speaker 4:think the the the reception has been broadly positive. You know, I think that, of course, there are still talks to be had. I know ambassador Peter Mendelson has said that this is this is a it's not a still picture. I think he said it's a movie, that the trade will continue. The trade talks will continue.
Speaker 4:But if you look at the headlines, it brings down to the the average, I think, tariff to somewhere between 12%. That is the aim, which, of course, is is hugely beneficial, for both when we were really stuck at the the 10%. So I'd say it's been broadly very positive. Obviously, markets reacted well to it, and it really hit some of the key points around, sort of steel and autos, which I think are, in both sides' views, potentially a blueprint for how The US is going to engage with other trade partners. I think that's, where I would like to see things move next is really expanding this into a broader dialogue around UK and US tech partnerships.
Speaker 4:I think that that is certainly something that we should keep our eyes peeled on over the coming weeks and something that, you know, I think there's a lot of interest on The UK UK side about really firming up our relationship with, you know, US big tech. We already have a fantastic working relationship, with many, you know, large tech companies in The US, but I think we could really push the needle on some of the sectors that have become issues of national security, it, you know, AI, defense, robotics, and and and stuff like that. So, yeah, broadly broadly positive, and I think it's been interesting to watch how we've seen, you know, The UK public and and also UK big industry react to, you know, the new administration and what the White House is doing.
Speaker 1:Do you think, The UK will be kind of a net importer or exporter of venture capital, over the next few years? Obviously, there's a lot of LPs there that would love to invest in American companies. There's also new projects to invest in, UK based entrepreneurs, new startups. So where what does the trade balance look like from a venture capitalist perspective?
Speaker 4:I think it depends who you ask. I think that, traditionally, we have struggled in The UK, and I say we obviously, I'm British. I do I have I have personally, as a microcosm, spent about 70% of my AUM on The US. So I think it's clear sort of how I voted with with our our wallets. But I think, certainly, if you if you look at Europe, there has traditionally been a issue with getting scaled capital to the pre IPO stage.
Speaker 4:So, you know, you had a lot of this homegrown seed capital and sort of, you know, of course, US counterparts setting up their UK offices, be it Accel, who's done very well there in index, who are Mhmm. You know, still big firms in The US, but they really found their footing in in Europe. And then in recent years, you had, you know, Sequoia come in. You had, you know, Andreessen Horowitz do a a big crypto play, NEA, and and many others. So I think that there certainly continue to be sort of a wealth know, The UK has really wanted to welcome US venture capital, but, of course, it has also raised the question as to why isn't there more homegrown, you know, European and and and US, funding at that later stage.
Speaker 4:So I think, know, in some ways, the industry is just more nascent there. So the law is has taken time to scale up these these funds. But yeah. I mean, I personally think that we should continue to try and push for for greater collaboration
Speaker 1:on
Speaker 4:the capital side, at those later stages as well.
Speaker 1:Do you think the The UK is a good kind of launch pad for investing in The Nordics broadly? Because The Nordics seem to be a little bit of violation of the narrative that Europe isn't producing generational companies. You have Spotify, Skype. There's tons of stuff out of Sweden and Estonia. Yeah.
Speaker 1:And there seem to be pockets of, like, really entrepreneurial cultures there even if it doesn't fit, like, the traditional Euro narrative. So is that an interesting angle to, like, go set up in The UK and then deploy into The Nordics broadly?
Speaker 4:Okay. First of all, I wanna know if my colleagues have been texting you because four of my four of my founders are Swedish, the other is Italian. So this is definitely, like, a setup. But but yeah. Look.
Speaker 4:I'm I'm a we're a big fan of, obviously, investing in the Nordics. I think that my general view and, you know, John, I saw a lot of you lost at the end of last year when around the US election, I was I was on the ground in The US for for a couple of months during that ramp up. And I think I remember on election night, being at a sort of election watch party, a lot of people were saying to me, okay, well, this is great, you know, in many ways for The US tech, US tech scene, but how will this impact The UK and Europe? And I was the one going around saying, look. This is a fantastic, chance for, you know, The UK and, you know, The US's closest allies to also benefit from some of these, hopefully, blockages that are moving, especially within the tech sector.
Speaker 4:So my view is that, you know, The UK is still a fantastic place from which to welcome, you know, tech companies as a gateway to broadly Europe. Yep. I do think the Nordics are definitely a sweet spot. So King, obviously, basically, also being a part of that.
Speaker 1:The Sure.
Speaker 4:The the Nordic gaming community is huge.
Speaker 1:They didn't even make this list. I'm looking at this list cursor calling on MySQL, Minecraft, Spotify, or Skype, or Yeah.
Speaker 4:The Yeah. King I mean, King invest listed on the on the New York Stock Exchange, but, you know, its headquarters were in London, but its cofounders a lot of them are Swedish. But certainly, we we you know, our second office really is is is Stockholm. Mhmm. So, yeah, big fan of that, and I think that it's it's proof that both in The Nordics and also in Eastern Europe, you've had some really breakout sectors, including gaming.
Speaker 4:So yeah. I Makes sense.
Speaker 2:What about what about foundation models? Is is there is has anybody kind of raised around, like, you we're the UK OpenAI. Let's raise This is gotta be worth a billion.
Speaker 1:Right? Gotta be worth
Speaker 4:at least a billion. Yeah. So we haven't so, yeah, we haven't had our own sort of foundation model in that sense. I think that's that's something that The UK is is is seriously considering. And and as we think about this theme of sovereign capital and secure capital and how The UK is actually gonna be able to compete at that level of this sort of e AI ecosystem, of course, across the channel in France, have Mistral.
Speaker 4:Yeah. And, you know, famously, we you know, we've had incredible generational AI talents on the engineering side in The UK for a long time, but, you know, DeepMind
Speaker 1:DeepMind.
Speaker 4:Was Yeah. DeepMind was started in The UK and and obviously moved over to to Google. So I think that, certainly, as the UK government thinks about this next generation of AI companies, and sort of technology companies in general Yeah. It's certainly something that is very top of mind for how both, you know, DSIT, the Department of Science and Technology, the Foreign Office, so, and we'll say number 10, thinking about these things. So Have
Speaker 1:have you thought specifically about, like, expatriating entrepreneurs? I mean, just go find the best entrepreneurs. Set them up with the first round. Take a huge chunk of the company and then say, hey. Go to San Francisco.
Speaker 1:That's where you need to be. Go build the company. Because there is like, you you you the the the aperture widens when all of a sudden you're talking about, yes, American companies, but founded by European entrepreneurs, then you're in the trillions of dollars of market cap. Right?
Speaker 4:Yeah. I sure. We could I mean, if you we already look at companies that
Speaker 2:Sure.
Speaker 4:Fit that, then we get we sort of we can draw a line nowhere. I mean, Stripe Yeah. In theory has British, like, you know, founders or, you know
Speaker 1:Irish. Irish.
Speaker 4:Let's not I know. I know. I know. Don't get policy.
Speaker 1:Separatist Well, I mean personally. I am against the implication.
Speaker 4:I I I think what's important, though, is is, you know, is keeping. I think the UK government would be also keeping its homegrown talent in The UK. I think that's obviously Yeah. You know, a very sore spot as to why DeepMind, you know, did leave. I think that The UK, in my view, needs to at itself and consider what are the requirements that you really need to build, you know, multitrillion dollar market cap companies in The UK and Europe more broadly.
Speaker 4:But, you know, I I think that there is if you look at this current administration, there has been a lot of, you know, really encouraging signs. Early at the beginning beginning of this year, we had the AI, an AI act that, PM signed off on where, you know, 20 new ideas around how to enable, AI progress in The UK specifically, were were announced and and and adopted. And that really came from a lot of great work from, you know, collaborators in the venture capital industry in The UK.
Speaker 1:A
Speaker 4:friend of mine, Matt Clifford, who has been advising number 10 on, you know, really the opportunity around AI and AI security. So, yeah, let's let's see. But I think that my hope is is stepping out more broadly that the conversation between The UK and The US can also start a bit of a blueprint for how The US starts to work with some of its other other allies on on tariffs and also on tech partnerships.
Speaker 1:It's great. Well, thank you so much for joining. Well, you are fantastic.
Speaker 2:Our official official UK Correspondent. Yes.
Speaker 1:Let's get a sound effect.
Speaker 2:Let's get an air horn for you.
Speaker 1:We need
Speaker 4:the Thank you. I'm honored to be that, guys. Yeah.
Speaker 1:Yeah. We'd love be back soon. We'll talk to you soon.
Speaker 9:Good to
Speaker 4:see Awesome. Cheers, guys. Good to see you.
Speaker 1:Really quickly. Let me tell you about Bezel. You can shop over 25,500 luxury watches fully authenticated in house by Bezel's team of experts. Go to get Bezel.com. Tell them TVPN sent you.
Speaker 1:And we have our next guest ready for us to join the show, the founder of Intercom. Welcome to the stream.
Speaker 2:Yo. Yo.
Speaker 3:Gentlemen, how are you?
Speaker 2:Look at that microphone. Look at the lag time. You're doing fantastic. You're ready for this. Terrible?
Speaker 2:No. It's good. Fantastic. It's good.
Speaker 1:It's fantastic.
Speaker 2:You're good.
Speaker 1:I I don't wanna mispronounce your name. Can you pronounce it for me?
Speaker 3:Well, before I tell you, there are two types of people in this world I found out. There are those who guess Yes.
Speaker 1:And then
Speaker 3:there are the rare few fucking gentlemen. So thank you because you'll never guess. It's pronounced so kinda like o h n, own. Wait. You you
Speaker 1:You cut your tongue.
Speaker 2:Cut out. Right? As you said it. You give it to us again.
Speaker 1:What is it?
Speaker 3:It's pronounced own. Oh. Basically, own. So as if you as if you spelled it o h n, own. Own.
Speaker 3:Awesome. A lot of people say Owen and I will accept that.
Speaker 1:Okay. Own. Well, thank you for joining us.
Speaker 2:It's great to have you.
Speaker 1:Would you mind just giving us a brief interview of kind of brief intro to your kinda entrepreneurial journey and the company that you built and kind of then we can dive into a bunch of the hot topics. I'm sure we'll be talking about AI, venture, all the top all the typical topics, but I'd love to know kind of, like, your story.
Speaker 3:Yeah. In a nutshell, I moved from Dublin, Ireland in 2011, a long, long time ago to the Bay Area in San Francisco. And we started Intercom around then. Intercom at that time was a general purpose customer communication platform. We had a cute little messenger, the first of its type.
Speaker 3:You put it on your website, in your app, and it was great for sales, support, marketing use cases. And it blew up two or three years into Intercom. We were the fastest growing software companies in Salesforce. Slack subsequently beat us, but that was our that was our hot start. And, yeah, it's been a an an incredible the whole since.
Speaker 1:Snippet trend. Right? Like, you were able to boil down installation of your product to just, like, a few lines of HTML or JavaScript. And so the integration all of a sudden went from get a four year deployed engineer build on top of our API to drop this snippet into your website, and you're good to go with some basic functionality. Is that correct?
Speaker 3:Yeah. Yeah. There was there was other people doing it. There was a company called Olark years ago that had, like, a kind of a live chat thing. We were a little different.
Speaker 3:We were a messenger, so it was a mixture between live chat and and kind of, you know, asynchronous. But what was different about our approach was that you'd install the JavaScript, and it would start to learn about your customers. And so you had a really data rich customer experience. So How did the business it was almost like a CRM for digital businesses, but
Speaker 1:it Sure.
Speaker 3:Core to it was all the communication stuff.
Speaker 1:How did the business model evolve? Were you on kind of just like a monthly plan for a little bit? Did you go consumption based at some point?
Speaker 3:We we tried approximately 14,000,000,000,000 price plans. Most of them were unsuccessful.
Speaker 1:Yeah. What'd you learn?
Speaker 3:But we we, you know, we charged per seat and per message. The problem with a really horizontal product like ours was was that you're trying to capture value in a dozen directions. So you have a super complex pricing model if you're really trying to do all the things. So we Yeah. We did that, and then eventually we picked a lane.
Speaker 3:So these days, we're in customer service.
Speaker 1:Okay. So so, I mean, you've tried all these business models. I have to ask you about Salesforce. They're moving to this, like, ticket completion pricing, getting away from seat pricing. Is that a reasonable strategy?
Speaker 1:Is that the future like Marc Benioff has kind of said? Are you testing that? Do you have any information on what we should expect from future pricing of these types of services in an AI driven world?
Speaker 3:Yeah. I think it'll stick. We were the first to charge per resolution. Salesforce came to me.
Speaker 1:Oh, there we go.
Speaker 3:Yeah. Hey. This is
Speaker 1:we want to hear. We're we're going to
Speaker 3:source. You guys think about this?
Speaker 1:Does it work? Yeah.
Speaker 3:And, you know, we like it. We like it because it's aligned with our customers.
Speaker 1:Yeah. Makes
Speaker 8:sense. We don't charge you if we don't do work for you.
Speaker 1:Yeah.
Speaker 8:And every time we do work, we charge you. And when we
Speaker 3:make our technology better at doing work, we earn more money.
Speaker 1:Mhmm.
Speaker 3:And right now, forgive the plug, Fin, our AI agent is the
Speaker 1:That's good.
Speaker 3:Highest performing agent in service. And so we more we earn more per customer Yeah. At least when you charge for resolutions than the other guys because we just do more work.
Speaker 1:Oh, interesting. Wait. So it it's highest performing not on a particular benchmark, but on just how much money it makes?
