TBPN Live - SpaceX IPO, The Erdős Problem, Spotify CEO Joins | Alex Tabarrok, Bill Clerico, Alex Norström, Jordan Schneider, Christina Lee Storm, Erik Bernhardsson

Episode Date: May 21, 2026

(01:25) - SpaceX IPO (12:37) - Anthropic Revenue Surges (17:31) - OpenAI Solves the Erdős Problem (27:53) - Alex Tabarrok, a Canadian-American economist and professor at George Mason University, co-authors the Marginal Revolution blog and co-founded Marginal Revolution University. He discusses the Baumol effect, explaining how sectors with stagnant productivity, like education and healthcare, experience rising costs due to increasing wages in more productive industries. Tabarrok also explores the potential of AI to mitigate this effect by enhancing productivity in traditionally labor-intensive sectors. (01:02:22) - Bill Clerico, founder and managing partner of Convective Capital, discusses the firm's recent $85 million fundraise, doubling their previous fund, to invest in disaster resilience technologies. He highlights the increasing frequency and severity of disasters due to aging infrastructure and climate change, emphasizing the need for private market solutions. Clerico also shares insights into the fire technology market, noting the challenges and opportunities in selling to utilities, insurance companies, and government agencies, and underscores the importance of technological innovation in enhancing disaster preparedness and response. (01:15:12) - Alex Norström, Spotify's Co-Chief Executive Officer since January 2026, discusses the company's recent Investor Day, highlighting significant user growth and financial achievements over the past four years. He introduces four major future initiatives, including a new feature that reserves concert tickets for premium users, addressing challenges like ticket scarcity and scalping. Norström also emphasizes Spotify's advancements in AI, particularly in enhancing user experience and content personalization. (01:36:38) - Jordan Schneider is the creator of the ChinaTalk podcast and newsletter, focusing on China, technology, and U.S.-China relations. In this conversation, he discusses the recent U.S.-China summit, highlighting the stalemate in relations and China's leverage over the U.S. through rare earths. He also touches on the absence of key AI leaders at the summit and the implications for future technological collaboration. (02:02:17) - Christina Lee Storm, Head of Studio at Secret Level and co-founder of Playbook PLBK, discusses the evolving role of AI in film production, emphasizing its integration as a natural progression in storytelling rather than a disruptive force. She highlights the importance of embracing technology to enhance creativity and efficiency, while underscoring that compelling storytelling remains paramount. Storm also reflects on the potential for AI to democratize filmmaking, enabling independent creators to produce high-quality content, provided they maintain a strong focus on narrative depth. (02:14:28) - Erik Bernhardsson, co-founder and CEO of Modal Labs, discusses the company's recent Series C funding round, raising $355 million at a $4.65 billion post-money valuation led by General Catalyst and Redpoint Ventures. He highlights the rapid growth of their Sandboxes product, which has been doubling in usage every month for the past six months, enabling safe execution of language model-generated code. Bernhardsson also addresses the challenges of demand planning in the AI infrastructure space, emphasizing the need to secure GPUs months in advance to accommodate their 30-40% monthly growth rate. (02:25:14) - 𝕏 Timeline Reactions Follow TBPN: https://TBPN.comhttps://x.com/tbpnhttps://open.spotify.com/show/2L6WMqY3GUPCGBD0dX6p00?si=674252d53acf4231https://podcasts.apple.com/us/podcast/technology-brothers/id1772360235https://www.youtube.com/@TBPNLive

You're watching TVPN. Today is Thursday, May 21st, 2026. We are live from the TV for the TV for the United, the Temple of Technology, the Fortress of Finance, the Capital of Capital. We have a massive show. There's so much tech news. People said the technology industry, they were out of news. They weren't. There's plenty of tech news.

All over the Wall Street Journal. AI companies are duking it out for prime placement in the journal. SpaceX got top billing in the journal with the IPO filing. SpaceX sets its IPO in motion. The SEC filing starts move to raise tens of billions of dollars in record debut. We've talked about this a lot on the show. Clock is officially ticking on SpaceX's huge stock offering. What are you laughing about?

Ryan says I knew Jordy couldn't do this two days in a row. Did I not do two days in a row? Nope. Haven't done two days in a row in months. We can roll the tape. I mean, after reading that piece about us, I feel like some brand differentiation is actually to our benefit, since some people can't tell us apart. And so I've become a fan of the split. Of casual Friday, Thursday.

Yeah. Of just a casual look over there, more buttoned down, buttoned up, button left and right over here. Somebody's got to be buttoned up. Someone's got to do it. SpaceX on Wednesday revealed new details about how it's, about its financial. and how chief executive officer Elon Musk will try to grow a sprawling enterprise dedicated to advancing cutting edge technologies in space and back on Earth. The company disclosed the information in an investor prospectus.

Publication of the document sets SpaceX on course to potentially raise 80 billion or more for a stock sale as soon as next month. The rumored date is what? June, July? Was it June 12th? June 12th? That's just 20 days away. basically. They're going to beat out Saudi Aramco that raised 26 billion when it went public in

2019. Musk has touted out of this world objectives for the company from deploying a huge number of artificial intelligence satellites in the future to colonizing Mars, Texas-based SpaceX, has distinct businesses ranging from rocket launch to satellite operations to a nascent AI unit that it's rivals, that is racing to catch up with rivals, founded by Musk nearly a quarter-second, A century ago. Yeah, it has been a long time. SpaceX revolutionized the commercial space industry. The company has grown from a startup with a handful of employees that almost went out of business

to one of the world's most valuable private companies with over 22,000 workers as of March 31st. It controls technologies, the competitors, and even nation states haven't been able to fully match. SpaceX reported its revenue last year at 18.67 billion, and Dan Primack had a post saying that the business was smaller than he expected. He's going on CNBC today to talk about the IPO, has had a couple interesting takes. People are going back and forth.

Overall, the reception has been the S-1 is an extremely enjoyable read. Kevin Kwok says it's the most enjoyable S-1 read in a long time. Reads so easy like sci-fi or fiction. It's kind of the perfect post. Or just regular fiction. Because if you're pro-tech, you're like space, you're excited about space. That could be a positive. Yes.

But if you're a bear, you can say it reads almost like science. Science fiction. Of course, the best Tam slide ever. Probably the best Tam slide ever. Sawyer Merritt has the screenshot here. SpaceX and IPO filing. We believe we have identified the largest actionable, total addressable market in human history. We estimate that our quantifiable Tam is $28.5 trillion, consisting of $3,000.6,000.

370 billion in space from space enabled solutions, 1.6 trillion in connectivity across 870 billion in Starlink broadband and 740 billion in Starlink mobile, as well as additional opportunities in enterprise and government. 26.5 trillion in AI across 2.4 trillion in AI infrastructure, 760 billion in consumer subscriptions, 600 billion in digital advertising. That's massive. Well, is that for XIllia? I don't know. The idea, so everything else is more believable. Everything else is more believable to me than X getting meaningful digital advertising penetration.

Yeah. I guess the time matters here because a lot of these markets aren't this big currently, I think. I don't know. But I guess over time, you know, if you think about the next 25 years, the next 100 years, I don't know if these are inflation adjusted, but there's lots of things that could happen. For illustrative purposes of sizing our addressable market, SpaceX excluded China and Russia from global estimates. I feel like you might want to put in China and Russia over the next couple decades. Who knows? Maybe we become best buds with both countries. You know,

anything can happen. World peace might come, and that's going to expand Tam. That's an economic incentive for world peace. I like to see it. There were some beautiful photos that were shared in the start of the S-1. Lots of pictures. Lots of pictures to start. And then it gets very tight. text dense, but the photos were, I liked them. I thought that they were unique. I hadn't seen them like that often and they felt like they were kept in the back pocket for a while. And they, I don't know, they just like remind you of SpaceX. It's like a beautiful thing. Dan Pramack says, incredible that Goldman beat out Morgan Stanley for the SpaceX IPO left, lead left, given that Michael Grimes returned to Morgan Stanley in part for this deal. Of course, Morgan Stanley is on the deal.

but that is, it is a big win for Goldman that DJ SpaceX is at the helm, Goldman Sachs and Co-LLC lead left in the joint book running managers, but everyone's getting a piece of the SpaceX IPO at this size. Will Bitsky says, shout out to the Goldman analyst that was originally sacrificed to win this lead left IPO. It must have been an incredible amount of work. It's not just the biggest IPO of all time. It's not just this incredibly complex structure with multiple.

businesses. It's also you're reporting to Elon Musk. Elon Musk is your client, and he's going to ask for things probably more aggressively than anyone who's a CEO of a company that's going public. So lots of things, lots of winners from the SpaceX IPO. Luke Nosek is a huge one. He was at Founders Fund, co-founded Founders Fund with Peter Thiel. His next role will be leading. This is from a long time ago. He left to start Gigafund, which was billed at the time as a new investment firm that initially will be focused on raising capital for Elon Musk's SpaceX, a Founders Fund portfolio company where NOSIC is a director. And so David Kwan says, today I learned Luke Nosec left FF to fund, to start a fund exclusively

focused on investing in SpaceX. There are a few of those that we're hearing about these days. Of course, exclusive does not mean 100% of the capital went into SpaceX. It just means that they were very, very focused on that. Gigafund has a lot of different companies in the portfolio cover. We've had a bunch of founders on the show who have raised money from Gigafund. But SpaceX is where Luke is a director, deeply involved, and has focused on participating in many, many rounds. And so, conviction will do that to an MF, says pocket jack's capital.

Lots of big winners. Frank asked Codex for SpaceX fair value based on the S-1 should be an interesting build-up to the IPO. What was the result from Codd-Land-Sher? I'm 1.1 to 1.5 million. It's not bad. That's not bad. Bull case gets to 1.7 to 1.9 if investors assume entropic stick. AI infrastructure margins are strong.