Speaker 3:No. Well, yes.
Speaker 1:We we Because that I I've been saying that, like, that's actually the real measure of AI is how much how much economic value can it create. Yeah. And it's weird to say because we wanna be like, it's really good at math or whatever. But I'd much prefer, like, no. It actually does a job.
Speaker 2:Solves real problems.
Speaker 1:It solves a real problem. And there's no better measure than that than economics.
Speaker 3:Yeah. Absolutely. You know, work in some sense is a bit of a commodity to a degree. Right?
Speaker 8:Yeah. And so, you know, if
Speaker 3:you can charge more for your work than others or if you earn more from doing work, it means that you're providing more value to the world. Yeah. Totally. Yeah. So, yeah, we we have more customers than anyone else in the AI service agent space.
Speaker 3:We have more revenue than anyone else.
Speaker 2:That's very Yeah.
Speaker 1:We have
Speaker 3:a higher average resolution rate, etcetera.
Speaker 2:Have you been, in general, applying AI to customer service makes a lot of sense. There's a lot of spend there. It's just a generally good application of LLMs. Were you surprised at how many companies came in to try to compete in the category given that the intercom of AI, I imagine is intercom, right? Because I feel like a lot of companies came out and just said like, oh, we're making AI agents for CX or we're making, you know, more more native experiences.
Speaker 2:But in this case, it feels like, you know, there's always been this debate, right? Is AI a disruptive in innovation or is it an extending innovation? And I'm sure as the models have gotten better and better, you've just gotten more excited about their potential at at Intercom. So maybe talk about the kind of market dynamic.
Speaker 3:Yeah. It's been interesting. So in hindsight, I'm not at all surprised because it's a giant category. I mean, the space we're eventually going for is all customer experience, sales, marketing, success, service. There's certainly trillions of dollars spent on salaries globally doing all of that work.
Speaker 3:Mhmm. So, of course, many other people are gonna chase it. I I I do think that categories are gonna be more you know, they're gonna be shared in a way that they weren't in the past. There's no way one company gets half of that trillions. It's just not the case.
Speaker 3:There's gonna be many different players in the space. Yep. At the time, I was a little surprised. We were first out of the gate, and we had so many different advantages. But I was only surprised because I had yet to realize that that times are changing.
Speaker 3:The the technology world is just so much more competitive now. Like, when we started in 2011, you'd pick your lane. You you probably would have a direct competitor if you were doing something interesting, but you wouldn't have 16. Like, that just was not the case. And I don't have a hypothesis for why that is.
Speaker 3:I mean, if I had to guess, I guess I would say that AI is most likely the biggest innovation the world has seen since, you know, the Internet, maybe way bigger than the Internet. When there are new technology changes, opportunities open left and right, and opportunists come out of the woodwork.
Speaker 1:Mhmm.
Speaker 3:I mean, opportunists in the bus way, wonderful entrepreneurs. Yeah. Come out of the woodwork to
Speaker 8:go and and and and and pounce on those on that moment. So I don't know.
Speaker 3:It it's fascinating. It's incredibly competitive. And not just our space, every single category in AI. I mean, think of, like, note taking.
Speaker 1:Yeah.
Speaker 3:Think of you know, it just make anything up. AI is
Speaker 1:fault. Let's just say it. I mean, I love the guy, but, you know, we gotta we gotta hold him accountable for all the competition.
Speaker 3:Wait. Who is that?
Speaker 1:I was saying I was saying I love Gary Tan, but it's clearly his fault. So there's so many startups now. I mean Half
Speaker 3:half the intercom competitors are YC companies. Yeah.
Speaker 1:I mean, you you know that, like, say something like three or four of the top payroll companies all went through YC? Deal. For a
Speaker 2:while, there was
Speaker 1:this there was this narrative of, like, OYC doesn't fund competitive companies. Like, no. They fund a ton of competitive companies. Totally. Totally.
Speaker 1:But it's great. Yeah. I mean, competition breeds innovation and breeds, you know, these huge power line outcomes. Like, it's all it's all good stuff. But it is very it it is very, very competitive right now.
Speaker 1:I wanna hear about your evolution with artificial intelligence. Take me through were you tinkering with the GPT three DaVinci API playground? Were you trying to implement that stuff? Was were there times when it was unsuccessful and then it became successful? Is reinforcement learning and reasoning the critical turning point for you guys?
Speaker 1:Like, how have the different eras of AI over the past few years played out into your product strategy?
Speaker 3:I will answer that question. I first do have to mention that I think you just heard a burp live on air. Did you ever hear that? No. What?
Speaker 3:Hear that? Okay. Good. I just a lot of laquois. It was just like the burpee moment.
Speaker 2:I'm trying to check ears on my We're all getting carbonated.
Speaker 1:Yeah.
Speaker 3:Good thing we're gonna cook this out. Right? Yeah.
Speaker 1:So Yeah. Good thing it's not live.
Speaker 2:Yeah. Good thing it's not live.
Speaker 1:Thank goodness we didn't randomly choose to livestream the show.
Speaker 3:Anyway To your question, you know, so there hasn't been, for people in our space, major innovation at the model layer or within the model providers that has dramatically changed how it is that that we function. So much of the innovation is in the orchestration around the models. And a lot of ways in which we've got these massive performance gains over all of our competitors is that we've built a lot of our own AI to allow us to do more sophisticated RAG and use multiple models in different types of ways. We've needed to be very experimental. We've run something like 200 different AB tests to eke out different improvements along the way.
Speaker 1:Interesting.
Speaker 3:Going forward, the next innovations will likely come by the way of these application layer companies starting to work in their own models. I I you know, at least right now, and this space is so dynamic, so I may have a different opinion in just weeks. At least right now, it looks like the biggest leap forward for the verticalized AI application companies will come by way of building verticalized offerings where they have applications and models kinda working together and somehow leveraging that interconnection.
Speaker 1:Yeah. We needed an application layer sound effect on the soundboard. I yeah. I I I wonder I imagine that there was an era where you were effectively building AI agents or AI chatbots back during the chatbot boom that were defined much more like linear business logic if them statements, and you layer those up. And that that might be derided today, but it was value creative back then.
Speaker 1:I'm wondering if there is a world where, having done that work results in a better product today because you can slot LLMs into the business logic or train a model to interact with some of the business logic because I imagine customers and companies do want to enforce some rules restrictions around the interactions. And so if you already have those those those bumper lanes on the on the metaphorical, bowling alley, you're Yeah. You're gonna be able to deliver a better product. But can you talk to me about the evolution of that that rules based chatbot development to modern oh, I just have an LLM that one shots it.
Speaker 3:Yeah. Well, you basically said all the smart things I could say, but I'll just repeat it. There was kind of three generations. We're on the third generation now. The first generation was all the conditional stuff.
Speaker 3:And we had pretty sophisticated conditional stuff where you could build big, beautiful, graphical diagrams that showed exactly how the customer would flow through your machine.
Speaker 1:Yeah.
Speaker 3:That was great. Generation two used machine learning. Mhmm. And it used various heuristics that learned from all the human data points we have about conversations that happen to try and route people to the right answers in your knowledge base, and it would pull out little snippets. So we had a thing we ended up calling a resolution bot because I can share exclusively here that Zendesk, right, just sue us because we had an offer called Answer Bot.
Speaker 3:And little did we know, apparently, they also had an Answer Bot.
Speaker 1:Oh, no.
Speaker 3:Yikes. Yikes. Generation three now is LLM part. And so that is one that uses, you know, AI as we know it today, and it does away with everything in generation one or two. Except, as you say, there are some companies like us that can leverage those innovations.
Speaker 1:Mhmm.
Speaker 3:So we sell to banks. We sell to businesses with highly restricted operations in regulatory environments that don't allow them to make mistakes. You know, you get it. Our customers very much want confidence that the LLM's not gonna just hiccup and bump its way in the wrong direction. You know, hallucinate even though, you know, we've managed to squash out pretty much all
Speaker 2:the The classic classic example would be, you know, somebody gets the LLM to refund them a huge amount for some purchase that they
Speaker 1:don't Fueled the prompt injection. I heard about that at an airline.
Speaker 2:Yeah. Think I think a big I think a big question I have is at what point is your AI actually better than an agent that would use the platform. Right? Because right now, over the last few years, as AI got kind of good, but maybe not great, I would still find myself in that sort of cycle of being like, you know, kind of getting frustrated and just saying talk to a human, talk to a human. But you could eventually get to the point where somebody would actually just prefer to talk to an AI because it's instantaneous and you can really potentially move a lot faster than an agent who's working across, you know, multiple open tickets.
Speaker 2:So I'm curious, like what what is the point where it kind of flips where the average user is, you know, is preferring to talk to artificial intelligence?
Speaker 3:Yeah. The world is coming to exactly that point for the average user, but it's there for a lot of people already. You know, we have multiple funny instances where we see people asking for the bot. We see requests increase when people realize that they can ask quick questions and get quick answers. Mhmm.
Speaker 3:We see resolution rates and kind of response times improve dramatically for certain categories of questions. The dirty little truth in the era of AI is that well applied AI is far better than humans. It is always available. Mhmm. You know, always stays on script.
Speaker 3:It's never rude. You know, often gets the answer far more right than the humans. We've run a couple different studies where we've classified the answers that human agents provided using internal, you know, LLM products that we've built. We found that only 65% of the tickets that humans marked as resolved are actually resolved. So the humans are way worse than they think, way worse than they report, and just anecdotally, you will have far kind of messier experiences than humans than you will with a very good AI agent.
Speaker 3:The problem is that still most AI agents are not very good. Most of them are in fact cheap cheap cheap BT rappers. And so there is a lot of kinda crappiness. The very big consumer products that already provide shit support don't really mind, but in the future won't be acceptable. But we are nearing that point.
Speaker 2:Yeah. How how has it been a challenge figuring out the right way to message inter prompt Intercom's products given that many of your actual core DAUs on the customer side, the actual reps are people that over time, like, they have to be using the software and realizing somewhat slowly or maybe quickly that they aren't as good as the underlying system, and that's kind of a difficult, very human question crisis.
Speaker 3:Yeah. Look. The reality is there's a couple realities. One reality is that those people on the ground and even the support leaders are often not those buying these technologies. You know, there's there's a vested interest in those two groups of people not adopting them.
Speaker 3:And so a lot of people adopting these technologies are CTOs, even CEOs that realize their their their operations and customer experiences could be dramatically improved by bringing these agents to to to the fore. I will say that often these agents are almost sugar on top. They resolve, at least right now, some of the easier issues, and the humans are still needed for the harder ones. They're serving unmet demand. So sometimes people will deploy Finr agent to their free customers that they never gave support to before.
Speaker 3:But often when they deploy it, like I mentioned earlier, people will ask more questions, and so it increases demand too. So you're not really seeing we haven't seen big mass layoffs where the humans are just obsolete.
Speaker 1:Yep.
Speaker 3:That said, all of that said, it will compete with human work. Mhmm. And AI and robotics is simply gonna compete with the most repetitive, most of meaning, least enjoyable, least purposeful work out there. And if you talk to customer support reps, very few of them wanna be customer support reps long term. Yeah.
Speaker 3:It's a great way to get into the tech world, earn a tech salary, learn what you wanna do, but pretty much all tech people have their mind and eye on something else.
Speaker 2:Yeah. What what are your high level thoughts on the AI sales agent market? You know, we've seen hundreds of companies at this point.
Speaker 1:And The face says it all.
Speaker 5:The face says
Speaker 2:it all. But but, yeah, I mean, I'm at you you said earlier in the call that you guys will eventually get into sales and marketing. And so I'm sure you have a ton of opinions on it.
Speaker 1:And great customer service is often a sales role.
Speaker 2:Yeah. You're
Speaker 1:closing the customer as they ask questions. And the best sale the the best customer service reps I've ever worked with have always been able to turn a customer interaction into a sales interaction.
Speaker 2:Yeah. And it's just a much different dynamic sort of taking inbound concerns and feedback with a This is a big one. Trying to solve it with AI Yep. And then passing it to a human quickly versus
Speaker 1:As opposed to spamming.
Speaker 2:Spamming somebody with just nonsense. My my favorite one was a sales agent that was, like, reaching out somebody in New York.
Speaker 1:Have you been to New York?
Speaker 2:And it's like, hey, have you What do like doing? You should try to go to the opera in Central Park.
Speaker 1:Yeah. The Big Apple. The city that never sleeps. I'm I'm ready to close. Anyway, yeah.
Speaker 1:What what's your take on the AI BDR race?
Speaker 3:I don't know. It's it's you know you know the way they say marketers ruin all channels? You know? All all channels get, you know, exploited and trashed and spammed and completely destroyed Yep. By marketers because the job of marketing is to find, you know, the frontier, like white space where it's not flooded by other marketers.
Speaker 3:So all sales and marketing is really exploiting to death all opportunities until people are thoroughly fucking sick and sick of the teeth of them. So so that's gonna happen with AI, you know, unfortunately, and it's already happening. We're we we you know, I've gotten tricked a couple times with some emails. I open them. Some of them are kinda on point, and you're like, fuck you.
Speaker 3:This is
Speaker 8:god. I don't even know if I'm allowed to
Speaker 3:say this f word. I've said it three times.
Speaker 2:We're working on getting a blipper, but
Speaker 1:you're good. Family friendly show. We don't swear, but we we won't hold it against you.
Speaker 3:Okay. Thank you for not holding against me. I will try my very best to not use it one more time. But I I I I don't I don't know if it's gonna work. But Yeah.
Speaker 3:Like you said, there's a full spectrum. There there there's a massive spectrum and
Speaker 2:Yeah. Now it's challenge is the the any tool that's decent will get such rapid adoption Yep. Because of the Internet being the best distribution channel ever, and X even. Yep. Used to be Faster than X.
Speaker 2:Yep. So I think the issue is is any tool that's Yeah. Worth anything will just be used so much that it'll quickly lose any type of real edge.
Speaker 1:I have a follow-up on the cost side of things. Obviously, some of these API calls are quite expensive, especially if you're doing o three level reasoning, test time inference. Like, everyone knows that it'll get cheaper. It'll get baked down into ASICs, or there'll be specific chips that run these things really cheaply in even six months, even a few years. The cost per token's dropping.
Speaker 1:But at the same time, we've heard about startups that are like, yeah. I burned through 500 k of OpenAI credits in a couple months testing this thing out. So, is there a world where you've actually seen an impact on your COGS or your margins in the short term? And have you had to work with the board or investors to kind of think through that cost benefit analysis, or have you always been able to kind of dance around it so that the business always feels like a software business and and feels like it has very high gross margins like any other tech company, or is the fundamental gravity and the laws of physics around building a software company changed or at least temporarily changed?
Speaker 3:I think it's too early to say, and I think it's a really pertinent question, obviously. When we started and we launched Fin, like, four months after ChatGPT came out, each resolution cost us $1 and 20 something cent, and we we we charged 99¢. So we decided to take a loss on that. Yeah. We don't share our margin at the moment, but it's it's very, very healthy now.
Speaker 1:Yeah. Of course.
Speaker 3:I think businesses that like ours build very deep applications on top of these base level models will be able to extract plenty of value because of what makes them unique. Those that are simply GPT wrappers will need to charge something closer to GPT prices, but model prices are just gonna continue to come down.
Speaker 5:Yeah.
Speaker 3:So in the same way that SaaS companies were able to make 80% margins on AWS, in the future, pretty much everyone will be able to make 80% margins on OpenAI or AWS when they run their own model. So Yeah. I I I actually we'll see, but I don't think it's gonna net out where the margin structure is completely different.
Speaker 2:Yeah. How much have you followed the the Klarna CEO? Every every every one one day he says, oh, we fired everyone. Now he says, oh, we rehired everyone. Next week, I think he just found the the ultimate attention hack is we gotta have him on the show.
Speaker 2:Yeah. We gotta have him on the show, but it's, you know, basically just just flip flop.
Speaker 1:Risk on.
Speaker 2:Risk off. Yes.
Speaker 1:Risk on. Risk off.
Speaker 3:Nice. I don't know. Yeah. He's really good at marketing.
Speaker 1:Yeah. He is. Yeah. What has your kind of founder journey been? And where do you see the company going over the long term?
Speaker 1:Like, from the outside, I I think it's you know, there's a lot of people that would see Intercom and just think like, oh, like, venture back, they're gonna sell and get rolled into something else. It seems like you've been in founder mode for a long time, and it doesn't seem like the writing's on the wall for you to stop. You're enjoying what you're doing. What do you see your the rest
Speaker 2:of your career Yeah. In many ways, the company the the biggest opportunity is still ahead in terms of being perfect
Speaker 1:Yeah, this is one those things where
Speaker 2:roll out.
Speaker 1:Where we talk to a founder and we're like, wait, like, if he's really gonna work on this for like twenty years, like, it's gonna be insane. So, yeah, I'm interested to hear like, what do you Yeah. Do you see
Speaker 2:all the your ambitions. Yeah.
Speaker 3:Yeah. I mean, I'm fourteen years in now, which is long. You know? Most people are like, oh, we success.
Speaker 1:Overnight success. Overnight success. Nice.
Speaker 3:Well, you know, we were an overnight success two years in, and then we just did it for another twelve
Speaker 1:That's great.
Speaker 3:Yeah. Maybe maybe we mess maybe we mess it up. Yeah. You know, we're there there have definitely been periods certainly near the tail end of our first chapter where, you know, we were all tired. I actually was off for two years.
Speaker 3:I was sick and tried to run away and ended up coming back. That's a whole other show perhaps. But Wow. The AI thing definitely reinvigorated us.
Speaker 1:Totally.
Speaker 3:And, you know, it's a you know, I won't deny that. I'm 41 now. I was 26 when I started Intercom. It's a different thing when you're a little older. And AI, give or take, is a young man's game.
Speaker 3:Certainly, now that the world is so competitive, people are working their damn asses off. And a lot of our competitors, they're in their twenties. They're working literally seven days a week, twelve hours a day. We don't do that. So we have to take advantage of the things that make us unique.
Speaker 3:But the thing that keeps us going and that keeps me going is just the scale of potential. You know, our business is accelerating dramatically now. I think next year, our growth rate our annual growth rate will have doubled three years in a row, and these are very significant growth rates.
Speaker 1:And so for yeah. Thank you.
Speaker 2:That was all that was all I was looking for. There we go. I mean, I guys, chill. He's still talking. He's still talking.
Speaker 2:Come on. Thank you.
Speaker 3:Thank you. You. Thank you. Well, yeah, for for for a company at scale, you know, in the hundreds of millions to accelerate at that pace is just insane, and it's because of this AI stuff. And yet, very literally, we've just scratched the surface.
Speaker 3:Yeah. I mean, if we're gonna do the future of work, then we wanna get started.
Speaker 1:What do you think about the early stage AI market, the the wrapper market? People were very bearish on it. Then we saw OpenAI acquire Windsurf for $3,000,000,000, and it feel it felt like, you know, it's a very special company, very incredible team, but it felt like it could be game on for every big tech company needs a rapper or a or a startup in every single category. And, you know, so all of a sudden, could see, sure. Maybe some of these companies don't become massive public companies.
Speaker 1:But if if a founder out there is building a narrow AI solution for something that can slot very neatly into AWS or Azure or or Microsoft Office, you could see kinda game on in the m and a markets and some good outcomes for the founders and maybe even the VCs. What do you think?
Speaker 3:Yeah. I mean, from what I hear, their m and a activity is is picking up. Certainly from our perspective, all sorts of bigger companies have started to paying us. Sure. It's it's kind of a thing.
Speaker 3:You know, the what I respond to this general question is is is is I just ask how how big is this market, really? I mean, if we are doing the future of work, if
Speaker 1:Oh, we lost you. Of future. Oh, there you go. Sorry.
Speaker 3:If Cursor or Wainsurf are doing a big majority of future development work, these things are insanely valuable. So all of this is just way bigger than software. Like, AI, AI applications, wrappers, etcetera.
Speaker 1:Mhmm.
Speaker 3:Maybe they're a hundred x the total software market. Maybe they're a thousand x. Maybe that's way too much, but think about it. They're doing all of work.
Speaker 2:That's crazy. I really VCs get, you know, so much shit, but I would love for all the VCs
Speaker 1:Oh, swear jar, buddy.
Speaker 5:Yeah. Yeah. Yeah.
Speaker 2:I gotta put one in that swear jar. But but I would love for all the VCs to just be right this time.
Speaker 1:Oh,
Speaker 2:yeah. For Like, all the rounds, you know, the perplexity of 14 Like, if if, you know If all If they're just what if it all works out? Right?
Speaker 1:It'd be amazing. What did you do before founding Intercom? And would you do anything different? Or would you recommend that path to the next generation of entrepreneurs?
Speaker 3:I was starting companies. I was doing consulting, software development design. I don't know. There's a dozen paths, maybe a hundred paths into this. At this point, I wouldn't do anything differently.
Speaker 3:You get to a certain age in life where you love all your mistakes. Yeah. Maybe you, like, look at your younger self, and you're like, wow. Look at you. Look what you did.
Speaker 3:But it made you made you who you are, so, you know, no regrets. And people should just follow their own paths. Follow their hearts.
Speaker 1:I love that. Yeah. Follow your heart.
Speaker 2:Well, I am Fantastic conversation. So excited for you and the whole team. So
Speaker 1:bullish. I'm actually extremely these conversations where just like, oh my god. Yeah. Beast.
Speaker 2:Yeah. No. I mean, you guys are you guys are basically, you know, fourteen year overnight success in the exact perp Yeah.
Speaker 1:In the conversation.
Speaker 2:Definitely in the conversation. But no, just in the perfect position to take advantage of a massive trend, but then Yeah. Also deliver that value back to all of your existing customers and
Speaker 1:all your
Speaker 2:new customers. Great time.
Speaker 1:Let's get the Ashton Hall effect and thank him for joining the show.
Speaker 3:Thank you
Speaker 2:for joining the show.
Speaker 1:Thank you, Kevin. Great.
Speaker 2:It's great chatting. Come back on
Speaker 1:again soon. Yeah. We'll have to have you back on soon. There's so much more to talk about. We'll talk soon.
Speaker 1:Bye bye. And I think we have David from Box Group in the waiting room. We'll bring him in, chat with him. We love when a venture capitalist yaps about venture capital. It's one of our favorite activities.
Speaker 1:We got a plan. I would love to get his take on what are we gonna do in August because I think August might be an existential crisis for the show. As all of you know, every venture capitalist takes all of August off, and so we won't have nearly as many guests.
Speaker 2:I think we go to the South Of France and just do man on the street interviews.
Speaker 1:Do do for a Hey.
Speaker 2:What do do for living?
Speaker 1:Multi stage venture capitalist. I think we have to.
Speaker 2:What about We have to. Anyway Get in a scuba diving suit and swimming up to boats and say, hey. What do you what do you do for a living?
Speaker 1:Let's bring him in and and we'll get his take. David, welcome to the show. How are you doing?
Speaker 6:Why limit it to the South Of France? There are lot of destinations. You guys are being quite isolated in
Speaker 1:here. Okay. So give us the full tour. How do we make sure that the show doesn't implode in August when all the venture capitalists go on vacation and we have no one to yap with?
Speaker 6:I think you need a yacht.
Speaker 1:A yacht? Okay.
Speaker 6:Yeah. Like, you guys need a yacht. When you travel from port to port Bring the show to the VCs.
Speaker 1:The VCs. Yes. Okay. And what ports
Speaker 2:we Take the show on the road.
Speaker 1:We're going mean, there's
Speaker 6:a mean, there's
Speaker 1:a Gulf Coast.
Speaker 8:VC, and then as they get more advanced,
Speaker 6:I feel like you can find new destinations. Okay. Antarctica for the really successful adventurous. Yeah.
Speaker 2:If your yacht doesn't have an icebreaker Yeah. I'm sorry. You're not ready to read you're not ready to lead the series b's of
Speaker 1:I agree. I think we should get into halo jumping. So when we when we get intel, hey, there's a big VC in Antarctica, we're just pulling the parachute minutes before hitting the ground, seconds before hitting the ground, show up with the mic, what do do for a living? So
Speaker 6:And and if this period, as you alluded to, works, I mean Yeah. The destinations we're gonna expand to, tremendous.
Speaker 1:I think so. Yeah. I think so.
Speaker 2:There's something here. Yeah. There's something here. We'll keep noodling on it.
Speaker 1:Anyway, how do Do they have a
Speaker 6:wander location in all the places you need to go? I mean, let's get the plugs Probably. We do need to in
Speaker 5:Antarctica.
Speaker 2:Yeah.
Speaker 1:Yeah. They should definitely get some of those stuff locations on on the Greenland location, the ones that just pop up purely for marketing mostly. But
Speaker 6:Yeah. You know,
Speaker 1:I would take them up on that for sure. Yeah. But, yeah, how how was your weekend? How are you processing all the the flurry of of news and business and trade deals and biotech? Do you have any exposure in your portfolio?
Speaker 1:What are you excited about right now?
Speaker 6:I think we I I my wife makes clothes in China.
Speaker 1:Oh, okay.
Speaker 6:So that's my main exposure. So I live with exposure
Speaker 1:Sure.
Speaker 6:If you will. Yeah. Making clothes is not a good business Sure. For anybody. And then when you get tariffed aggressively, you start doing math, and your math already doesn't work.
Speaker 6:Yeah. So then and you're like, oh, what if we make it worse? And so I think I live with her emotions Yeah. Which which impacted me. I think as a a venture firm, we're generalists.
Speaker 6:We have exposure in all different categories. I think, you know, the TJ who's joining you after, I think we'll talk about the the pharmaceutical side of this. I think there's you're in a world where reading headlines, reacting to them, and then waiting until the news comes out. Right? You read about the China deal.
Speaker 6:It's like, we made a deal. We'll let you know the details. Yeah. Yeah. Okay.
Speaker 2:No rush. Market immediate market immediately starts pricing it Zero
Speaker 6:rush. Just let us know whenever you get a chance, and then we'll understand things better. Yeah. And I feel like all of the news is getting rolled out like that, where you're like, here's the headline, more to come. And I think reacting again, reacting to that as an early stage VC is is important for Twitter Mhmm.
Speaker 6:Or what we call x. It's important for podcasts Yeah. And really unimportant for the actual job. So you have to balance these two stressors out, which is like, how do I get engaged and sound like this is really impactful to me and it matters and I have to overreact and then on the same time just doesn't matter?
Speaker 2:Well, I think for you, if you're a true contrarian, which every VC should be Yes. Everybody's bearish, biotech, You know, they've had a bunch of, you know, issues over the years. You should just invest in, like, 30 new biotech companies today even without any sort of real insider edge. We probably did.