Starship unlocks major new markets, and public market scarcity drives demand. But $2 trillion means the market is effectively assigning something like $800 billion to $1 trillion to the AI orbital compute story on top of an already rich Starlink valuation. Possible is an IPO mania print, but that's not what I'd call for fair. So we'll see what happens. I mean, the big news was the partnership with Anthropic, where Anthropic is spending over a billion dollars a month, I think.

It's ramping up. $15 billion a year. And that's huge for SpaceX, given that they did 18 and a half or something last year. This is a huge jump up in, in, I mean, they have to be one of the biggest neoclouds

like overnight with this. Yeah, I was trying to find. Huge, huge. I was trying to find some of our conversations from last year where we were, you know, X,

sorry, XAI and GROC was growing, but maybe not at the rate that, not close to the rate, that would require that much infrastructure. Yeah, finding product market fit on the actual distribution side. Obviously, we love X, but it's not the biggest platform. Yeah, it wasn't.

It certainly, you know, shoot for the stars. Yeah. And if you miss, you have a pretty great neocloud business, right? Anthropic has to pay way above traditional neocloud pricing for this compute. and so ends up being a great outcome for SpaceX. Yes. Well, Antonio Grosso is another investor who's absolutely printing off the SpaceX IPO.

Antonio Gracios at Valor has 30 entities invested in SpaceX in case you were wondering what truly going long looks like. He added some corrections saying that some people were assigning like, oh, he's the only investor. And he says, no, no, no, I have a lot of LPs. I do a whole bunch of different funds. Like, this is not just his windfall, although, of course, he's going to be doing very, very well personally. But so many different, Valor for Space Holdings LLC.

Valor M336, like so many different investment vehicles because Elon has raised money so many times, both for primary capital and for tender offers for employees who had worked at SpaceX for 15 years and needed to buy houses, needed some liquidity. Elon was very good about never doing a downround, growing the good. valuation very, very gradually over decades to get to this point. And Peter Hague says, just reading the SpaceX SEC document, one thing that sticks out is the capital spend on AI is 3x that on space. It's an AI company with some rockets, which is a wild, wild pivot at the last, it's the 11th hour. You know, this has been a rocket company for, for 20 years or 15 years.

then an internet company with Starlink, but that was still so tied and so clear and so quick to get to like a logical link. Like you needed the launch capacity to build Starlink. And so you had this new capability, satellite internet. It was amazing. And it went from idea to launching the satellites to consumers actually using it when they're traveling, camping off the grid, real and then showing up in planes and all sorts of different applications, it became very, very relevant, very real, very quickly. And the Colossus XAI, that felt

like a different company, because it was, it felt like a different initiative, but it has just become so, so, so big, so quickly. Yeah, and looking back at the plays Elon and his investors have made around this over the last year, right? There was that, felt like somewhat of a coordinated effort at the, was it beginning of this year? last year when suddenly everyone started talking about space, data centers very suddenly. I remember Gavin Baker started coming out talking about it. That's around the time when they sort of floated the, I believe it was December of last year, started floating the idea of like what the potential valuation would be, started building that AI narrative,

started, you know, made a play for cursor, you know, partnered with Anthropic, even though, you know, only a few months ago they were much more combative. Yeah, his name-calling. So, yeah, he, you know, I think this is why Elon has been able to accumulate so much capital. Yeah. He is, like, he is pretty much the best in the world at, like, making, just making place. Yeah, making place. And doing whatever it takes.

Yeah. So the most recent play, unrelated to the news that made the front page of the Wall Street Journal, Anthropic revenue, surge is set to post-first profit, sales scene reaching 10.9 billion in second quarter, up 130% over pre-devis quarter. Truly, in the title of the, in the actual URL of the Wall Street Journal article, they call it mind-blowing growth about to propel Anthropic to its first profit, absolutely fantastic execution. So Tom Brown, co-founder of Anthropics, says,

we're expanding our partnership with SpaceX and we'll be scaling up GB200 capacity on Colossus 2 throughout June. Appreciate Elon Musk and the team. helping us find good homes for the clods. Is Claude plural? I thought it was all one Claude, and the purpose of Anthropic was to build Claude, and Claude will eventually build Claude. But I guess you have multiple instances of Claude running

on different servers on different GB200s. Ray Wang over at Semianysis sort of shares a little bit more. Anthropics Q2 revenue is set to increase by over 200 percent. We'll post an operating profit. The AI will never be profitable group is in absolute shambles right now. There have been a lot of folks who have been just doubting time and time again. Will this ever make money? Will this ever make sense?

And Dylan Patel sort of laid out on the Dorcasch Patel show. This idea that at a certain point, the leading models might actually be able to raise money because they're raised prices because they're driving so much economic value. Seminianysis also put out a table showing for particular workflows that would take them, you know, a thousand dollars of human time, that they would have to hire more people for they were able to use AI and actually get an equivalent result for a tenth of the cost or a one hundredth of the cost or even, you know, a 30% saving sometimes. Lee-San Al-Gabe says, can someone check on Gary, February 23rd, 2026? He said, turns out Gen A.I was a scam. I had to check the date on this because this seems like something he would have written in like 2024.

And I would have been like, yeah, okay, yeah. Maybe the usages are a little limited. Maybe there is some sort of wall here, the data wall. Or, you know, maybe we won't be able to, you know, maybe we'll need new paradigm. But to write this in 2026 when we're in like, The fastest period of acceleration in terms of actual value from these models is pretty, pretty remarkable. I'm interested to see where he goes from this. Is he going to double down?

Is he going to stick with this? It has been a couple months since February. I think there's, I think, I think the entire crypto boom and NFTs in particular just broke a lot of people's brains. Yeah, and VR, Metaverse too. Metaverse. Metaverse. Yeah. Metaverse and underdelivered.

Metaverse, you know, potentially even more. Yeah. Yeah. Yeah, yeah, there was a lot of discussion about, uh, this will destroy Hollywood. This will destroy movies. Like everyone would be doing. There was never, there was never a moment where you could use a product and have a mind-blowing experience.

Well, without paying for it. Like you had to. No, no, no. I'm just saying, I'm just saying like, period. No, no, no. The Applevision Pro demo, like there was a day. You called me and you were like, why is everyone losing their mind on the timeline over the Applevision pro?

Do I need to buy one of these? And I was like, it's kind of like a previous. It's not like perfectly there. I like it's still a niche. I don't even think you're remembering correctly because there was a current thing. There was no moment where I wanted to buy one. No, no, no. You didn't want to, but you recognize that it was the current thing when the Apple Vision

Pro launched for like that week when everyone got them delivered and they tried them. There were a lot of people that had Vision Pro psychosis. Vision Pro psychosis. A lot of people had NFD psychosis, all sorts of psychosis. We'll see how the AI psychosis. develops. It goes both ways. Yeah. But anyways, comparing it to anyone can have a pretty wild experience with AI in, you know, on like a ton of different, a ton of different services. Yeah. You could never do that with the metaverse. So Lisan Al-Gaiib is contrasting Gary Marcus's

sub-stack post with what's happened in the AI industry. Anthropic valuation up 173% since the start of the year, posting profits in Q2, according to the Wall Street Journal. Open AI evaluation up 67% since the start of the year. And Open AI general purpose model solves longstanding and well-known Erdos problem. Is it Erdisch or Erdos? I believe it's Erdos. Airdosh. Air-dosh problem. The two dots over the O, get me on the pronunciation, without a scaffold. And so there was a lot of questions about how hard is it to solve these problems. But Fortunately, we have Tyler Cosgrove, who's going to take us through what actually happened with this solution to this math problem that people are very excited about. Nome Brown said, today we are sharing that a general purpose internal open AI model achieved a breakthrough on one of the best known combinatorial geometry problems.

Less than one year ago, Frontier AI models were at IMO gold level performance. I expect this pace of progress to continue. and Sidhar Ramesh. I don't know if he was joking about this bet, but he says I have lost my $30,000 bet that AI would never solve the planar unit distance problem. Yes, I believe that was a joke. That's a narrative violation.

He jokes around a lot, but no. But a lot of people were surprised and a lot of people were excited about this. So take us through what actually happened. Okay, yeah. So I can basically go through like a simple explanation of what the problem actually is. Okay.

So just for some context, Paul Erdos, kind of this legendary mathematician, Throughout the 20th century, he basically proposes, I think the number is like a little over 1,200 different, like, little problems. These are the Aeros problems. People talk a lot of these as, like, goals for AI to solve. And you've heard, like, over time, there's been kind of like small, iterative kind of solutions to a lot of these problems. Yeah. Sort of like collaborative, a mathematician working alongside AI model or an easy one just getting.

There's like a main kind of, like, place where all of the solutions go. So sometimes people will find, like, AI will, like, find a different paper that wasn't actually put on the website. And then they're like, oh, AI solved it. But it's honestly true. But this is kind of the first time we've really seen kind of a big step change. Like, this is actually a new solution. This is using, like, you know, kind of novel ideas here. Yeah, doesn't exist in papers out there already.

So this was problem number 90. So I can kind of read the question that I can explain it what it means. So it's, does every set of n distinct points in the real plane contain an, most n to the 1 plus 0 of 1 over log log n many pairs which are one apart okay so like what does that mean yeah basically we have like the real plane right 2d and we have a bunch of points on it what is basically the how many like pairs of those will be basically one unit apart and what's like the max number like how do we basically organize those points such that we have the max number of them right so

it's not just a grid no so you would think that but I'm gonna basically explain why. So let's kind of like formalize this better. So we have U of N, right? And this is basically the largest number of unit distance pairs among end points in the plane. Okay, so basically like we're thinking about like how do we solve this? Naively, it's like, okay, what if we just take all the points? We have end points, and we just put them in a line. Yep. And unit distance apart, right? So it looks something like this. Yep. Right? So for this example, we have four points, but it doesn't matter, it's just N. So one, two, three, four. How many pairs are there? There's three.