Speaker 6:I was on an airplane today, and there's a chance that we did It happened?
Speaker 2:Like, 30 new 30 new deals.
Speaker 6:Yeah. We're investors in Zach Weinberg's Curie, which
Speaker 1:Oh, cool.
Speaker 6:In fact does 30 new biotech deals regularly. So we have achieved your goal.
Speaker 1:Yeah. I think he's hopping on the show next week to give us his his take off all the biotech Yeah.
Speaker 2:There's gonna be three more Neil game and chill.
Speaker 1:Yeah. I'm sure. Yeah. I mean, wait. Talk more about that idea of, like, patience and venture.
Speaker 1:There was this headline recently that Tiger Global, they got really stung during the ZERP era, but they're looking a lot better because they put a bunch of money in OpenAI, and that eventually seasoned. We saw the same thing with the FTX fund buying a big stake in Anthropic and and and the the deal winding up looking great over time. What what
Speaker 6:And they they invested in Cursor too.
Speaker 1:Oh, Cursor.
Speaker 6:Open AI investment in Cursor. Right.
Speaker 1:Yeah, yeah. Didn't FTX as well?
Speaker 6:Yeah, they might have.
Speaker 2:Yeah, I think so.
Speaker 6:But they sold that. That got sold by the
Speaker 1:Yeah, yeah, yeah. It got sold in like the bankruptcy.
Speaker 6:No one knows who bought it.
Speaker 2:Yeah, that's, I mean, that FTX's investment was not one of the best investments ever. It was the person who bought it out The
Speaker 6:cursor mouth on Twitter that was shared made no sense.
Speaker 2:Yeah. The 200 to 500,000,000, that that was great.
Speaker 6:Not how math works.
Speaker 2:Yeah.
Speaker 6:Yeah. Like, there's no equation that equals that.
Speaker 1:Yeah.
Speaker 6:Like, you can't get there. So I was confused by that. But I didn't want to keep my mouth shut.
Speaker 1:Maybe they invested, like, a $50,000 post money.
Speaker 8:We invested in the The three
Speaker 2:is not very good at numbers yet.
Speaker 6:Yeah. We invested in the seed pre seed of Cursor, and I Okay. That math wasn't correct.
Speaker 1:Yeah. Okay. I
Speaker 6:can tell you that. It's interesting.
Speaker 2:Otherwise, wouldn't be doing podcasts anymore.
Speaker 6:From a hotel room. Yeah. I would be my yacht.
Speaker 1:Yeah. Yeah. I mean, speaking of, like, Cursor and just, the AI application market broadly, how are you thinking about demand from the hyperscalers for, finding a dance partner in the application layer companies? There was a big meme for a while that all these companies are just gonna get steamrolled by the foundation model companies. Now we're seeing deals get done.
Speaker 1:And, I've been, you know, arguing with Jordi about, you know, what if there is a world where every hyperscaler needs a dance partner in AI in the AI application layer, and there's just a flurry of M and A deals, that seems plausible, but Jordi's a little bit more hesitant about that. What what's your take on, how the how the m and a markets look for application layer AI companies in big tech now in the new era?
Speaker 6:I think I think, you know, app application layer companies is a catch all of so many
Speaker 1:different Sure.
Speaker 6:Behaviors and and pass in. Does every application layer company look the same? No. I think what you're looking at is, in many ways, a brand. Mhmm.
Speaker 6:And there is, like, a speed momentum and scale advantage to not being first mover, but to being fastest mover. Mhmm. Is there a barrier to switching like there has been historically in software? Probably not. Mhmm.
Speaker 6:But in many spaces, barriers haven't been the the thing that defends winners. It has been brand, and it has been sort of recognition. And I think that that piece has been under sort of underappreciated, and OpenAI is the perfect example of that. Right? ChatGPT.
Speaker 6:The idea that that, like, name
Speaker 1:Yeah.
Speaker 6:Created it became a household. It's, like, hard to say. It's weird. I don't think technical people understand. Like, why is that the name?
Speaker 6:But yet here it is. Yep. Household name.
Speaker 1:Yep.
Speaker 6:It's it's very hard to disrupt that on a better model.
Speaker 1:Yeah.
Speaker 6:A better piece of technology isn't gonna suddenly like, the same way Google won search by Google becoming the verb, not because Google search engine necessarily was always the single best product, the single best tech, even though it was for the most part. I think there's a brand value. And so at the app layer, I think brand is equally going to be important here. If you can and and more users, more usage on your product, it ideally improves because of, as as, you know, AI. And that's going to matter.
Speaker 6:There's a compounding value of scale that's different than just the initial momentum. And I think that that's underappreciated. In terms of m and a, I'm more interested to see if the big companies need to buy app layer companies. Right? The the Fangs of the world or the Big Seven.
Speaker 6:If the government allows actual m and a to happen, anymore, I think that's the more intriguing unlock versus all the sort of foundation models buying, a handful of app layer companies. I think there is a value of sort of by users and by scale that you're probably looking at at the at the beginning stages.
Speaker 1:It's almost more like product. Like, I I feel like Google has their destination website. They can point Google.com to anything, and they can funnel a billion I mean, Sundar recently said that, Google has over a billion users of generative AI, and this is the same story with Llama. They're getting stuffed into WhatsApp and Instagram. They have a billion users, but the product isn't thought of in the same conversation as ChatGPT, which is a destination, a front end the front door to artificial intelligence.
Speaker 1:And so, yeah, there's something that there's some still secret sauce to building really great products that happens kind of only in the startup ecosystem.
Speaker 6:And if you look at Facebook, now Meta on the way up, right, they were buying things every step of the way that felt either threatening or felt interesting. So if you go back to FriendFeed, a, they bought a CTO there. Right? And so Brett stayed on and built a a big chunk of the technology inside of Facebook. But FriendFeed was was an interesting early momentum company.
Speaker 6:And then they bought, you know, obviously, Instagram and WhatsApp totally sort of separate channels within this bigger ecosystem. It ties into the business model. I look at those acquisitions as how you historically built companies intact. If you go to this, like, previous ten year period when the government sort of stopped allowing it and valuations and founder expectations just became misaligned with acquirers, you saw so little m and a in terms of companies growing and getting bigger. And I think you're coming back into an era where the valuations of the foundation model companies, the valuations of the the big tech public companies are so large that you can actually hit a founder expectation in terms of acquisitions and not make as big of a dent.
Speaker 6:You're not paying you know, Twitter paid 10% of their equity for Summies back in the day. Which which is a crazy story.
Speaker 2:What can can venture, as we know it today, survive even in a low M and A environment just because all that matters is the power laws? Or does it make things a lot, you know, the power It
Speaker 6:has survived for ten years because you got a you you had a period of ZERP, and then you had I I think
Speaker 3:Well
Speaker 2:to me, AI Ten years is like one fun cycle. So we have one
Speaker 6:if we're if you're lucky. But but I think it created momentum of liquidity for a moment. And I think it saved this dearth of m and a. And so it's this moment in time where people are able to find liquidity after seven, eight years of very minimal m and a. Do I think VC needs m and a as a, like, secondary channel for exits?
Speaker 6:Yes. I I think fifteen years into my career, that was, like, a bet I've been mostly wrong on, is that there would be a lot of old companies buying new companies. I think AI might be a catalyst for that forcing function. Right? If if you are not able to buy software, you might have to buy companies to modernize.
Speaker 1:Yeah. It's it's super interesting, like, playing back some of the other Facebook acquisitions. Like, they bought Control Labs. Do you remember this? It's a wristband that could, basically, like, read your mind.
Speaker 1:And so, if you if you pinched your fingers, it would pick up on the electrical signals and be able to put that into the computer and the VR face. They acquired Control Labs between $500,000,000 and $1,000,000,000 And this was when was this? 2019, I guess. So it's been six years. They still haven't commercialized that technology, but they're going to in the new Orion smart glasses.
Speaker 1:And so just so much patience.
Speaker 2:They have, John. It's it's Oh. It's in the iPhone. When you squeeze it, they it's like, give John more of this dopamine. Yeah.
Speaker 2:He likes But
Speaker 6:the The iPhone is made by Apple. I just don't know
Speaker 3:how to know that. Okay.
Speaker 6:I just want to clarify.
Speaker 1:But but but then Facebook was trying to buy a VR fitness app, and they got blocked. And everyone was like, it's so dumb because, like, the FTC said that that they that they were creating a monopoly in the VR fitness industry. And everyone was like, what are you talking about? There is no VR fitness industry. But at the same time, when you think about Facebook's really or Meta's really long term horizon, if they can sit on Control Labs for six years before seeing any sort of economic return, they're still not even close, what what could that have what what could that team gone on to do?
Speaker 1:Maybe they could have done something cool. I don't know.
Speaker 6:Facebook from 02/2005 to 2015, acquisitions.
Speaker 1:50.
Speaker 6:Wow. 50. Right? These are real and some of them were acqui hires, or some of them were were the version of acqui hire that was aligned to, like, future, you know, value at Facebook.
Speaker 1:I think same lesson came in through Same lesson. Too. Right.
Speaker 6:There was, Hot Potato, Justin Schafer's early company. There was a bunch of early acquisitions that were team acquisitions when it made sense. And those people became important at Facebook. And I think when you look at today's modern companies, they were not built off of that same talent acquisition, the same same way to build a company. I think you might get back to that because not every one of these companies is going to succeed.
Speaker 6:But if the value of the ones that are succeeding skyrockets quick enough, your equity becomes attractive to a company that is looking for a home. And I think that's a a real alignment.
Speaker 2:You talked earlier about companies potentially buying brand from all the companies that you've invested in. Brand in the early days doesn't matter. You know, what usually, when you guys are writing a check, brand if somebody's trying to sell you on how great their brand is, it probably means there's other fundamental issues with the company, the team's not you know, anyways, brands take a long time to build. I'm curious if you have any framework framework for evaluating whether or not a team has the capability of building a brand that is going to resonate over time. Just because brand can originate from so many different places, right?
Speaker 2:You can build a great brand because you ship quickly. You can build a great brand because you have good taste, you know? And your marketing assets
Speaker 6:are pretty Yeah. Think brand is this big amorphous word that when applied to specific spaces means something totally different. The brand that Cursor has built, their audience, and how they've gone about building that is totally not related to a d to c, you know, we're we're early investors in, like, Warby Parker. Warby Parker is is a version of a consumer product brand. I think in software, capital helps.
Speaker 6:I think there's this this two sided thing. One is users and a community, however that fills in within your company. A community can be, like, a b to b start up building customer momentum where the customers are telling other people to to sign up, but I think it's users and and the community of users sort of spreading the word. And I think in this moment in time, capital helps. If you're telling this, like, every six months fundraising story, you're creating momentum for your company that is different than your competitive set.
Speaker 6:And so if you can go out into the market and say our valuation doubles up every six months, we're able to raise from top tier investors, You're able to hire differently. Right? You're you're when you're going to pitch in a competitive hiring process and you're able to show that this is the rocket ship, that you're trying to tell that that potential hire that it is, I think those things matter. And I think that a brand in all those components can compound to make you, you know, some version of I don't wanna say too big to fail, but Yeah. Sort of you're you're getting, you know, made the the winner You
Speaker 2:have a lot people that care about your success.
Speaker 6:Yeah. And and you're getting made the winner. You're the default winner. You're at some point, you're not fired for picking that company if it gets to be that, you know, big of a name. No one's fired today for picking Salesforce.
Speaker 6:And I think when you're trying to challenge a company that no one's fired for picking, you have to really be a unique outlier to get somebody to risk their job in essence by picking your company. We're an investor in the the eight year overnight success of Clay. Can you do your sound effect, please?
Speaker 2:Which one? I mean, we got a lot.
Speaker 6:Just do them all. Congratulations
Speaker 1:on Clay's overnight success.
Speaker 6:That one. But, you know, Clay today, eight years in, is starting to to do a go to market Mhmm. Motion that starts to compete with some of your entrenched software players. And I think that it takes a lot of product build, and that's been, in the past ten years, something that's been hard to do as a start up because you're not funded for these five, seven year builds of software. And I think, you know, as as the Intercom founder said, if you can develop software automatically or through, you know, a combination of your engineers and AI, the the scale of product that you can build will happen a lot more rapidly.
Speaker 2:Tell us the story of meeting and investing in TJ back in the day, since he's coming on next.
Speaker 1:That's a good one.
Speaker 6:TJ. Yeah. I met TJ
Speaker 4:Must have been
Speaker 2:a rascal back I think
Speaker 6:Skype, to be fair.
Speaker 1:Are on Skype?
Speaker 8:It wasn't Zoom.
Speaker 1:Okay. Yeah.
Speaker 6:It had like, it it wasn't like Google Meets. It was pretty all that, so it had to be Skype.
Speaker 1:Yeah.
Speaker 6:And I was in the room with, I believe, TJ's, like, first employee, not TJ. Okay. And not Elliot. So it's like their first employee was physically in the room, and he Skyped in luckily TJ. And TJ and I really liked each other.
Speaker 6:And but we didn't meet for, like, four or five months after, we Skyped and and I invested. So it's been a journey. You know, we were we were the first investor in Pull Pack in that original, he was in Tech Stars in Boston and, you know, so I met him. Thank you. It really feels good when you get the sound effect.
Speaker 2:You gotta work for
Speaker 1:it. Know? Brings the energy level, like,
Speaker 6:way off. I mean, this kind of story. As a VC, it takes a long time to get feedback. And this is like
Speaker 2:all you had to do is do something ten years ago.
Speaker 6:Exactly. So I appreciate that.
Speaker 2:Twelve years ago.
Speaker 1:It's a thankless job, venture capital.
Speaker 6:So yeah. And and then, you know, watching TJ's journey and then tricking TJ into becoming a VC, it's probably a a point of, you know, pride in my career, and watching him thrive, being able to ski, golf, and invest all at the same time, which is First
Speaker 2:to do it.
Speaker 1:To do No.
Speaker 2:It's funny with TJ. We gotta I gotta ask him about this when he comes on, but it's like, I I don't know if I've met I've met anyone who's a VC who hates VC broadly as much as TJ. Like he seems like he has like a
Speaker 6:disdain for He has pride in that.
Speaker 1:Yeah. Yeah.
Speaker 2:Has a in how how much disdain he has for the for the profession. But I I think part of it, he gets some ability to kind of laugh at at the industry given that he got to a billion dollar outcome He's
Speaker 1:great founder.
Speaker 2:Billion dollar outcome less than five years.
Speaker 1:He knows something about an industry that no one else knows about.
Speaker 2:And his company got to a billion dollars of revenue in less than ten years. And so I think you get the ability to kind of just laugh at it.
Speaker 1:Powering Amazon's pharmacy. Like, it's still a it's still a product in the world.
Speaker 6:And and I think I think his ability to have seen the inside of one of the biggest companies in the world and then operate there, which he also found funny
Speaker 1:Mhmm.
Speaker 6:I think gives him this unique insight as an investor to really have a top down look at the health care system and a bottoms up as as you built a startup by competing against the world. And then sitting inside Amazon, you got to see, sort of the the world operate at scale. I think it's a unique perspective. So
Speaker 1:did you see Business Insider's new list of the 100 best early stage
Speaker 6:venture capitalist. Dream in '26 to be
Speaker 5:on that list.
Speaker 1:Do you feel like you got snubbed? What
Speaker 2:what They they went to him and they said, David, we know you're really number one, but you gotta pay us 7 figures.
Speaker 1:Well, it was ultra competitive this year as I don't know if you saw, but, Peter Thiel just barely made the list. He's at 67. Marc Andreessen didn't make it at all, so you're in reasonable company.
Speaker 6:I I mean, it's a data driven list.
Speaker 1:Yes.
Speaker 6:And nothing is more truthful in venture than data. So it's hard to argue that, you know, random pitch book and crunch based data isn't the correct outcome for rankings.
Speaker 1:Yes. Yes. Exactly. Yeah. Yeah.
Speaker 1:A lot of snubs on here, but a lot but a lot of great people.
Speaker 6:It's it's sad because I got this inbound I got this inbound spam email saying that I could buy a plaque for being on the list, and
Speaker 1:then I
Speaker 6:I didn't make the list.
Speaker 1:Oh, you didn't make the list.
Speaker 6:But I bought the placard, I think.
Speaker 2:Oh. No. Damn.
Speaker 1:Yeah. I mean, I'll I'll I'll share this with This year, we're thinking about doing our own version of the Midas list of the top 100 venture capitalists, not just seed across everything. On what? Just the top venture capitalist, TBPN's version of the Midas list.
Speaker 6:But on so criteria? Vibe?
Speaker 1:That well, I mean, it Mostly. We're putting out a simple call. If you wanna be included in the list, packages start at a hundred k and go up from there. So you can reach out to sales@tbpn.com if you're interested in being included. If you're a venture capitalist and you're listening, we'd love to include you in the list of the best venture capitalists.
Speaker 1:We we we accept we accept credit card and wire transfer.
Speaker 6:So And everybody was worried about how you guys are gonna monetize this.
Speaker 1:Yeah. Yeah. Yeah. Exactly. Exactly.
Speaker 6:Yeah. We figured it out really quick. I mean, year year one, you Yeah. You cracked the code.
Speaker 1:Yeah. I mean, this is like the old like million dollar web page. Do you remember that? Where you pay $1 per pixel. What was that?
Speaker 6:You accept equity.
Speaker 2:Well, take a stake in your management company.
Speaker 1:Yeah. Yeah. Give us
Speaker 2:Well, take a stake in your life's work to to be on the list
Speaker 6:for this use. Secondary market too have Potentially. A lot of opportunities here.
Speaker 1:Potentially. Potentially. Anything else top of Jordan?
Speaker 2:Oh, I was gonna go through the the timeline. Let's do it. And, so I have a post here. I want you to react to it, David.
Speaker 6:I thought we were gonna go through the top hundred. One No.
Speaker 2:Yeah. The top we'll go yeah. And you can go long short every you can go on the record and go long short every single Is
Speaker 1:that top hundred. That'd great for
Speaker 2:your brand.
Speaker 1:It's a list of the best venture capitalists, and Marc Andreessen didn't make the list, but Marc Benioff did. And he's not gonna get from
Speaker 6:Sequoia did either.
Speaker 1:Oh, no. I like pretty sure.
Speaker 6:Not that I read
Speaker 2:Sorry, Andrew.
Speaker 6:Or anything and thought
Speaker 5:about But
Speaker 1:Sean and Andrew, you got snobbery.
Speaker 6:Has never funded any good seed companies to be fair. Yeah.
Speaker 1:Notoriously bad. Those guys just can't make a buck. Yeah. You know? Those guys just just scraping pennies through the couch cushions to to pay them.
Speaker 6:I don't think anyone on at first round May. It was a great list.
Speaker 1:It was great. It's great. It's great. Yeah. I mean
Speaker 6:I'm not bitter or anything.
Speaker 2:Okay. I have I have a post I read it. This post from m Stanfield. I'm just gonna read it out loud to you, David. Me, I'd like to invest in this brewery.
Speaker 2:SEC, no dummy. You're not an accredited investor. Me, cool. I guess I'll just teach myself some double broken wing butterfly trades by watching TikTok. SEC, yeah.
Speaker 2:I mean, for sure. It's your money. Do whatever. What do you I have do that. Yeah.
Speaker 2:Yeah. What do you think about accredited investor laws?
Speaker 6:Oh, I didn't know where this is.
Speaker 2:I thought we were gonna that I
Speaker 6:have to fund a brewery. We funded a nicotine company, so it felt like in the same Yeah.
Speaker 1:Yeah. Same vibe. Similar. Yeah.
Speaker 6:Accredited investor look. Like, I I, you know, I I think the challenge of having credit investor rules is that you have it in one area of, like, the country and not in everything, and that's the challenge to me. Right? You you have, like, scams left and right throughout the economy, and yet in this one area, it's like, no. There are a lot of rules here.
Speaker 1:Yeah.
Speaker 6:Yeah. Yeah. And so I think that feels unfair. So to me, you're either gonna sort of clean up the ability to invest in things across the board, or you should have sort of everybody operate at your own risk. So I
Speaker 1:think level playing field generally. Right? Yeah.
Speaker 6:And so I feel like that's the issue. And then there's all these, like, gray areas of, like, getting around it, which feel like you're not holding, the bar properly. So I I don't know.
Speaker 1:What's your reaction to the new news that Elizabeth Holmes is advising her husband's AI medical testing startup, which can conduct diagnostic tests using a small sample of blood from prison?
Speaker 2:I mean, were saying this when we when we
Speaker 1:I think she's so
Speaker 2:She was in the news. You're saying, like, the real way to be vindicated is not just get out of prison is to come back, run back the same product, but actually win. It's real.
Speaker 6:Yeah. I my first question is what are we gonna do with the blood?
Speaker 1:Right? Like like where does it go? Like the
Speaker 6:collecting is step one, but then what?
Speaker 1:So Yeah. I think send it to prison. She should be doing the titration in her prison cell.
Speaker 6:Right? Is this about like the young boy plasma thing? That direction?
Speaker 1:Yeah. Anyway.
Speaker 2:What do you think? Klarna's CEO says his pursuit of cost cutting fueled by advancements in AI has gone too far. When you have a port portco that's later stage that says they're, you know, cutting everyone due to AI, do you get do you get worried? Are they
Speaker 6:No. I I think there's a there's, like, a timing and sequencing here. Right? When you overstate the present, you may be also under estimating how soon the future will be here. And so it feels like a a nice mid cycle story for the eventual outcome as you guys alluded to before.
Speaker 6:But it like, does 90 plus percent of customer service get solved by AI? For sure. When you look at, like, e comm customer service generally, like, 65% of the questions are when I'm when am I getting my item? That feels like you can automate that. Right?
Speaker 6:And then you start going to the next chunk of things, and there's, like, three to 10% that feels like you actually need to to think about how you respond here. And even in those situations, it's typically some version of a save. And so I think as you get to customer service across most companies, that becomes relatively automatable sooner versus later. I just the idea that we need to announce that we're gonna let go of a lot of people because AI is magical today, might be a stretch.
Speaker 1:You thoughtfully, informed us that the iPhone is made by Apple. Do you have any, do you have any reaction to the news of the new Apple products that are launching their potentially a curved iPhone without any cutouts in the display? New Meta Ray Ban's competitors, new Apple Glasses, and then, Apple Intelligence developments. Are you are you the type of person that lines up to buy the latest Apple product? Do you drive for a couple weeks?
Speaker 2:Big line big line guy over here.
Speaker 6:I wanna stay I wanna stay focused on being a VC. Sure. Smart home. Right? You you didn't mention the screen that goes in your house, which I think for every VC is just like a pipe dream to have screens everywhere.
Speaker 6:And so that is another one of the products that is rumored to be coming out, A new Apple TV. We're at, like, six years later, new Apple TV. So there's a lot of a lot of opportunity here to spend a lot of money. The foldable phone confuses me.
Speaker 1:Yeah. Why?
Speaker 6:I don't know. I I
Speaker 1:Don't need to fold it?
Speaker 6:Well, feel like there's a iPhone. There's like a baby iPhone for little hands. Then there's the big iPhone for bigger hands. Then there's a little iPad
Speaker 1:Yeah.
Speaker 6:And a big iPad.
Speaker 1:Yeah.
Speaker 6:So the foldable phone is like you
Speaker 1:Well, you seen the demos in China where it's three phones stacked together to the size of one phone that you unfold and you get a tablet? That's pretty cool. Right?
Speaker 6:So then I have a a iPad.
Speaker 1:Yeah. But in your
Speaker 2:pocket wanna be able to you know, you can put a newspaper in your back pocket. You pull out the newspaper and you you pull it out. That could be just kind of a cool
Speaker 1:This is this is interesting. They say Apple's pushing into robotics, which will include a tabletop machine with a robotic arm that would feature
Speaker 2:in
Speaker 6:the What does the arms do?
Speaker 1:I don't know. I assume it can, like, juggle for you or something.
Speaker 6:Yeah. Or it gets you or it gets you beverages. I feel like that's the other, you know, VC pipe dream. Beer me, robot that just brings you stuff.
Speaker 1:Yeah. Beer me, Siri. Right. I like it. Anyway, this is a fantastic conversation.
Speaker 1:Thanks so
Speaker 2:much. He's gonna hang out for a minute to say hi to TJ.
Speaker 1:Okay. I
Speaker 6:just wanna see what TJ's facial hair looks
Speaker 2:like today. Have one more I have one more post from a former employee and and a friend of mine, Josh Harris, he says, American oligarchs be like This has over a hundred thousand likes by
Speaker 1:the way.
Speaker 2:American oligarchs be like, oh, I founded Bloober. European oligarchs be like, yeah, my family owns the trees. Have you have you found much success on the LP side in Europe? Do you do you go
Speaker 6:Is this Josh Harris from Apollo?
Speaker 1:What's that?
Speaker 6:Is this Josh Harris from Apollo or
Speaker 2:No. Josh Harris. He was at EIR at Paradigm I
Speaker 6:was afraid of Apollos. Do not understand anything. Clarifying. You don't mess with private equity people ever. It's a real, real cardinal rule.
Speaker 6:We have a great mostly domestic LP base.
Speaker 1:Mhmm. Okay.
Speaker 6:Damn. I punted it.
Speaker 2:No tree.
Speaker 6:No tree. Tree. PJ, Matrix. Yeah. Never know.
Speaker 2:Big big big tree LP base. Yeah. Big trees
Speaker 1:I've watched a lot of VCs that are raising new money from LPs in Pyongyang. Getting North Korea
Speaker 2:The final frontier.
Speaker 6:Final frontier. And Antarctica. That's why they're there. In the summer.
Speaker 1:Yeah. Exactly. Exactly. Anyway, let's bring in TJ and and we can all chat. Hopefully, the the layout works here.
Speaker 1:TJ, how you doing? There you go. Looking good.
Speaker 2:He made it. He finally made it. Let's hear it from the crowd. Yay.
Speaker 1:Welcome to the stream, TJ. How you doing?
Speaker 2:It's great to have you.
Speaker 5:It's great to be here.
Speaker 2:And David just had to join too. He's just so proud of you. Not only the company that you built, but your transition to venture capital, which is the highest and best use of anybody any genius's time.
Speaker 1:We were trying to assign credit for your success, we kinda broke it down, like, percent David, twenty percent you. Does that sound fair?
Speaker 5:Yeah. I mean, seventy, thirty, maybe.
Speaker 1:Seventy, thirty?
Speaker 2:Okay. Yeah. Gotta give yourself a little credit. A little more credit. How's your what what was your first impression of David back in the day?
Speaker 2:Gotta ask.