Right? Okay, yeah. So basically this scales with N minus 1. Yeah. Right? So you would have a billion points and there's 9-99-9-9-whatever, N-minus 1. Yeah. Okay.

So now if we put it in a grid, what happens, right? So if we have a square grid here, there's nine points here. And then how many pairs are there? I believe there's 12. And basically, as this number scales up, it's still linear. So it's 2N. Okay. Basically, if you do a billion points, it's 2 billion pairs.

Two billion pairs. Yeah. Okay. So then basically... The pair is specifically that. that line. Correct. Yes, yes, because it's one unit distance, right?

And diagonal doesn't count. And it's not one, yeah, it's not a unit distance. Got it. So then, okay, what's the next thing we can do? The next kind of configuration is what's called the lattice construction. And so if we can pull up a picture of it, it's this kind of crazy looking grid that has all these super, like, intricate, you know, lines in between. You can see it on the, this is from the open-eye blog. If we can pull it up here.

Oh, I think I saw this. So this is what it looks like. Okay. So if you can like zoom in on any of these points, you see that, you know, it's somehow it looks like a grid, right? But there's not just kind of pairs at the edges, right? There's like way more. Okay.

So this scales at n to the 1 plus 01 over log log n. This is basically the best kind of example that we know works. Yes, but not a proof. So we know we can find this, but is this the upper bound? We don't know. So this is basically the lower bound. Okay. So then the question is like we have the lower bound, which is this is the best one we found.

This is the most number of pairs. And then we theorized that the high bound, upper bound, is scales with n to the four thirds. And then so Erdos, the original conjecture that he thought that the upper bound, the upper upper bound is still going to be less than n to the 1 plus O of 1. So this means 0 of 1, it's like as it scales, as N scales to infinity, right? So O of 1 basically scale to 0, it goes to 0 as then goes to infinity. And then basically opening I figured out that this is not true and that there actually are some, there are some ends for which this kind of max number of pairs is greater than the

air-dosh conjecture. So for infinitely many n, this is not for every single N, right? So it's not like five points or whatever, but there are infinitely many ends for which this is true. Okay. That it scales with, that it's greater than n plus n to the one plus constant. Okay, so that was basically the big thing, right? This is like, you know, huge if you're into math. Decades old problem, right? This is an incredible thing. Terence Tao is like, wow, this is incredible. But yeah, that's basically the overview of the problem. Okay.

But yeah, it's very exciting because this is not like a math model. This is just an internal model, general, like, reasoning. You could say it's like generally intelligent. Yes, I think you could say that. And then I think it's interesting because from like public perception, it seems like this didn't take like that many tokens. This was not like millions of dollars of inference time. Sure.

maybe something like hundreds to thousands of dollars of interest compute spent. That's very interesting because we were talking about like Gwern's conjecture about like novel ideas coming from just like brute forcing different connections between things and This is more token efficient. Yeah, this is not just taking some solution to a different a different airbrush problem and just like Spamming it on all 1,200 of the problems and oh one of them works. Okay, this is like kind of a new novel idea like maybe this solution is the way that they found this It's like super complex. You can read the proof. It's like 18 pages long. Wow.

I don't really know what it means. But like there's a lot of the math decisions are saying, okay, this actually could be useful to a lot of other problems. Huh, that's cool. This is like a new way to do things. Interesting. I think it's like very exciting. This is like maybe similar to a alpha fold moment or something where now this is like a real kind

of step change in math capabilities. Do you, are people going to run out of problems? How many more problems do we have? I don't know the exact number. I think, so there's 1,200. in total of just airdth problems. I believe the number is around 500, 600, of ones that have been solved.

But there's so many of these famous open math problems. There's like the Millennium Prize, right? A million dollars if you win. How much did Open AI win? If you get a million dollars for the Millennium Prize, how do they get for cracking this puppy open?

So every single AirDF Prize, if you solve a problem, there is a prize. Yes. I'm anchored at a million, so. Yes, so these are going to be slightly less. I think this one was around $500. $500. I believe the Erdus Problem scale, there's $25, $100 and $500.

This was kind of the big one. Non-delutive financing. Yeah, non-delutive financing. Yeah, yeah, so it could be a revenue pathway for Open AI. I have to imagine that the inference bill for this was over $500. I think so, yeah. So the mathematician that just works with a coffee still. So obviously, like, okay, what does this actually, in fact, does this, you know, bring us to level science?

Maybe not, but it does show that, like, Okay, these models are not just, you know, the average of all their training data. Sure. They can actually make novel ideas. They're outside of distribution outside of the training data. It's not just knowledge retrieval. Yeah, I think this is very much contrary to, you know, kind of the Gary Marcus take. These are just, you know, parrots, these are just predicting the next token.

These aren't actually intelligent. Yeah, yeah, yeah. Yeah, I think it's very exciting. Yeah. Cool. Well, thanks for breaking the gong for the researchers. Yes. Boom.

Boom. Great, yeah. Thank you for breaking that down. As universities, classes become live podcast settings. Podcasts are becoming university settings. This is where we're going. Well, let's take everyone through our lineup today because we have Alex Taberock from George Mason University and co-host of the Marginal Revolution podcast with good friend

of the show. Tyler Callan coming on in a minute. Bill Clarico from Collective Capitals coming on, Alex Nordstrom. Convective. Convective Capital from Spotify, the co-CEO of Spotify is coming on. Then we have Jordan Schneider back from China Talk, going to probably spend a few minutes talking about the overwhelming summit in China and then move on to a bunch of other talks, a bunch of other topics. And then we have Christina Lee Storm from Secret Level joining at 1 p.m. Pacific.

So the other news, rumors about OpenAI is closing in on the IPO filing. and that pushed out Nvidia's results, which is normally something I would expect on the front page, but there was too much AI news. Nvidia results skyrocket on rise of AI agents. We talked a little bit about it yesterday. But the big news is that they're doing an $80 billion share buyback authorization and take him.

Take him was bullish. People were wondering where he would sit on Nvidia. He laid out pretty convincing case. You can go listen to the interview. it aired yesterday on TBPN. But without further ado, we have Alex Tabarok in the waiting room. Let's bring him in to the TBPN Ultridum. Alex, how are you doing?

I think we don't have audio. Can we check your microphone? Make sure it's working. We're good. Okay, it was something on our end. How are you doing? I'm still doing great. Fantastic.

Perfect. Perfect. It's great to be on the show. It's been far too long. I'm a huge fan. I've read Marjor Revolution since I studied. economics back in 2010. And a huge fan of the Marginal Revolution podcast. I very much enjoyed your debate with Tyler Cowen all about the cost disease or Baumal effect. And I think we should

start there. And then we can go all over the place in AI and labor and the economy broadly. But do you want to start with an introduction on the Balmall effect? Maybe why it captured your interest and some of the work that you've done around it? Sure. I mean, probably a lot of people have seen this famous chart where you have a bunch of things going up in price and a bunch of things going down in price. And the question is why. I mean, the things are going up in price, I think we all know, is like, you know, healthcare,

education, right? And then things are going down in price, often manufactured goods like automobiles, quality adjusted, or televisions, computers, things like that. And the question is like why, why do we see these big differences? And what Bamo pointed to was that there's a problem with service industries, you know, like education. You know, think about what I do, which is teaching students. And you think about what Pythagoras did. Like Pythagoras, he's got, you know, 10 or 12 students around him and he, you know, he puts a triangle, you know, in the sand and, you know, draws some.

taught some math there. It's more or less what I do, right? I mean, thousands of years later, maybe I'm using chalk or maybe I'm using PowerPoint. But basically, you know, it's me and a few students. And productivity really has not gone up at all in the education industry. So because of that, prices have to go up because you take an industry where productivity is flat. And you might say, okay, well, prices are going to be flat. But no, no, because all the other industries are improving of productivity and the education industry, they have to attract labor from those industries which are getting better, right?

So they still have to pay me as much as I would earn, you know, in another industry. But my productivity hasn't gone up, you know. So that means prices have to go up. Yeah. So that's the basic bomb effect is that industries, especially services where productivity is not going up, prices have to go up. Yeah. We have the chart here.

And I imagine that there are a few logical pushbacks. One is regulation. Everyone will say that the number of licenses to practice medicine is restricted. It's a taxicab medallion system. it's a regulatory capture situation. Does that not play into this chart as much as people think? Is that to be disregarded or is over-regulation still something worth contending with if you want to avoid runaway inflation in or just disproportionate inflation in important

services that people have demand for but are maybe paying through the nose for and not happy about? Right. Yeah, look, look, I'm a free market guy. You know, I'm anti-regulation, anti-bureaucracy, all that kind of stuff. But you have to understand with these trends, we're talking about increases in prices, which have happened over 100 years. And, you know, medical care, people were complaining about medical care going up in price in like 1920, 1930s, it says before, you know, Medicaid, Medicare before a lot of government involvement. education has been going up in price. So I think it's deeper than just regulation.

And let me give you just one other example is think about car repair, okay? You know, or cobblers. That was the last time you took your shoes to a cobbler. You know, my mother will say, oh, it's a new generation. You just don't care about repairing things, you know. And I'd say, no, no, mom, I love you. But look, it's that the cost of repair has just gone up so much compared to just the cost of buying a new pair of shoes. Yeah.

How would you like, yeah, how would you like to, you know, spend $70 to fix your $60 parachute? Exactly. Exactly. So, you know, I had a, my car had some, I bashed it in the parking lot, you know. And it was like, not a serious. you know, just a surface injury, but it was like a third the price of the car, the value of the car, just to repair the side, you know. And that's pretty typical. Yeah. So, I mean, a lot of people in the AI world are saying that AI will do to services what technology has done previously

to manufacture to goods, to manufactured products. Does that mean that the, the, the Bommel effect goes away? Is it more pronounced in the industries that are AI resistant? And you see some sort of runaway inflation in the things that can't be automated. Because when I think about teaching a college course, I do see the sort of maybe linear scaling that you're discussing. But we have microphones now. We have amphitheaters. You can teach more students. There's online resources. There's ways to delegate and manage teams of homework reviewers and dis-aggregate the work. And so you would imagine that technology would be a lever on services in some ways, but I'm wondering how you think it will change in the age of AI.

Yeah. So the big question is robots, right? If you can replace labor with capital, then a lot of the bomb-al effect goes away. which would be great. I mean, that would be great. Basically, you know, anything that improves productivity is good. But I think people also get a little bit too upset about the bumble effect because really why, another way of putting it is why are services getting more expensive? It's because manufactured goods are getting cheaper, right?

It's because what we have to pay for the services in terms of giving up other goods has gone up in price. But still, we're richer than ever before, which is why people keep buying more education and more health care. Right. So that's another reason why I don't buy entirely the regulation story. Yeah. Because if it was sort of regulation and the price of health care was going up, people would buy less of it. Yeah. But actually, they're buying more of it.

Yeah. So it's the fact that, you know, our productivity is going up. We can afford more of it. That's really why the price of medical care is going up is because the price of computers and other things is going down. Yeah. How are you processing the latest and greatest in behavioral economics around maybe this concept of the vibe session, this idea that, yes, we are richer than we have been in history.

And yet, I mean, right now. consumer confidence is very low. There seems to be a lot of dissatisfaction with the with the progress that the economy is making. How much of that is grounded in in real economic data versus psychological factors? I'm amazed at the amount of psychological factors. It's something I've changed my mind on how big the psychological factors can be. If you just look around the world today, no other country has done as well from globalization. as the United States. I mean, it was us which kept open the sea lanes and globalized

the world to our benefit. And we're the richest country in the history of the world, the richest at any point in our history, and yet somehow we're upset about free trade and globalization. And again, no other country has done as well

at assimilating immigrants and doing well with immigrants than the United States. And yet we're upset about immigrants. Yeah. So I think it's very disappointing. I hope we get over the bad vibes because the U.S. is a lot to be proud of. Yeah.

And a lot to be feel good about it. Yeah. Is one of their psychological factors, you know, the average American's perception of debt to GDP? We seem to anchor debt, like, nominal. values of debt to GDP, which is a sort of an income stream. And we get very irritated or anxious when debt sort of touches GDP and relative values. How are you thinking about the level of indebtedness that is appropriate for a modern economy to sustain itself? I'm not happy about the debt. You know, we still don't know.

The U.S. has a big choice. Do they want higher taxes or do they want less spending? And the U.S. voter just keeps saying, how about neither? Sorry, this is not working, right? You know, I do cake and eat it too. No, you cannot do that. So the American public has just not decided which way it will. Yeah.

That is what is driving. the malaise? I don't know. I'm not sure. I don't know whether it's cell phones. I don't know whether it's Instagram. But it does seem that there is an anger, a grievance culture in the United States.

At first, you know, I thought it was just on the left, right? You know, when we had everyone was complaining, oh, African Americans are treated so poorly, the women are treated so poorly, the poor are treated so poorly, you know, and then with Trump, we've just changed our set of grievances, you know, and so now, oh, it's, it's the, the, the, the foreigners who are ripping us off, you know, crime is terrible, and of course, it's not, you know, all of these things, we've just changed our set of grievances without actually focusing on.

Is that, yeah, is that not? How much does the fact that, you know, so many people are downwardly mobile? I mean, I was born in the 90s and I remember as a probably an early teenager hearing, like, you know, statistically, this is the first generation where you're more likely to do less well economically than your parents did. And I feel like part of the challenge with that is that America's culture is so progress-oriented, right? like the American dream is just centered around doing doing doing more doing better you know if your if your father was a was a cobbler like you own a shoe store that that kind of thing and and so now when you have you know still this like massive wealth and and as you said you know

the richest country in history uh there's this constant comparison to uh to the past and I think frustration from that, which is making, like, you know, huge swaths of the country frustrated. And you want to, you want to blame it. You want to blame it on, like you said, foreigners or free trade, et cetera. But it's just like this sort of latent frustration. Yeah, there's definitely frustration. I agree with that. Compared to the past, we are doing better.

Yeah. There's no question of that. Now, to be sure, there are some key areas like housing, right? Housing is much more expensive, you know, that it should be. You know, that's a zoning problem. That's a choice people have been making, I think, a bad choice. I think we ought to do something about it. But even with housing, you know, houses are so much better today. They're larger. Kids have their own rooms. You know, Air conditioning, parking, in 1960. Yeah, a large fraction of the housing stock in 1960 didn't have indoor toilet, didn't have indoor plumbing. I was still pretty common not to have indoor plumbing. So I don't think it's compared, I think if people are saying that we are worse off in the past, I think that's incorrect. maybe what's going on is that inequality has gone up somewhat, not as much as people often think, but it has gone up somewhat. And of course, we have more access to seeing inequality.

You know, Instagram and stuff like that, which is sort of a fake, you know. The Lamborghini might be rented. No, I completely agree. Yeah, the other, the other, the other factor is that the forms of entertainment that are constantly being chosen today like doom scrolling, right? When you maybe had the hippie generation,

it was like, hey, we don't have jobs. Let's go to Yosemite and just live there, right? And like what that would do to your sense of well-being versus like, I don't have a job, I'm going to sit on my phone all day long. Or, you know, last week. Everybody really hitchhikes across America when they're in between gigs anymore.

Yeah. What happened? Yeah. Yeah. Like just, just, I don't have anything going on. I don't have opportunity.

I'm going to go outside. Yeah. I'm going to have a wildly different impact on your psyche. I know a super successful corporate lawyer today that like was in the middle of a career transition, spent a year like surfing in southern, in South America. And like that is unheard of by today's standards. Like that just doesn't happen.

Yeah. Yeah. Yeah. Yeah. I have also been thinking about like if there was a, If there was an alien that showed up and had a quadrillion dollars, like, if you include that alien in the genie coefficient, it skyrockets it. But the existence of that alien doesn't affect your perception until you're made aware of the diamond spaceship that the alien comes to town with and starts flexing on you on Instagram. But the mere existence doesn't change your economic well-being or anything real, but it does change your psychology once you see them flexing on you.

I'm interested in the housing thing though. I want to go back to a bomb-all effect because housing seems to potentially fall in the middle. Like there's manufactured goods that go into building a house. There are also services that go into a house. Like how do we apply the thinking of the bomb-law effect and what you've learned to what would happen to housing? Like is there a second step? Everyone when they talk about housing will say let's fix the zoning rules, let's make it easier to build. But is that enough?

Yeah. I mean, look, with housing, it's not the construction of housing, which has gotten so much more, you know, expensive. It's almost, almost 100% the land. Okay. The cost of the land. Yeah. So, and you look, I mean, you just go to, you know, San Francisco, San Jose, which ought to be, right, some glorious metropolis, you know, the future with, you know, sky-high buildings and people traveling around and, you know,

fantastic. Yeah, it should look like a Chinese city where there's LED walls and, yeah, we have that on Salesforce Tower, but outside of that, there aren't these massive skyscrapers. And it just doesn't happen. It's a land of strip malls. Yeah. You know, Silicon Galley is a land of strip mall. It really is.

And strip malls, which is extremely, extremely expensive. They're just lying on, you know, this very valuable land and there are people not allowed to build. Yeah. And hopeful there's something like California forever, you know, where they're trying to get permission to, you know, start a new city. I'm hopeful for things of that nature. But none of this, this is all policy. This is, all of this is under our control in some sense. This is not like we haven't been hit by, you.

you know, or a tornado and we're all poor and have no housing, it's because we've said, no, you cannot build. Yeah, I've been thinking about the push into cities, which makes so much sense in the sense that the economic opportunity is in the cities. And so we've seen, you know, successful college graduates leave their hometowns, go to San Francisco, Los Angeles, New York, Miami, Austin, these mega hubs that have been very expensive if they aren't building. But I was really optimistic that between remote work, self-driving cars, like faster highways,

like we would get just an extension because I think as you look through history, the 45-minute commute is sort of a sweet spot before the horse and carriage. People would live a couple miles because that's what they could walk in 45 minutes. We got the horse-of-carriage. Once we went to 60 miles an hour, it became, okay, you live 30 miles away from your workplace. But I was hoping that we would get another leg up on that. and maybe it's coming, but we certainly haven't seen it yet. Have you been surprised by any of the fallout or lack thereof of the COVID era,

the shift to remote work, any changes technology or otherwise in just the housing and labor markets? Yeah, I agree with you. I've been a little bit surprised that we haven't seen another city really take off. I mean, we used to build new cities, right? You know, like, and, you know, Chicago, you know, not that long ago was a city of 50,000 people. Yeah. And Trump briefly talked about freedom cities for a while, which I thought was a good idea.

But it's sort of gone away. Okay. It does tell you that there's something very strong about these so-called agglomeration, the technical term in economics, agglomeration effects. Yeah. that like people just get more productive when they are near other productive people. Yeah. And you really need this big push to try and get this into the new city.