Speaker 5:You know, it was pretty good. I talked first time I met Dave was a phone call where I already told, like, five investors the round was closed and somehow weasel his way into the round anyway. So he must have made a pretty good first impression.
Speaker 8:I think it was Skype. Was it phone?
Speaker 5:Well, I was, like, at some conference, and we kind of met at Skype on a on a Skype, but then we actually talked, like, the next day on the phone, and that's when that happened.
Speaker 6:Mhmm. You remember that?
Speaker 2:I do. I feel
Speaker 6:like your memory is more shot than that. Yeah.
Speaker 5:I know. I know. It's a rare it's a rare memory for me.
Speaker 6:Thanks for thanks for letting that stick. Is that important for you?
Speaker 2:Yeah. Very big problem.
Speaker 5:In here on drug prices, get this conversation started. It'd be very exciting.
Speaker 2:Were you, my last question for David, were you worried that that TJ would, you know, sell secondary at the b and get too caught up in Porsches and and and that's in that whole world?
Speaker 1:Or The
Speaker 5:record is so married at the b and I bought an e 63 wagon. So it didn't
Speaker 1:There we go.
Speaker 2:There we go. There we go.
Speaker 6:I was worried about TJ.
Speaker 5:My daily driver, actually. I still drive that car.
Speaker 1:I was
Speaker 6:worried about TJ selling drugs at the b, honestly.
Speaker 1:That was
Speaker 6:that was amazing. Yeah.
Speaker 5:Was great.
Speaker 6:Thanks for having me on, guys.
Speaker 2:Awesome. Thanks for joining.
Speaker 1:Later, David. Great to
Speaker 2:see you. For you.
Speaker 1:Cool. Yeah. TJ, take us through it. What was your reaction to the news? How would you actually summarize what the proposal is?
Speaker 1:Because a lot of these press releases get written kind of aggressively, and then the actual implementation is very different. How are you processing the news, and and and what's your And are you early take
Speaker 2:Are you getting some of that context directly on True Social, or do you wait till it hits other parts of the Internet?
Speaker 5:Wait till the delay for sure. I mean, I think maybe helpful to, like, level set, like, lay of the land for folks that are kinda less Please. Familiar with the category. So, you know, I think probably the problem I've been most focused on and I've beat a, you know, beat a dead horse on on Twitter is this rebate issue. Mhmm.
Speaker 5:And I think in many ways, that's the most interesting part of the executive order. It's the thing I'm most excited about. So today, if you're a normal consumer, you go to the pharmacy, you need to fill up branded prescriptions like a higher cost prescription. Maybe you need an EpiPen and it's January and your deductible just reset, or you wanna fill a GLP one, at the counter and it's not covered by your insurance. You end up paying something like three to four times order of magnitude what that drug actually cost in The US.
Speaker 5:No. So not even talking about, like, what it costs, you know, the countries, but what it costs net in The US. So for, like, an Ozempic as an example, you're paying a thousand dollars or so, which is the list price, the gross price in The US. But the net price is actually $250. That's the price of the PBM, the pharmacy benefit managers negotiated, and you've effectively paid $750 more than that drug costs.
Speaker 5:And that money is getting captured by either the PBM, the insurance company, or your employer, usually some combination of all of those things. And everyone's always bemoaned pharmacy benefit managers, obviously. They're kind of everyone's favorite punching bag, the middleman in health care, and they're capturing all this margin. And to some degree, that's that's true. But no one has come up with a solution that could be an alternative path that could work better.
Speaker 5:Right? That's the sort of fundamental issue. It's like, you could hate how the mechanics work today, but without an alternative like, without some alternative, it doesn't matter. And so I think what's most interesting about the EO is that it there's a specific call out around requiring that pharma companies have comparable direct to consumer prices to list prices in other countries. Right?
Speaker 5:So you take that as a Zepic example. Mhmm. In The UK, that's a hundred and 50 to $250 drug. Actually, not that different from our net price. Right?
Speaker 5:It's sort of similar. It's a little bit less, but it's, like, not that different. They're basically requiring pharma to have that sort of pricing available if the consumer is just paying cash, kind of paying out of pocket. And why I think this is so interesting is if you start having these things get priced in somewhat of a rational way for consumers, All of a sudden, they need to negotiate these rebates and have all these kind of backdoor negotiations and these fees and all this stuff that creates the complexity effectively goes away because you have some version of rational pricing for consumers. So there's a bunch of other stuff in the EO, and I'm happy to get into some of the more nuanced complexities.
Speaker 5:But to me, that's pretty exciting if you actually have, like, normal reasonable cash prices for the end customer.
Speaker 1:So just staying on prices, is is this conf is this confounded by the fact that in other countries, they have larger government sponsored health care plans? Or so when we talk about Americans paying higher drug prices, are we saying American consumers versus European consumers, or are we saying that the same pharmaceutical company actually makes more money from a single dose in America versus Europe?
Speaker 5:Yeah. So both is the short answer. But I think what's happened in the press that has really been challenging is that everyone always talks about the list price as the price in The US. Right? And so the narrative, you listen to, like, the rhetoric over the last handful of years, it's like we're paying 10 times as much for Ozempic or we're paying 10 times as much for insulin.
Speaker 5:We're not. The list price is 10 times as much as a bit as a list price in The UK. We're paying and it says this in the EO. This is definitely the truth. We're paying two to three times the net price.
Speaker 1:Yeah. The Wall Street Journal here said that, the list price for diabetes medication Jardiance was $611 for a thirty day supply in The US versus $70 in Switzerland and $35 in in Japan. That's what you're talking about being not entirely accurate.
Speaker 5:Drug is probably actually, like, a hundred bucks net in The US. Hundred and 80 Okay.
Speaker 1:Got it.
Speaker 5:So, yes, more expensive.
Speaker 1:Yep. Like But not 20 x.
Speaker 5:That's interesting. And so I think you're hearing in like you know, I think you're hearing a lot of the dialogue be about, like, all the downstream implications of r and d Mhmm. Investment if these prices come down in The US because we're the only ones willing to pay. That's an interesting conversation. People should have that conversation.
Speaker 5:It's it's pretty complicated and nuanced. But I think everyone can agree consumers shouldn't be paying 10 times as much when they get stuck with the full bill. Yeah. And certainly shouldn't be paying three times as much as the PBM is paying or their employer is paying. That to me is what's most interesting is you could come up with a there's a there's a real credible solve here potentially for that problem, which I think is much more, yeah, it's compelling and and and interesting.
Speaker 2:Cool. How have you what are your thoughts on the market's reaction? I think everybody expected this massive sell off in pharma and biotech, and maybe it's because there was other news announced this morning. We haven't seen that.
Speaker 1:But you went up by like 3%?
Speaker 2:Yeah. Do you think people are processing this? We had
Speaker 1:What we heard earlier was that it was kind of like like the like a really, really bad scenario was priced in and this was less bad, so it popped. Do you buy that narrative? Or what what what are you taking away from the kind of the market reaction?
Speaker 5:Yeah. So the PBOs in Paris have gotten whacked, which makes sense if you think about the the dynamic here. I think there's a lot of skepticism about how how much this can actually be implemented and the success that they'll have. If you jump back to the last administration, they tried to repeal rebates, which is solving the problem I just described. It's it's sort of getting rid of this excess margin that's invisible to the consumer, and they failed.
Speaker 5:They got it pretty far along. It was like an admirable effort, but ultimately, CBO shut it down because rebates do contribute to lowering premiums, and there's things that made it difficult to get rid of rebates. They also had an MFN approach on Medicare part b drugs, so, like, drugs that are dispensed if you're in office, things like that, and that failed in the last administration. So I think my sense is that some combination of if the real punch line here is that effective this is a backdoor way to get rid of rebates, it doesn't it's actually not that big of a deal for pharma. Like, they're still getting their net economics.
Speaker 5:It's just bad for the middleman. Right? So that's, like, one Yeah. Invitation from the market. And then there's probably also just some skepticism about whether this will actually get implemented, and I think that's fair skepticism given the the historical track record here.
Speaker 1:What does this mean for pharmaceutical r and d the way it's done? We talked to Zach Weinberg a little bit about Yeah. NIH funding getting cut. There's debates about how research gets done in, you know, the Ivy League universities that spin out a lot of drugs. There's so many moving parts to actually get us what we want, which is probably just like a cure for cancer or just great new drugs.
Speaker 1:Right? How is the actual pipeline evolving through all these different changes when you stack them all up?
Speaker 5:Yeah. So if you jump to the other other components of this beyond the consumer implications Yeah. That's where I think these questions become more relevant. Right? So if there's really, you know, an an MFN for the net price that we pay compared to other similar situated companies or countries that that would have potentially some of the impacts folks are concerned about on r and d.
Speaker 5:I think we're so far away from that, and that's so difficult to imagine truly getting implemented on face value that I'm skeptical that that's really the the thrust of the CEO. I really think it's a potentially a better way to to eliminate rebates than historically. I do think if you kind of play out let's let's assume that all of a sudden Ozempic does cost $200 at the pharmacy counter, which I do think is a credible path here, and it will be reflective of what the true net cost. And all of a sudden, consumers are sort of just paying for most of these products out of pocket versus, like, bothering to use their insurance.
Speaker 1:Mhmm.
Speaker 5:And then you have pharma companies competing on price to win the to win the transaction. That's actually, I think, how net prices come down ultimately, not because there is gonna end up being some true kind of a dead net MFN that that they're able to execute against. So I think the the debate about r and d is sort of, you know, to me, just from a practicality standpoint, kind of two clicks away from where we are today, and I'm pretty focused on can we just get to a a place where consumers are choosing these products based on price instead of PBMs and other middlemen trying to determine price.
Speaker 1:Why why is the market for Ozempic so competitive on day one? You hear this whole narrative around patents and, you know, the whole idea is like, yeah, you you should be able to incentivize this, like, this heroic, Herculean research effort because you'll generate all this value over the long term. And that certainly happened with Novo and their share price. But at the same time, it feels like the GLP ones came out. There were like, every major pharma company had one around the same time.
Speaker 1:Then there was compounding going on. There was so it felt like they were already generic almost, but I know that they're not. But, why why did the market play out in this way? Is it just because it's such a dominant technology? Everyone was thinking the same idea or something?
Speaker 1:What what happened there?
Speaker 5:Because it was originally approved for diabetes, not weight loss. And then if weight loss was a byproduct that they figured out was a was a not a side effect, but an also an effect of the of the products. And so when it caught, you know, the public's eye, it was already much farther along in its life cycle than a traditional kind of new indication, new drug.
Speaker 3:Got
Speaker 5:it. That being said, like, the the price dynamics with GLP ones are not that anomalous. Like Mhmm. If there's a successful product and there's a known pathway, there's going to be other similar products that get developed.
Speaker 1:Mhmm.
Speaker 5:In the current ecosystem, supply chain, current structure, that does drive down net price. That's why these things don't cost a thousand dollars anymore. And so their net price is hundred, 3 hundred, 5 hundred dollars depending on the how new the GLP one is. So, like, the the system actually kind of works okay right now. Like, the price does come down based on competition relatively quickly.
Speaker 5:It just doesn't work particularly well for consumers in these instances where they're paying out of pocket.
Speaker 1:So Everyone else is wearing a hat, so I wanted to put
Speaker 5:on a up.
Speaker 2:How how, can you comment at all on Europe's existing solution? They have some complex system of price controls where they tell US drug makers what they can charge is what we heard from an earlier guess.
Speaker 1:Yeah. Somebody else was saying that this EO is like Bernie Sanders' dream. Is that true at all? Are these like are we in, like, left wing or right wing territory? I can't even tell anymore.
Speaker 5:Yeah. I mean, that's gonna depend a lot on exactly what's being contemplated here. Right? I think if the extreme interpretation is these are literally price controls at the government setting. Like, yes, I think you're kind of in the Bernie Sanders extreme version of managing these prices.
Speaker 5:I think if you take the other extreme and it's really focused on consumers, and they say, well, look, either you can set reasonable prices for consumers that are somewhat comparable to list prices in other countries
Speaker 2:Mhmm.
Speaker 5:Or consumers can just buy these drugs from other countries and import them here.
Speaker 1:Yeah.
Speaker 5:That's not particularly that's not a price control. That's just actually opening up the market to more competition. So, really, I think it depends on the exact, the exact implementation and what's being contemplated.
Speaker 1:Yeah. Where are you seeing opportunity in start ups in health care to kind of carve out value or deliver value in health care broadly right now?
Speaker 5:I mean, you can probably tell from my my, tweeting, I'm I'm quite interested in how you pull forward shopping and pricing into health care. Mhmm. Like, to me, that is the linchpin to make the category work better. That's a lot of the work that we did. And Amazon, as far as I know, was the first time you could actually see an insurance price for something before you bought it.
Speaker 1:Mhmm.
Speaker 5:Health care, which is, pretty insane. And so, you know, I think being able as a consumer to understand what your options are, how much they cost, what's available, and, ultimately, like, transact in a very seamless way, think, is the most interesting thing. Now that could be, like, literally what feels like a marketplace. Right? I think that's a very interesting opportunity in different categories.
Speaker 5:It could be utilities that make that possible. So, like, super clear, like, APIs for pricing. There's a bunch of permutations of things that enable that, but that's what I'm still
Speaker 1:How are we talking about APIs in 2025? Like, it's the age of AGI, ASI. Like, how do the insurance companies not have APIs? This is insane.
Speaker 5:Yeah. I mean, what's gonna end up happening because, you know, similar to faxes, we still send faxes, but, really, it's just two digital interfaces on both ends. We end up with all these, like, phone agents that are talking to each other, but it's basically I know I swear to god. I know this isn't hyperbole.