I mean, Miami briefly, you know, seemed to be jumping ahead, but that trend seemed to have gone away. Las Vegas, you know, tried it with Zappos. But that, you know, modestly, only took off modestly. I am somewhat surprised that we can't plant our flag and say the new city is going to be here and have a lot of companies all agree to move in at once. Yeah, I've heard it referred to as like the rainforest theory that why San Francisco is so resilient because you have so many different participants and the VCs can go to Miami, but they're just a phone call away while so many other key pieces of the economy are still chugging

along and so San Francisco clearly made it through a trough and is on a major, major upswing. What data are you most obsessed with following to try to understand the current moment? We see AI in the GDP data primarily through CAPEX right now, but what kind of productivity data are you looking at? We've been very excited about what we've seen from Stripe. They have this incorporation product. seeing companies, you know, more companies formed, growing revenue faster. That's very exciting.

But it's also like a certain type of person finds themselves incorporating, you know, their business with Stripe and is not perfectly a reflection of the economy more broadly. So what are you looking at to try to understand the impact and try to ignore maybe the headlines from CEOs that say, oh, well, we light off this 20% of people because of AI, because, you know, as we know, oftentimes it's marketing. Yeah, it's very interesting. There's a lot of theories, you know, about is this going to be a job apocalypse or something like that?

Not much data. And, of course, all of the data we have so far is that AI is increasing the number of jobs, not decreasing the number of jobs. what I'm most excited about and most interested in seeing is the effect of AI on medical care. So, you know, we just saw yesterday that AI had, you just had it on your show, you know, had proved a new mathematical theorem or counterproof. So AI is making these inroads into the highest levels of mathematics. If we could do that for drug discovery, you know, if we could have, you know, a 5% reduction in cancer mortality, that would be worth trillions. You know, that would be worth trillions.

So the opportunities there for AI to make tremendous leaps in human welfare by improving medical care, health care, I think are really exciting and well within the realm of possibility. You know, one new drug like solving an air dose problem, that would be incredible. And what does that mean in the labor market? I'm just, I'm thinking back to, like, there was a time when there was sort of only one track for doctors. He was just like a generic doctor. Now there's much more specialization. There's a dermatologist, a podiatrist, all sorts of different doctors. Is this like there's a, there's a fracturing and further employment creation from the administration, distribution, advisory around new treatments as it rolls out?

Because you could imagine, okay, there's a new drug. That's great. That helps everyone live longer, but I'm unclear on how it interfaces with the labor market. Yeah, I mean, I think the trend is, you know, increases in the division of labor. You know, which Adam Smith talked about from the pin factory. And when you apply that idea of the pin factory, you know, somebody shapes the pin, somebody puts the volume that you can't pieces in the trade.

When you apply that to the knowledge economy, then it's exactly, as you said, you no longer have a physician. You have a podiatrist and you have an optometrist and you have your nose control specialist and so forth. And yeah, I think that will continue. And they will all be using, you know, AI for sure, right? But yeah, they're going to get more specialized. and the tasks which physicians do will differ will change. But so far, you know, I'm not terribly worried about the job market per se. You know, look, this is a problem of people worried about people who are worried about,

oh, the AI is going to do all the jobs, right? like this means we're going to be fabulously wealthy and you know even without any jobs just being fabulously wealthy we'll figure things out this is the sort of problem you want to have right again this is not like a tornado or hurricane the tsunami which destroys wealth this is a tsunami which creates wealth and yes it could be a tsunami in the sense that it's going to be very dramatic, okay, but it's going to be very dramatic, like, you know, Santa Claus coming and leaving us goods, you know, under the Christmas tree. So that's drama that we can, we can handle. It won't be, it won't be without problem, okay, but problems where the pie gets bigger

are problems that we can solve. You know, it's problems when the pie gets smaller when we are forced into a zero-sump society of one person versus another. That's when society breaks down. Not when the pie is getting bigger. Like, we'll figure out ways to make sure everyone gets a decent slice. If the pie is getting so much bigger, we can solve the problem of dividing it up with everybody being happy. I'm not, I'm much less worried about that.

How do you, how do you think about value capture with this technology way, versus historical technologies. You know, if you get really good at inventing engines, you can sell a lot of those engines and hopefully have a nice margin. And maybe other people copy the engine and also make similar engines and benefit from that. But we're at a moment right now

where frontier intelligence is like very widely available, right? There's certain internal models that aren't with the public yet. And if you have one of those Erdos, moments in medicine, it could just be an off-the-shelf model that helps make a breakthrough and you pay for the tokens or you pay your subscription. But then right now the labs are not really set up well to capture that value at all. It could be, you know, some, it could be a big company that captures the value. It could be another startup. There's small businesses. And so how are you thinking about value capture versus like public benefit of this technology cycle and how it would

differ to prior technologies, let's say, like the internet and telecom and all the way back to railroads and the steam engine, et cetera? Yeah, it's a very interesting technology because this will sound odd, but it doesn't seem that hard. But, you know, the fundamentals is, you know, it's linear algebra. It's very surprising. I don't think anyone predicted this. But, And it's true, of course, that the frontier models are ahead, you know, Open AI, Anthropic, you know, have the best models. But they're like six months ahead, you know, of open source models. And for most of what you want the models to do, you don't even need the frontier models. And, you know, what today is a frontier model, like tomorrow, you know, it'll be.

be much cheaper second rate model, right? Like, like people are worried, oh, you know, some people have access to, you know, 5.5 and other people are still working with 5.4, right? Well, the big point is that even 5.4, you know, the free model is 100 times better than 3.0, right? Which was also incredible. So the model seemed to be getting more powerful and cheaper at a faster rate than any other technology that I have ever seen. So I think the gains will be fairly widespread, if not at first, you know, then soon afterwards. I mean, you know, some people are obviously open AI and anthropic, you know, the people who got in early and the program there, you know, they're going to be fabulously wealthy. No question about that.

But the technology itself, so much of it is open source, so much of it is really quite accessible. There's no magic there as far as I can see. Like it was just you had a few good ideas, and then those ideas just turned out to be incredibly powerful. So I'm expecting to see really the technology being quite widespread. Yeah. I know, I know we're out of time, but one last question. How do you think about the part of the reason I think we feel this insane acceleration with this technology shift, maybe, you know, more so than certainly mobile, but, you know, looking back to the internet and everyone in this moment wants to figure out, okay, are we in 98? Are we in 99? Are we in early 2000?

Trying to figure out the moment that we're in. And it feels like because we have the internet today, like there's this compression in the technology cycle because ideas get distributed faster, products get distributed faster. If there's a breakthrough, it's instantly everywhere. There's instantly, you know, hundreds or thousands of companies working on, you know, improving it, furthering it. And so, um, I find it hard to try to think about where we are because it felt like in Q4 of last year we actually did have a correction. Like we were joking like great, the bubble popped because like there was over like maybe too much excitement around chat bots and there was somewhat of a correction. And then we got agents that really worked.

And then it feels like in some ways we're in a new cycle now. And so I'm curious if you have any sort of frameworks or thinking around that like compression. in progress that we're getting because we're building on top of all these other technology cycles for this new one. Absolutely. And, of course, the AIs themselves are starting to improve the AIs, right? So some people worry that precisely because of that, we'll get a sort of a fume scenario under which one day everything is fine and the next day

you have a god in the laboratory, right? I'm not too worried about that, but it's not insane. It's not insane. Yeah, so far, my view is that I trust the technologists when they say that the technology is going to keep getting better quite rapidly. where I think the technologists are not quite right is that it's going to take much longer than they think for this to start affecting jobs and the economy writ large and things of that nature. That'll be slower. So the economists generally are on the slow side in terms of it's going to take time to adapt to this technology. I mean, we saw like with electricity, for example, you know, electricity was another, you know, incredible technology.

But it took time. You know, it took time to adapt to that, even when the frontier, you know, was very far ahead. But for that to work its way in the economy and for people to figure out how they're going to change their production structure if that took time. And I think it will take time here as well. But as far as I can see, the technology is going to keep getting better, which it does give one pause. And I will say, never in my life have I felt that the window of what is possible is as large as it is today, both on the possibilities for superintelligence, huge gains, the boomers, and also on the domer. I don't discount those entirely. My view is more in the middle, but those two sides, they're not insane.

So we do have to do a lot of thinking. Yeah. Well, thank you so much for taking the time to kind of chat with us. We'd love to have you back on the show soon. It was long overdue. Yeah, thanks for the time, Alex. The rest of your week, have a great weekend. And hopefully we'll talk to you soon.

Talk to you. Goodbye. GMU Economist, always so much fun to talk. too. Well, our next guest is Bill from Convective Capital here with a new fund. Get that gong ready. Let's bring Bill from Convective Capital into the TVP. And I'm welcome to the show. How are you doing? Doing great. Thanks for having me, guys. Kick us off with the news. What happened today? Yeah, so we raised the new fund, $85 million. There it is.

Thank you so much. It's up 2X from our last fund, and we're focused on disaster results. The thesis of the fund is that the world's getting warmer. Our infrastructure is getting older, and that's literally a recipe for disaster. And so as disasters rise and volatility rises in the world, there's got to be private markets that can respond, and that can build solutions and services and technology to stop that. And so we back founders that are building those things. Give us an overview of the fire.

Give us a fire market map. What's exciting in fire? It's top of mind right now. There's a fire burning in L.A. slash, I think, Ventura County. And so my house has been very smoky around my house. And, yeah, I want to know. This feels like a particularly brutal industry

because there's these like insane spikes of interest and then people just kind of forget about fire. Watch duty for profit conversion. Yes. It's got to happen. Yes. Lead a Series A and watch duty, please. Lever it up.

Yeah, John, I watched it. He's a good friend and we started, you know, I started my company around the same time he started that. He will never take that for profit. He's a died in the wall. It's such a good job. Mission first, you know. And it's actually become the standard not just for people that care about their homes,

but also, you know, people in the fire service use it. It's an amazing example of how technology can address this problem. So I guess to get. To get to your question around market map, you know, we think about a lot of, like, who is the end buyer? Because that's actually what's kept people out of this space historically. You know, the, you know, VCs typically don't get excited about companies that sell to utilities or insurance companies or government agencies. And, you know, our thesis is that that is in the middle of a really big change that, you know, if you see like PG&E went bankrupt a couple years ago, the insurance companies have had to leave California in some of these really large markets. And that's changing behavior.

You lose $70 billion of market capitalization, and you respond and you do something about it and you act differently. And so, you know, we think a lot about the market in terms of who's going to buy these technologies. And we've had a lot of success investing in startups at Selti utilities like Overstory, which, you know, uses satellite imagery to help utilities trim trees around power lines. We just invested in fund, too, in a company called Volt Air, which does autonomous drone power line inspections. So, you know, utilities cause about 11% of fire ignitions. about 60% of the acres burned. And so if you can actually just help reduce utility ignitions, that's like a huge leverage point.

Interesting. Interesting. Interesting. What's going on on disaster prevention in like more of the consumer, prosumer space? I saw a house for sale over in Malibu, and it was by some actor. And he had installed like fire shutters and like all this different equipment. He was like living off grid and this was like his getaway. and it feels like I saw after the LA fires

like the autonomous water sprinkler that would be bolted to the top of the house. I think a lot of homeowners in Los Angeles at least were like, oh, I want one of those. And they would have clicked the button to buy it if they'd seen an ad that day, but then a year goes by and nothing happens in the next fire season and they think,

oh, maybe not. But it does feel like there's some fertile ground in the consumer space, but is that more challenging than people might think it is in reality? I think you're totally right. Like consumer demand goes in spite. It's a very seasonal, volatile business.

You know, I just saw today watch duty is the number two downloaded app on the app store today. And it probably was not the case a couple weeks ago. So, you know, it's certainly that's the nature of the beast here. In terms of home hardening and things you can do to protect your home, I think that also kind of goes in waves to your point. But to me, the real unlock is going to be when insurance companies create incentives for people to actually install these things around their home. So we're investors in a company called Stand. They help model homes. They use computational fluid dynamics to simulate wildfires moving through the property.

They come up with a list of recommendations for the homeowner of what they should do with shutters and windows and remove certain vegetation. They remodel it. And then they can actually provide discounts on insurance. I think that's going to be the real unlock that drives, you know, at scale consumer behavior. Yeah, it has to be a real time like you're renewing your home insurance and they're like, if you do spend, you know, in California, it could be like, spend $10,000 on this new system. And if you do that, we'll give you a $10,000 reduction this year and, you know, further discounts in the future so that you end up, you know, effectively, you know, saving real money. Yeah, exactly. I think historically insurance companies have not done that, but that's the key to protecting, you know, homes in this kind of new era.

And it's got to happen. You know, the California Fair Plan, which is like the state-backed insurer of last resort, just announced they're going to raise rates 30% this year after the, LA fires. And so, you know, if we don't actually reduce the probability of homes burning, housing and insurance is just going to become unaffordable. How are you thinking about selling to the government, maybe in California or elsewhere? Anderil has this interesting story where they built a firefighting tank. They were trying to sell it to California firefighters, but there was pushback around job displacement, even though it was ideally a new capability that would actually have support staff and not really take anyone's job

because no firefighter can sit in the middle of a blaze like this particular firefighting tank could, but it was still became a political issue and ultimately did not become a real product. Is there movement there? How are companies positioning themselves as additive? When I think about drone review of power lines, there's probably someone that went up there earlier. Cost savings is good. Doing more with less is great, but also there's always that pushback around job displacement. Yeah, I think there's kind of two issues. in play here. First is, like, is there actually job displacement? I think the reality is no. I mean, it's just we are so under-resourced relative to the scale of these disasters. They're happening

three times more frequently with huge severity. You know, Cal Firefire is the largest and best resourced firefighting agency in the world, bar none. Like, that's not going to change. And I think it's really about how do we get leverage out of those investments. I do think, though, you're pointing out a cultural issue, though, and that's something that we've really worked at China Bridge. You know, I think it can be really harmful of like a bunch of guys in Palo Alto sipping lattes, like walk out to the fireline and try to tell people how to do their jobs. You know, there's just this huge disconnect. And so one of the things that we built is this conference called the Red Sky Summit

where we actually get 600 fire chiefs and other emergency managers together every year in San Francisco. And we kind of create like an off-the-record venue for them to talk to people that are building stuff and technology. And it kind of creates this great sharing back and forth where, you know, you can show the value of this technology. you can have these two-way conversations. It sort of changes the tenor. And that's been a real unlock. We've seen a lot of buying behavior come out of that event.

I think things like watch duty that show how impactful technology can be. The firefighters see that. And, you know, I think the tide and the cultural tide is really changing. And so it's an exciting time to be building in this space. Yeah.

Is there any relevance? Like, we talked to some other sector-specific funds or thematic funds. And the classic example is like in CPG, they can be a harder business sometimes, but there's a number of like clear acquirers for mid-scale companies,

like a Unilever or Coca-Cola will take out a lot of these companies at a unicorn valuation. And so it sort of changes the underwriting. It's worked for a lot of funds in that category. Is there a 800-pound gorilla in this category that's maybe not being

disrupted, but maybe can be a partner at some point in time? Or is the thinking like everything is IPO, it needs to be a standalone business or bust, or is anything different financially about these businesses that you see? Yeah, it's good question. I don't look at Wildfire as like a market in and of itself. It's this sort of dynamic that touches these huge markets like energy, insurance, housing, real estate, forestry, you know, government emergency response. And in each one of those categories, there are, you know, really large

companies. There are, you know, contractors in the utility space or providers in all of, you know, all of those markets. So I think there's certainly exit paths. But the economics here are just like immense. You know, the Bloomberg just published a report, disasters cost the U.S. economy a trillion dollars a year. That's like on par with what we pay for interest on the national debt or defense. And so it's like, you know, there are really big public companies that will be built, you know, solving that because that cost falls on these really large deep pocketed institutions and you know we think that there's just just very big businesses to be built yeah is there opportunities for wearables uh for firefighters i was uh once the the the sandy fire started here in l.a i was uh i was showing

uh my son some videos on like wild uh just like wildland firefighters and i was shocked that a lot of them just like weren't wearing gear they were wearing, they'll wear something like a piece of fabric over their face seems like there's probably opportunities there and potentially a decent size market. Yeah, I mean, it's, it's a travesty what we equip our firefighters with and send them out there. I mean, it's like, you know, the, the health impacts of wild and fire smoke are just terrible. I mean, and so, and there's really not a practical way currently to help filter that air for these wild and firefighters. So they're out there, you know, really with no masks, sleeping in smoke.

at a time carrying packs it's 110 120 degrees you know they're working hard with chainsaws and axes I mean it is it's a really dangerous really ruling job and I think you know part of the original thesis for convective was I was actually volunteering with my local fire department up in Mendocino County and you know I just was watching this and I'm like I can't believe we're doing this with you know trucks from the 1970s and you know axes and like that's the state of the art and so there's a huge opportunity there and I think you know it's And you can look at, you know, wild and fire as a market, and it's a certain size, but it's

also a path into all types of field service jobs and all types of worker safety. And so we've looked at a lot of companies there. We haven't made any investments yet, but that's a category we're really interested in. We jump straight into the discussion of the fund, the strategy. Can you take us back a little bit to what you were doing before? Why start this fund when you started it sort of the prehistory of the fund? Yeah. So I was a founder.

I started a company called WePay back in 2008. It was an early FinTech company. And we built that up over about 12 years and sold it to JP Morgan. Where was the headquartered? Overnight Success. Yeah, I wish. It was, yeah, it was headquartered in Palo Alto. Okay.

Yeah, I just remember running into it in Boston, I think in like 2012 or something. That was around the time. I was probably still at all that started in Boston. Okay, that's right. in Boston. That's right. That's right. Yeah. Okay. Got it. Cool. We started in Boston. We were funded by Y Combinator, moved to the West Coast. Oh, that's right. Built out for about 12 years, and then we sold to J.B. Morgan. Yeah. I left J.B. Morgan. And I think one of the things that really suited us as well at

we pay was we were early to, like, the financial technology market. People called it like banking technology at the time. And a lot of the same skepticism that I hear around utilities and government. We heard, you know, we're trying to raise money from Boston VCs in 2008. And, you know, they were wrong. I mean, the fintech market was like the most exciting sector of technology over the next 10 years. And, you know, so as I was leaving JPMorgan, I wanted to work on something that was, you know, a market that was early and that we could be sort of one of a kind, that we could be a market leader in. And that also had an important mission where we were helping people doing good for the world. And this sort of lined up all of those things. My wife and I own a ranch up in Mendocino County, a couple hours north of San Francisco and fire almost burned under the property. and all the dots started to connect and here I am.

Yeah, that's amazing. It's sort of like the VC version of like build something you use yourself, like the YC ethos, make something people want. Well, thank you so much for coming on the show and breaking it down for us. Congratulations. Yeah, I'm really glad you're doing this. Yeah. Thank you.

We need more. Thanks, guys. Love what you're good. Have you. Good. We'll talk to you soon. Cheers, Bill. Goodbye.

Up next, we have the co-CEO of Spotify joining Alex Nordstrom. on a huge fan, calling in from Spotify Investor Day. Welcome to the show. How are you doing? What's going on? Thank you. Hey, John and Jordy. It's good to be here.

Great to have you. Fantastic. We also laid out our four big ideas for the future. And then we also talked a little bit about how we can further monetize Spotify and grow, grow all the sort of financial metrics and goals of the company. I want to send my greetings from Gustav Satterstrom, who was also on your show a while ago. Yeah, yeah, we talked to him in South by Southwest. It was a great conversation.

We're very excited to have you here. Where should we start? I want to jump into... I love big ideas. Yeah, I mean, there's so many different things. Maybe we should start with the reserve ticket access because I saw that organically promoted to me. And it seems so logical.