Speaker 4:Like This is crazy.
Speaker 5:Think, like, the insurance companies are like, okay. Cool. Like, you want clear pricing, and you're bombarding us with phone calls with your AI bots. We'll just give you, like, a dedicated AI bot, and you guys need to, you know, prosecute this and figure it out. Like, I've just actually
Speaker 1:bullish for 11 labs. Yeah. This is gonna be, like, voice agents win everything instead of just building an API. Are there any places where AI in health care makes sense or is exciting for you? There's, like, the super frontier research going on at DeepMind.
Speaker 1:There's protein folding is solved now. There's stuff like that. But then at the same time, I can imagine, like, the the the use cases you described being very real business cases.
Speaker 2:Yeah, the voice agent specifically feels like an area that's experiencing somewhat rapid growth. But the nature of that also means that it's probably it is hypercompetitive. So I'm curious if you think categories like that are are even in vestibule.
Speaker 5:It's tricky. Right? I think I so I buy that there's gonna be a bunch of administrative efficiency in health care, right, things like phone agents and prior authorizations and other kind kind of very laborious work straight like, workflows, it's much less clear to me where that value accrues. I think that's the the tricky bit. Like, there's an argument that it actually accrues to the service businesses.
Speaker 5:Like, that's historically where the value accrues in health care. So maybe the most effective service companies can accrue that value as being good at implementing AI. The place where I'm pretty convinced that it will be valuable and will drive real venture returns is companies that are are good at compounding those as differentiation for consumers. So as an example of before, it would have taken a human $40 to book you an appointment to see a specialist if you can use an AI bot to do that for two bucks.
Speaker 2:Mhmm.
Speaker 5:That unlocks a new consumer experience too. Right? It's not just like an administrative efficiency, and there's lots of these examples. That's probably what I'm the the most excited.
Speaker 1:You mentioned compounding. What's your take on drug compounding?
Speaker 5:Oh god. I'm I'm quite vocally anti drug compounding.
Speaker 1:Why? Is it a quality issue, or is it just a market dynamic issue? It feels like
Speaker 2:He's an IP respecter.
Speaker 5:I IP respecter above the law. Below the whatever the right nomenclature is. Yeah. It's twofold. I mean, I think there are there are real safety concerns.
Speaker 1:Mhmm.
Speaker 5:Last time there was a prolific compound or compounding a commercially available product at scale was, like, a compounding center that killed a hundred people with meningitis, like Oof. Happened. Yeah. Real. Like, not not claiming that's gonna happen here, but that is, like, the overhang from compounding.
Speaker 5:It also just it it sort of outside of these temporary shortages very much violates IP law. And so
Speaker 1:the Totally.
Speaker 5:To the conversations before about whether there's any incentive to do r and d, well, if someone can immediately just copy the product, there's certainly no incentive to do r and d. It's much worse than some kind of Yeah. Price
Speaker 1:Is it kind of a is it kind of a beneficiary? Like, is is there a room in compounding because of the Internet? Or, like, is there a is there a market force that's driving the increase in compounding? Or is it just like no one ever thought to do the loophole before?
Speaker 2:Well, the funny the funny dynamic
Speaker 1:What was that, Jordy?
Speaker 2:I was just gonna say, it's not like people are compounding and then, you know, hey, we didn't have to do R and D. We're just sort of like going to compound to this, and then we're going to pass the savings on to you. That's been like a big part of like the messaging online. It's like, no, like, you're gonna pay the same, and, like, you're gonna like it. And just, like, be happy that you're getting the drug has been seemingly
Speaker 5:But I think the market dynamic is rebates. Right? If Wegovy or Ozempic was the net price for consumers because it's open now out of pocket drugs, and they were $200, 3 hundred bucks. Is there, like, much of a market for compounding, which are also $200 and $300? Like, the reason that there was so much demand for it is because of this disconnect between list prices and and net price.
Speaker 5:Right? And so if that dynamic goes away, all of a sudden, the opportunity for compounders to really gain share is is is minimized. Right? Because, like, I can understand why someone would really not be willing to or could afford paying a thousand dollars a month, and they can get the compounded product for 200. But if we're talking 200 versus a hundred or a hundred and 50 for a, compounded product versus the real product, it's a very different calculus for the consumer.
Speaker 2:Yeah. What what percentage of doctors do you think are using ChatGPT on a weekly basis? And should there is there a big wrapper to be built there just giving them a more HIPAA compliant version of of ChatGPT? I can't imagine. Shouldn't be legal.
Speaker 5:I mean, I bet it's like I don't know. Like, using it all on a weekly basis, like most doctors, I would imagine this point. Using it, like, as part of their workflow all day, probably still a smaller subset, but definitely in the double digits.
Speaker 2:Is that good? Is is ChatGPT HIPAA compliant?
Speaker 1:He's just asking the most obvious.
Speaker 5:Well, you don't wanna be dropping, like, specific patient information into ChatGPT, but, like, you can certainly do Generalized?
Speaker 2:You can do generalized.
Speaker 5:There's other ways to do that, but certainly generalized, like, workups and notes and, like, we're using it a bunch in one of the companies I'm involved with to help, you know, automate the questionnaires or the the the notes or things that happen downstream for efficiency, like, makes tons of sense. Should it absolutely happens, and we'll continue to
Speaker 1:that. Yeah.
Speaker 2:Some of the biggest, you know, I think everybody has this idea in their head that you're gonna be able to go to, it's like AI doctor. I don't know what that looks like. Right? I don't know if it's embodied. I don't know if it's a screen.
Speaker 2:I don't know if it's a
Speaker 5:That doctor is chat GPT, roughly. Yeah.
Speaker 2:Yeah. But I don't know. I don't necessarily know what the form factor is. But as an investor, are you is that a category? How do you think about that opportunity, right, you know, at a high level?
Speaker 2:Is that one company that's just going
Speaker 1:to Yeah, we've seen that part easy for lawyers. Is there going to be
Speaker 2:Yeah, is it more of like a co pilot approach and it's just less exciting than it sounds? It's just more doctors can see more patients and deliver better service. But how how do you see that category? Because I I it's just one of those areas that people always bring it up in the context of, oh, yeah. Everybody's gonna have, like, an AI doctor.
Speaker 2:Yeah. And it's like, okay. Well, what does that actually look like?
Speaker 5:Yeah. I mean, I, you know, I think for sure the first step when you're trying to deal with symptoms and figuring out what's going on is going to be going to chat GBT or another similar CX. Like, I'm pretty confident that's gonna be the first step. It's not that dissimilar from the first step today. It's just people were googling symptoms and trying to figure out, like, what's going on, and it was just much less efficient, but ultimately, like, a very similar kind of flow.
Speaker 5:So I think that's for sure gonna happen. I think the interesting question is, are the vertical players actually gonna have a better differentiated product than the foundation models? That's a lot less clear to me. Like, I still think the found like, the core foundation models, in my personal experience are better at diagnosis and better at figuring these things out still even though there are dedicated other models.
Speaker 2:Well, that's the that's a big issue. Right? You could have a wrapper that's specific for diagnostics, right? That you can message and say, hey, I have this like, you know, skin thing, like what's going But that's like so infrequent, you're not paying $20 a month for something like that. If ChatGeeBT can do it 80% as well and, you know, it can kind of get you on the right path.
Speaker 1:So I don't think ChatGPT eats WebMD. Yeah. For
Speaker 5:sure. I think the the the more interesting problem to solve, right, is like at some point you get through most of that conversation. You're pretty sure you figured out what's going on. You still need an intervention of some sort if there's anything moderately serious going on. Like, you either need a prescription.
Speaker 5:You need labs. You might need some physical intervention. Like, you need something. And that's where nothing in health care has actually been digitized. Right?
Speaker 5:Mhmm. Like, if you think about this compared to other retail categories, which I do think is the right mental model, like ChatGPT is now implementing, you know, Shopify checkout right in ChatGPT. Right? So you can go from that, what should I buy straight through to a checkout flow.
Speaker 1:Mhmm.
Speaker 5:No one's built that checkout flow in health care. Like, you don't have a product catalog. You don't know how much stuff costs. You don't know, like, what's available to you based on your insurance. Like, I think that's actually a more interesting problem for startups to go wrestle through because ChatTPG is gonna be pretty damn good at the things you use Google for before.
Speaker 5:Yeah. And it's not gonna deal with any of this stuff. And so the stuff I've been working on and spending a lot of time on is much more on, like, how do you build the equivalent product catalog in health care? How do you ultimately make it easy to transact? How do you make it easy to shop?
Speaker 5:Because that infrastructure still has to get built regardless of where the kind of front door is into that experience.
Speaker 1:Shopify for health, something like that. Can we do overrated, underrated, telehealth broadly? How are you feeling about telehealth?
Speaker 5:I am bullish on the sort of usage of telehealth still. I'm probably bearish on most of the existing business models and monetization. It's probably the short bit.
Speaker 1:What about overrated, underrated?
Speaker 2:Existing business models. Have you been surprised to see, like, HIM's almost second act in the public markets? Do you think they would even have had a second act if it wasn't for GLP ones, or is there some underlying unlock that they have?
Speaker 5:I mean, it's sort of like commenting on any meme stock. Right? It's a tricky thing to to have a strong opinion on
Speaker 2:the Well, it's
Speaker 1:think that's enough commentary. Overrated, underrated GLP ones? Underrated. Underrated. What about some of the foundational AI applications coming out of DeepMind, protein folding, any of that stuff moving the health care markets or how you think about health care?
Speaker 5:Not intelligent enough to have an opinion on that. Yeah. Too complicated.
Speaker 1:Too complicated to get out of it. Anything else?
Speaker 2:Did you when you were a pharmacist, did you was there a world did you imagine a world in which you retired as a pharmacist, you know, at 65? Or did you like cars too much from a young age that you knew that you'd need to figure out another way to build a collection?
Speaker 5:I think it was pretty clear that the, working behind the counter was gonna be a short lived endeavor for me, if that's the question. Are you asking is that what you're asking?
Speaker 1:Yeah. Basically.
Speaker 5:Yeah. I think that was pretty clear from the job.
Speaker 1:How much do you love being a venture capitalist now? Is it just the best? I
Speaker 5:love it. I sort of, like, the second I took the job, I became an expert at everything. It was so convenient. Yeah.
Speaker 2:Yeah. Mean, instant. It really is almost
Speaker 1:Take us on a little world tour of all the geopolitical conflicts, how we would resolve them really quickly.
Speaker 5:I'm just really happy that my first conversation on here was political in nature. That was what I was looking for.
Speaker 1:Yeah. Yeah. It's fantastic. Yeah.
Speaker 2:The last question I have, just generally curious, given you guys are are I'm I'm sure do multistage, but I imagine given like, are are you, like, trying to pick like, are are you investing in a couple companies a year? What what's the goal for you? And and I'm assuming you meet a lot of companies all the time that you like, but don't end up investing because you're not like, you're just more of from a conflict standpoint, if I do this deal and, you know, some a better company comes around in in six months or a year, I'll be conflicted out. Is that accurate?
Speaker 5:Yeah. I mean, certainly, the first bit's accurate. We're we're, you know, doing concentrated early stage investing, kind of classic venture. So I'll do two to three deals a year in any given year. It's probably a pretty standard standard year for for me and for the other partners of Matrix.
Speaker 5:I mean, I certainly think about the conflict thing. I think that reassumes that I'm constantly liking things and wanting to do all of them. That's probably not the the dynamic. It's really, like, finding, like, really interesting things that I wanna spend a bunch of energy and a bunch of time on versus seeing, like, a lot of different things that I'd love to kind of be less involved in. So Yeah.
Speaker 5:It's certainly a dynamic, but we're, you know, we're doing a couple deals a year.
Speaker 1:You do deals, when do you start using the term we to describe how the company works?
Speaker 5:That happened pretty quick too. It was like, the same as my expertise, such
Speaker 1:as Yeah. Just immediately. Write some small check, and it's we. We are building the future. We are.
Speaker 1:Yep. Dropping a we as a venture capitalist is strong. Let's see now. Hey. I'm on the board.
Speaker 1:Yep. I'm part of the team.
Speaker 5:Okay. Well, this is former operators. Otherwise, you're not allowed to.
Speaker 2:What Yeah. What last thing before you take off, what should people be paying attention to in the days and weeks from now around the actual implementation of the of the EO? What are you looking out for? I I think it's obvious that, you know, you're not gonna walk up to a pharmacy after work today and and see lower prices. But but what are you looking for?
Speaker 5:I personally will be focused most on how much this is really about the difference between gross and net prices, right, which you talked a lot about, or whether it's really about true competitive net prices with other countries because those are pretty different paths. Right? And that's all sorts of different implications. So I think the more this feels like it's about solving the consumer problem and less about solving the the kind of payer problem or the fairness problem, the better for me personally. And the more it feels like we're trying to do some true price setting kind of net MFN against other countries, the more I'd be a little bit nervous.
Speaker 5:So that's where it pivots for me
Speaker 1:is is
Speaker 5:this about consumers? Is this about net MFN?
Speaker 2:Great.
Speaker 1:Do you think the Mission e makes it to production? Do you think Porsche goes a different direction with this next supercar?
Speaker 5:You know, I I know so little about, like, new modern Porsches. I'm, like, the the furthest drone expert. But
Speaker 1:Good luck to
Speaker 5:no idea. It's the short answer. Ask me about something old, and I've I'll talk about it for a long time. But Yeah.