And I'm fascinated by the rollout, the strategy and also like sort of why did it take so long? Has this been in the chamber for a long time? What has been the plan? What has been the go-to-market with this particular product? Great question. So I've been with Spotify for, I think it's now. almost 16 years.

Yeah. And this is right for one of the most, one of the most lovely improvements as part of our premium that we've done, I guess since the founding, really. So you're right. You know, it's long overdue. It's a great one. And the reason why it's so great,

it's really that it solves a couple of different problems. One is, you know, who hasn't been sitting there in front of a website trying to get tickets for a concert? Like, it's very hard. And if you get it, it's going to cost you a lot, right? And the second thing is, even if you get tickets, it may not be to the artists that you actually listen to and love. Yeah.

Right. So this solves that. So what we're launching is basically we're giving you, we're holding tickets for you for a certain time window, for you to just go and pay and collect with our partners. So it really solves the problem in a unique way because we're matching the tickets and the concerts and the participating artists and tours

with the users on our platform that are actually the true fans of this. Yeah. And we look at it from many standpoints, like not just the number of streams, that you're doing so you can't just grind yourself there. It's also, as I imagine, catalog engagement and so on. Yeah, so it's terrific.

This is a fantastic improvement in Spotify premium. Yeah, I mean, I have a new problem, which would be ticket scalpers setting up, you know, Infinite. Paying the monthly subscription fee for years. Just to try to run algorithms. No, but I think it's absolutely brilliant, solves a problem, you know, even from the artists,

like being in this position where you're trying to make your ticket prices affordable for your fans. but due to market dynamics, no matter where you price it, they'll go way up. And then the only beneficiary in that transaction is the person that's just buying the tickets to resell and everyone else loses. So I think it's... You're totally right. I mean, there's like many things that we do at Spotify, we look at what organically happens

on the platform and what we do. And then when we see that there is some sort of signal or trend that actually just come by we have organic behavior on the platform, then we double down on it. So we've done many events, you know, with artists and groups and bands and so on over the years. And, you know, on a yearly basis, you probably do 150 to 200 events. And the magic really happens when we look at who to invite to those events. And if we can really strike the balance of, you know, getting enough people there that are really

sort of on a very, very high engagement level with that artist, not only, again, not only just listening to the artist, but doing it maybe on a daily basis, having listened to the whole catalog and do it for, you know, at least an hour per day or something like that, it really gives the artist also, like a magical experience of facing, you know, your truest fans. And this is something that uniquely we can do for, for artists. Yeah.

AI is obviously at the top of everyone's mind. The large taste model is the latest technology from Spotify in the AI world. But I feel like you have to have been embedding every song into some sort of machine learning model for probably over a decade. Can you take me through a little bit of the history of machine learning or AI at Spotify? And then what has actually changed? Like, where are you seeing a break in the graph? Like, where are you seeing, okay, we're experiencing some sort of discontinuity in the progress we were making? Yeah. So you're right. It was actually just about a decade ago when Daniel and Gustav and I,

started investing into AI then was called machine learning. Yeah. Right. And it was very basic the Algos then. Like it was almost like, okay, similar to what you do on Amazon, you know, John, uh, listen to this. Um, he's similar to Jordy also listened to this other thing. Therefore he should listen to that too.

So look alike algorithm, if you will. Yeah. Collaborative filtering, probably based on text, not actually looking at the waveform even. Exactly like that. Yeah. And so now many, many years later, having continued to invest in that and just, the data, not just the data, but the learnings we have and the feedback loops we've had over the years. It's been compounding.

And now, you know, you're asking me what changed lately. Well, obviously, what changed is that, you know, we've gone access to, you know, large language models, like general intelligence that we can use to reason over the data that we have. But what it comes down to really is the unique data at scale here, right? So, you know, we log probably, you know, between, I think it's 3 and 4 trillion events that happen per day on Spotify. so we really get billions of signals that are relevant to feed it, to feed the algorithm with. And then the second thing that happened is, it's obviously because we started to sort of, you know, understand English.

Algorithms started to understand English. So we sort of started importing a lot of knowledge from outside, from the outside world, onto Spotify. Yeah. And, and, yeah, I've noticed that the search bar has gotten so much better at detecting lyrics. Like, I used to have to go in Google or search a lyric and then go to Spotify. And now I can just type it right in and I get it. I'm like, this is an amazing experience.

I'm interested in your build versus buy versus fine tune an open source model. What's working, what's interesting. Music is, you know, obviously you're benefiting from transformer architectures from all the open source work. But I imagine that a lot of the tasks that you're doing aren't exactly, okay, just fine tune like a text-based open source model. you might need to go a layer deeper, you might need to partner with someone. How have you been thinking about the way to deploy AI? Yeah, we certainly believe in general intelligence, and we've been riding that cost curve that's going to come down,

collapsed by 1,000 X over the last four or five years or so. So we believe in this industry commonizing more and more. So we're going to buy the best reasoning capabilities out there, and then we're going to use that on top of what we call a large taste model, which we are uniquely able to, to using proprietary data to actually build out, much thanks to the stuff that I was talking to. The other side of the equation here that is important, I think,

is also that we get a lot of feedback and data from artists as well via our Spotify for artist application, which feeds us with data that's also proprietary and unique, which is great. So you ask about build and buy and so on, I think it's a great question. You know, if we see opportunities to actually build something to help bootstrap or add a capability, we will do it.

And I'll draw two examples that are, quite good. I think three years ago we bought Synantic, which really helped us create AI DJ. Okay. And, you know, it really accelerated the build out of AI DJ and now AI DJ is all over the world and we have it in different languages and people are using it at scale. So that was a, that was a great, I think, transaction that we made. Another one that is also, it's more recent actually. It was just before the end of last year. We bought Who Sampled, which provided us not with much a capability, but a unique set of data. So I don't know if you've used song DNA lately.

It's been killing it. I think 50 to 60 million people are using it already. You can listen to a song and then you can check which were the samples in that song. Oh, interesting. And then you can also like follow the threads down to like, okay, what's the original? Yeah, you can listen to the original track and then hear how they sort of flip that into the new one. That's really cool. And you can see who was in there, the studio technicians, the artists, the composers and so on.

And a lot of this we can have done or it would have taken us much longer time without two samples. Yeah. Structurally, how is AI changing the work that Spotify employees are doing? Matthew Prince from Cloudflare was talking about this concept of you have builders and sellers, but just the raw measurement, that's less important as a discipline. And so he's pushing more of his staff to build new things and then go and sell it. Do you have a framework for thinking about how your employees should be using AI in the future? Yeah.

I mean, we, you know, a couple of years ago, I think we all went through about the chat GPT moment. And just before the holidays of last year, we had a similar moment around coding tools. And we all sort of got enamored with it and started adopting it. But at Spotify, the engineering and development, you know, teams have just, you know, done a crazy good job adopting it. So we now have, I think, close to 99% adoption across Spotify. And this goes beyond the engineering team, but also into the marketing team that are using it, not just for design, but also for better gaining insight into what type of compelling stories to tell on top of the story. So we do have very many different use cases. And, you know, people are crazy about just creating prototypes now all around Spotify, just test things in a way, faster way.

So what you get basically is a lot of productivity gains. and I know for a fact, one of my dear colleagues, the chief architect of Spotify, NGN, he was just at Anthropic and he was doing a presentation for their staff. And I hear from Anthropic that we are actually one of the leading developers out there in adopting AI and using it to gain productivity improvements. Yeah. Have you thought about the, I don't know, there is a tradeoff. You might be doing both. but there's a world where you have some sort of engineering pod, and there's an opportunity to have more members of that team pushing code,

shifting to individual contributor roles, but of course they're managing agents, so it's also a managerial role, versus embedding more technically-minded folks across different organizations. So you have more cross-functional teams, a marketing team gets an engineer who can oversee agents. How are you thinking about just spreading,

different AI tool use across different organizations that might not previously have been in a position to build a piece of software. Maybe they're in the market to buy a couple SaaS products for whatever their, whatever their vertical is, but now they have the opportunity to actually build. Well, you're seeing actually happening organically as Spotify is that as, you know, as adoption goes up, it's typically, you know, you're by your own and you're, you know, looking at what's out there, which MCPs to connect to and how that can help. help your work and then you're basically sort of copying some other people's skills around at the company and you're just sort of experiencing how it is to use AI to do your work,

your particular field. But what now is more happening is that we all of our Slack groups and in our communities we see people sharing, sharing, you know, use cases with each other. And the next step really is that for instance, someone, a product developer and an engineer, you know, sits down with a marketer, starts to understand, hey, okay, we, the three of us can actually build something of a, you know, a holistic experience of not just new product and feature, but also tell a compelling story about it, you know, in a much, much more sort of amplified and leveraged way, which I think is fantastic when that happens. Love it.

We got to talk about fan-made covers and remix is the new deal with UMG. Super, super excited about this personally. And, of course, it's been very... You got a song you want to cover? You're going to do that. You're finally going to do the gun of cover you were planning on. Yeah. What's your favorite track right now?

Is it a Drake track? I've been... No, I think I think I was expecting Drake to kind of grow up by this point in his career and maybe evolve a bit more. I feel like I grew up maybe faster than Drake. He's still obviously, you know, an incredible, incredible superstar. But, yeah, John was talking about Ghana. I'm a big Gunna fan. Oh, yeah.

Yeah. But so I'll be making some Gunna covers and remixes. But yeah, talk about this deal. certainly controversial, but this feels like one of those things that people will have one reaction and then they'll have the experience, which I'm assuming will be incredibly magical. And we've had Mikey from Suno on the show, he's a friend of ours. And people fundamentally, they say one thing on the internet, but when they use the products, they love them.