Speaker 2:Well, we'll, we'll be coming out your way. We're we're working on putting together the Amman rally. Yes. So more news to come there. Be one of the first to know.
Speaker 1:Is fantastic.
Speaker 2:Awesome. Thank you for coming on, TJ.
Speaker 1:Yeah. Thanks for watching.
Speaker 2:This was great.
Speaker 1:We'll talk to
Speaker 3:you later.
Speaker 2:Appreciate the insight. Bye bye. Cheers.
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Speaker 1:Seriously, any watch. I think I already
Speaker 3:did it,
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Speaker 1:Better. Hit me with some soundboard.
Speaker 2:What do you want, John? I got options.
Speaker 1:Ashton Hall. He knows my favorite. The the movie trailer
Speaker 2:Let's switch up.
Speaker 1:Let's switch up. Some poly markets up that are tearing up the news. The odds of Donald Trump eliminating capital capital gains tax this year are surging. It's now looking more likely than not that they'll be eliminated. 57% chance.
Speaker 1:Unclear if that means they'll be taxed as income or not taxed at all, but they will be eliminated.
Speaker 2:We eliminated capital gains tax. It's now 50%. Percent.
Speaker 1:Or 0%. Who knows? Also, the odds of Larry Ellison buying TikTok have doubled this morning. One in five chance now that he buys it before July. He's up at 18%.
Speaker 1:Someone knows something. Someone's going in with size. But, of course, this it's phrased as who will acquire TikTok. Big question about whether that's a whole co acquisition or a minority investment from an American company. Could also be the data is hosted on Oracle's, you know, cloud, their servers.
Speaker 1:Could be that the algorithm is run on Oracle servers, but that doesn't necessarily mean that Oracle knows what all the weights do. Just know that they're involved in the training of the algorithm. And so that's a big question is that, hey. If, yeah, you're inferencing TikTok's algorithm, but the weights have been trained in China to, you know, be favorable to China. That still doesn't really resolve the issue, so I'm sure we'll be tracking that.
Speaker 1:Anyway, let's run through some timeline and then get out of here. We're doing four hour shows now. Have you noticed that it's just grown?
Speaker 2:It's crazy, John.
Speaker 1:It's grown. We're just doing longer and longer shows.
Speaker 2:We're too addicted to podcasting. Podcasting.
Speaker 1:The pope was chosen in two days. Your your remote hire needs doesn't need five rounds of interviews. I said what I said. So funny that this got 5,000 likes on threads and then 350,000 likes on X as a screenshot. That's what's going on here in the screenshot.
Speaker 1:Do you see this?
Speaker 2:350,000 likes. I haven't seen that on anything
Speaker 1:That's huge.
Speaker 2:But an Elon post.
Speaker 1:And you would think remote hire about interviewing. Like, it's not that big of It's niche. That's very it seems niche, but 5,000,000 views here, 31,000 reposts.
Speaker 2:Also so funny C squared is just banger god. Yeah. I mean, should put that in banger archive.
Speaker 1:Seriously.
Speaker 2:Now the funny thing is the counterpoint here is that if you're meeting somebody for the first time, it's not like the Cardinals were meeting the Pope for the first time.
Speaker 1:Yeah, yeah.
Speaker 2:And they were just like, you know, oh, we just decided in two days, right? There's a lot of past history there. If you're talking to a remote hire, hiring the wrong person is just so painful. It really is the worst for everybody involved, Yeah, yeah, yeah. The person who got the job, who ended up not being the right fit.
Speaker 2:Company, you hire the person and has to invest all this time trying to ramp them.
Speaker 1:Yep.
Speaker 2:And then unramp, de ramp, let them go.
Speaker 1:Ramp.com.
Speaker 2:Switch your business to ramp. No, it's just really painful. And so if you're four interviews in and you're not confident, do the fifth one. You can avoid a lot of pain.
Speaker 1:So what's the right number of interviews for a remote hire?
Speaker 2:50.
Speaker 1:50.
Speaker 2:Have each of your 50 interns
Speaker 1:As long as
Speaker 2:you've got at least
Speaker 1:few in person workouts in that in that interview process, I think you're gonna be good. Anyway, I wanted to highlight Jesse Pelton. Interesting new account. Hadn't seen this guy before. Elon Musk's been amplifying him a bunch, and he's been posting about solar energy and energy a lot and just has some great posts and seems like a newer account.
Speaker 1:I don't know. He might be on there forever, but, seems to be blowing up most recently. He said if God wanted to build us a type one if God wanted us to build a type one civilization, a Kardashev type one civilization, he would have, one, put a giant fusion reactor in the sky emitting black body radiation around 5,800 Kelvin, which is exactly what we have. Two, made 28% of Earth's crust out of a semiconductor with a matching band gap, 1.1 EV or so, which is exactly what happened. And then three, filled the oceans with an alkaline metal we could use to store limitless quantities of energy, sodium or something similar.
Speaker 1:And he says, that would be a crazy coincidence. And he's basically a super long EV battery energy production. And I just think there's something about this account where I just saw a few of the posts. A lot of them were, lightly technical, but coming from this very optimistic techno perspective that I thought was I thought was interesting. Hadn't seen the account before, so I wanted to highlight it here.
Speaker 1:Thought we I mean, we should honestly have him on the show at some point because it seems like he knows his stuff, but I wanna dig in deeper there. Yeah. The other interesting post that I wanna highlight was from Mike Newp, who's been on the show, founder of Zapier and and Arc AGI. And he said, we are targeting at least three orders of magnitude instead of three x with Arc AGI three, but directionally, a lot of useful insight on AI benchmark development in this thread. And so Ophir Press posts.
Speaker 1:I have a post where I talk about how to build good, language model benchmarks. I've had to edit the part where I talk about how you should think about making your benchmark hard multiple times now. And so the first time, he says, you have to make your benchmark challenging to evaluate language models. The accurate if you if you drop your benchmark and the accuracy at launch with the best language model is 80%, people will see your benchmark is already being solved, and they won't even try to build models to improve performance on it. So you should think about, launching a benchmark
Speaker 3:interesting.
Speaker 1:At between one to 35% accuracy for the best model in the game. So take Gemini or take OpenAI's best model. And if you if you can get your benchmark to one to 35%, you're good to launch. Then he edits it in January of twenty twenty five. He says, due to the extremely fast development, I now say that you should do point one to 9%.
Speaker 1:Take that way down. Higher means that the benchmark is too easy. And then he says, May of twenty twenty five. Sorry. I have to make another edit.
Speaker 1:Due to the speed of development, I'm now asking people to think you can't just think your benchmark has 0% at launch. You have to imagine that your models would achieve negative 200%
Speaker 2:at human the smartest human ever Yeah. Should get a negative score on the test.
Speaker 1:Score. Yeah. Find benchmarks that are so hard. Find questions that are so hard that even if the models improve three x, they still get zero. Just building a benchmark where models get 0% today might not even be enough anymore.
Speaker 1:You have to look at how the models have been improving over the past three to six months, try and predict where they'll be in the future, and build benchmarks that would not only make the current models fail, but benchmarks that would make the models of next year fail. Anything easier than that might get saturated much more quickly than you expect. So I just thought there was a funny interpretation. We've been talking about benchmark saturation and the death of benchmark. But, you know, it's interesting to hear someone in the industry kind of put put it in such hard terms there.
Speaker 1:Anyway, Palmer Luckey is advocating that The United States should immediately expand our naval base on Guantanamo Bay into Liberty City at American Singapore of The Caribbean, shipbuilding, arms manufacturing, Near Equator space launch, energy refining, and more in beautiful paradise. Any Cuban who can escape there by running, swimming, boating, or biking gets asylum and a work permit to help build this mega project by robbing the communist of their worker the communist party of their workers in critical areas like power generation and military might. We accelerate regime change. Liberty City will be the first domino. I like how he's thinking outside of the box.
Speaker 2:Found it. Liberty City.
Speaker 1:Liberty City. GTA reference.
Speaker 2:Yeah. That's great.
Speaker 1:Anyway, we talked about Apple's new product launches. It's going to be a big 2027 that they're lining up for and a bunch of new iPhones coming out. What else is interesting to talk about in the news orb, But what else?
Speaker 2:Yeah. This is interesting. The foldables thing is so funny.
Speaker 1:They gotta do it.
Speaker 2:But I mean,
Speaker 1:foldables, it was one of those things where, you know, like, it was an interesting idea, but the first iterations, even from the top tech companies, not Apple, not named Apple, were bad. And everyone kind of knew that they were bad. So
Speaker 2:Apple funny that it used be It's good. Really used to be much more of a thing to text like this horizontal. So I was thinking the foldable phone, you bring it back. But I think people just got pretty fast at typing.
Speaker 1:Yeah. Is this one fit?
Speaker 2:Oh, swap it on. New hat.
Speaker 1:You gotta do all the different hats. This one's a little tight. Anyway, WorldCoin launched the Orb Mini designed to make human verification more accessible. It's transportable and seamlessly accommodates your lifestyle. The Orb Mini, it goes
Speaker 2:And I guess there's a bunch of World stores, showrooms throughout The US now. We're gonna hopefully have the founder of World, Alex, tomorrow, Alex. And So it's interesting
Speaker 1:because so so my take on this is like, I I understand the main pitch, which they they put up this infographic that said, like, 80% of gamers online say that their online gaming experiences are being ruined by bots. And that makes sense. Like, there's a cheater, there's a bot, there's AI. Like, no one really wants to go and play chess against the hardest AI possible. That's just not fun.
Speaker 1:They want to play against humans. Right? And so if you play against a cheater, it's just less fun. Right? You want to play against real people.
Speaker 1:So, like, verification makes sense there. But what's odd is like if you play out the AGI, ASI thing really, really far, you would imagine that at some point the AGI figures out how to either steal or grow eyeballs. Right? Yeah. Like or assemble them.
Speaker 2:That's really dark.
Speaker 1:It's really
Speaker 2:dark. Stealing the
Speaker 1:eyeballs. Stealing.
Speaker 2:I've hit a I've hit a WorldCoin human Yeah. Verification checkpoint. Yeah. I should just get a human.
Speaker 1:Yeah. The future is the the terminators keep us in cages and make us do arc AGI puzzles and then scan for the world coin. And and it's just like there's arc AGI puzzles all day long because we're just like being scanned. Brutal.
Speaker 2:But but but The final job, UBI is just Yeah.
Speaker 1:Offering your nanobots and you believe in the the the paper clipping. If you could turn me into a paper clip, you can turn a paper clip into an eyeball. Right? And if can turn a paper clip into an eyeball because it's just matter that you're reconstituting. Right?
Speaker 1:And you're just assembling atoms and molecules.
Speaker 2:Just matter reconstitution.
Speaker 1:Yes. So I mean, I guess that that's farther away. Like the bot crisis is here almost today, right? It is in the sense that like there's a lot of spam out there. We need a better version of Captcha.
Speaker 1:RKGI is maybe, like, six months after being cooked. And so the orb kind of makes sense in that case, but it is an it is an interesting, like, intermediate step. But I don't know. It's it's an interesting story to to to follow and interesting to see how it rolls out. And I'll be I mean, I'm excited to see, you know, there will be gamers who sign up.
Speaker 1:They will test it and they will let us know if their COD lobbies are cleaner. You know, if they're on Rust
Speaker 2:and they're having
Speaker 1:more fun. Isn't the bot
Speaker 2:problem something you can solve at software layer though? Like like, obviously, if if you could get, you know, a device
Speaker 1:You can get a device that does that.
Speaker 2:That
Speaker 1:I know exactly what you're saying. Yes. You can get a robotic arm to move a physical mouse and press buttons on the Yes. You use computer vision just to look at the screen and you can cheat that way. It is possible.
Speaker 1:It's not perfect there. It's obviously better to just go into the code at a lower level and see, okay, I'm not even getting pixels. I'm getting Almost more like screen view. Exactly. Yeah.
Speaker 1:But screen view is a viable cheating strategy.
Speaker 2:Form of botting.
Speaker 1:Yes. And so obviously it's much better to just interface with the net code that's coming across so you can see through walls and you can understand the full map and there's no fog of war, all that type of stuff. But you can cheat just by camera at the screen. And like, that's almost impossible to detect until the front facing camera turns on and it's constantly scanning your eyes to make sure that there's a human on the other end. Which, I mean, face ID is pretty secure.
Speaker 1:It does kind of make sense that there's be something You got to build it in the next Xbox, I guess, or something. I don't know.
Speaker 2:Well, before we go
Speaker 1:Anything else we should go?
Speaker 2:We should talk about Figma. Figma is our latest partner. We talked about this a little bit last week. It is the design tool that we've used to build the TBPN brand. Every single asset that we create for the most part comes out of Figma and it's a tool that I've used for my entire career.
Speaker 2:Very excited to partner with them and and be on the extended team. We were at Config. Config last week.
Speaker 1:Launched a
Speaker 2:bunch of new products. Take our takeaway is the Figma for Figma is Figma. Yep. I've said it before. But the new product they launch is Figma Sites which is sounds simple, but is really exciting.
Speaker 2:Basically, you can turn whatever you make in Figma into a website. So if you're not using Figma already, go check them out. And, thank you to the whole Figma team for, supporting the show.
Speaker 1:Fantastic. And And thanks to you for watching and listening. We'll see you tomorrow.
Speaker 2:And making it this far.
Speaker 1:Enjoy the bull market day.