And so I think it's super exciting. So, yeah, talk about this deal. What were the factors that were most important in getting this right so that, you know, fans win, artists win, and everyone involved wins. Yeah, yeah. Certainly, I am certainly very, very pleased with it. I mean, it's a landmark deal, and it's a landmark deal from the vantage point of we're enabling something that is for the first time a legal product for users and fans to actually create these remixes and covers. And what's more is that it's really the first time, you know, in a controlled and licensed medium that artists get to partake in the AI economy, really. So that is like the core of it.

And then you think a little bit about what is that we're doing here. Well, you know, people love, to your point, like people love remixes and covers. And they've always done that. But there hasn't been any scaled way to really sort of tap into this opportunity. And what we're doing right now with our product is that we're unlocking this, this, this, market. So where we think actually in the end it's going to be very additive to both the music industry and ourselves, including artists and songwriters. So it's very cool. We're launching it as a paid out-on, which means that, you know, if you have Spotify premium, you're eligible to actually

buy into this add-on. And when you have the ad-on, you can actually go ahead and create remixes it covers. And what's cool with Spotify is that, you know, we've been, we're very experienced when it comes to free and premium and, you know, how to convert people and, you know, how to convert people and lead people up the ladder. And so what we're going to do is always to give you a certain, you know, limited usage on premium. So you can actually try it out, play with it, create habits around it, and then commit to buying ad on. But the important point here is that you can think about it as, you know, creation is paid for and consumption is included. So basically, you know, the output that you create around the Ghana, the Gana remix that you're going to create, you know, I'll be able to listen and everyone will be able to listen.

Sure. Yeah, is there, so I can imagine, I can imagine a world, you know, maybe six months from now where the number one track globally on Spotify is a fan-made remix. Like, you know, may take more time, but it doesn't feel, doesn't feel, doesn't feel impossible. Is there, is, do you think this could potentially create a new category of actual artists on Spotify? Would the person that creates a remix ever, be able to get, you know, some element of rev share? Or is this, like, entirely going to be more like, you know, more like a live DJ where, you know, you're mixing and mashing and putting things together and maybe you can build up your brand, but you're not on a time. You're not getting royalties or any revenue share. Yeah. Yeah.

I can't speak to the specifics of it, but I can't tell you how I think about it. You know, when I started at Spotify, together with Guston, I, 16 years ago, we had roughly, I think it was 2 million tracks in the catalog, and I've lost count, but I think it's in the order of 200 million tracks now, 15, 16 years later. So the catalog being big and growing is a good thing, and the problem you're talking about, a real opportunity, is for us to do recommendations well.

And that's always been at the heart of Spotify. If you ask someone, why do you love Spotify? Well, most people say, hey, it's because they seem to know me. So we're able to sort of help you discover by way of personalization, help you kind of find your tracks again that you like and so on. So really this is what you're talking to is really a personalization problem. Right. So when this product creates more catalog, our job is to make sure that, you know, the best song gets to the best place. Last question. Talk about the app icon redesign. We loved it.

I thought it was really cool. I loved it. We loved it. But I'm interested in the actual, I mean, I want to know how you processed it internally. Did you ever imagine that a disco ball could get people? People were really talking about it. But my assumption was that, you know, it was the Spotify icon is on my home screen.

And I click it when I want to listen to music. But it jumped out to me. And I feel like that would show up in the metrics of jarring people awake. But I'm interested to know, like, what actually happened? Are you going to be changing the icon randomly every five years? Is it got to be every 20 years? Like, what's the, what is the learning from doing something sort of bold? Right.

So about 10 days ago, we decided to change our, the Spotify app icon or Spotify logo to one that is more of like a glittery disco bar version of the Spotify logo. And, and, you know, to your point, this just sparked a massive information around the internet on basically every major social platform. And, you know, what a lovely and wonderful piece of culture to have a conversation around the change of our logo and icon. So not only users, you know, have been sounding off, but also other big brands. Yeah, opening I made their version. A meme.

Suggested that they would make a version like that. Kid cat, Kit Kat joining on the phone. So, yeah. So when you have, you know, hundreds of millions of people that passionate about culture and art, and Spotify, this is what happens, right? So this sports like a massive conversation that I think is lively and fun. And to balance with you,

the reason why this is happening, having reflected on it a few days later now, it's pretty intense when it happens because there are two sides, right? And then there's also all of this, like, byproduct, you know, the internet coin, the new design term run this called disco-morphism.

Dysm. Disco-morphism. Oh, yeah. I love it. Yeah. And people have been asking for an answer to flat design, Lots of people have been lamenting how boring things have gotten.

You spice it up and then people were, I didn't mean that, which is a very funny way to process it. But sorry, continue. I mean, I just, the reason why this is happening after having sort of thought about it for a few days and discussed it internally, it really is because we are truly at the intersection of the humanities and technology.

And I think we're in a good place when it comes to that. We're at scale. You know, when hundreds or millions of people, potentially even billions are talking about you, then you did something interesting. I love it. I love it. Yeah, a really, really well-executed stunt.

And, yeah, just got everyone talking and reminding. And it's hard to break through with something like a 20-year anniversary, with a milestone, like, but it's important to do something like that. So congratulations. Yeah, thank you. We did it mostly for ourselves in the beginning, but now it turns out that, you know, music should be fun. Building a company around music should be fun.

Like, all of this, like, it's, I know people have their think pieces and their deep dive, on contrast ratios and all sorts of things. But like at the end of the day, it's fun for a company like Spotify to do something fun with an app icon for a few days. I love it. Also, I put back on those people.

Me too. I thought it looked exactly like a disco ball would look if you were in a dark room. That's right. Listening to music and you look up. Yeah. So I thought it was pure to the disco ball brand. I agree.

I agree. That's good. Thank you. Keep it on there. Anyway, thank you so much for coming on the show. Great to hang. Thanks.

Congratulations. the progress. Congrats to the team on all the new miles since. We will talk to you soon. Have a great rest of you done. Goodbye. And if you haven't been following, the stock is up 13% today. Spotify is a $103 billion company. Not too shabby. Our next guest

Jordan Schneider from China Talk. You know him. You love him. He's back on the show for the third, fourth, fifth, sixth time. Who knows how many times it's been? We lost count, but it's been too long and we're happy to have you here. How are you doing? I'm good. I got be honest, was also pretty confused by the Spotify. You were confused by it.

I thought why a big $100 billion company can't have fun in this country? Yeah. What's wrong? I'm just saying, it took me longer to click it. I thought I had like some weird iOS update. I just think, oh yeah, sure, sure, sure. I just think that like the fact that you processed it, even if it slowed you down,

it put you in the, you know, fast thinking, slow thinking mode, that builds the brand. You're not addicted to your phone enough. You're not addicted to your phone enough. Are they still rocking the, are they still rocking? It's still a disco ball. I like it. I think they should just keep this thing. It stands out so much from every other app on my phone right now.

I love it. Anyway, how are you doing? Maybe let's start with the post-mortem on last week. How is the China Summit? And then we can just go into everything else. So boring, man. I knew. I knew you were going to say that.

I was like, we're going to talk about everything but China because it was so boring. And they let me down. I mean, look, I think there is. is a clear period of stalemate, which we've gotten into, where the U.S. has some leverage over China, which has been something that really since, like, 2017, Trump won Obama, Trump won Biden. And then the start of Trump truth thought that they could kind of keep turning the temperature up and squeezing on tariffs and export controls and investment restrictions. and then all of a sudden, China, April 2025,

punches back with rare earths. And all of a sudden, um, uh, they realize, uh, you know, they run the experiment and it works.

That actually the PRC has real leverage over the US and is able to kind of like meaningfully constrain what, um, American presidents want to do when it comes to, um, more course of actions on China's, uh, you know,

technological and economic expansions. So both sides have kind of realized that. And what we got is a, you know, what was my headline? Prestige on the cheap where the U.S. where, you know, you have the whole cabinet flying over. You have every fancy CEO flying over. Just being awed and wowed by, you know, their 36-hour vacation to Beijing. Yeah, like tourism.

Yeah. And look, there's an interesting debate to be had about whether the, like, giving them the face and giving them the atmospherics of that is actually, like, kind of, and some level costless. And maybe this, like, makes them feel less aggrieved, less likely to start World War III. I mean, this is the argument with Putin, right? It's just like, we kept disrespecting him. And then he decided, no, like, I'm going to show you just how tough I am. So I'm not kind of on. face opposed to it, but, you know, it was, it was kind of just more or nothing.

Yeah, I mean, you mentioned every fancy American CEO was there, but were you surprised or were you expecting, uh, or did it break your expectations that, uh, no Sam, no Dario, no Demis, no Sundar, uh, a sort of lack of AI representation. Yes, you have Elon and yes, you have Jensen, uh, very important figures in the AI American AI buildout. But no, you know, true lab leaders from my, you know, rough estimate if I defined it a certain way. And it felt like, okay, maybe this discussion should be about AI. And it's, and it's, they're, they're not even bringing the people to let them get a word in edgewise. Not even a single line of, of conversation will happen.

Was that as expected or how do you process that? Yeah, I mean, it's interesting because like, um, this is phrased that. This is framed as like a trade delegation. Sure. Right. And so almost all of those companies like meta excluded. I mean, I guess they had a person there. But Zuck wasn't there. Yeah. But but that person's like a Trump one person. It's kind of just like keeping with the vibes. And I guess meta builds classes, little's classes in China. And they acquire AI agent companies. Manish. They, they're a buyer of Chinese companies or formerly Chinese companies that have moved to Singapore. Which they're now not allowed to do. So yeah, they had some lobbying to do, I guess. But like, like, the, you know, the asks, I think, are really inchoate. Look, the U.S. government, we just had news today that Trump 86A executive order because he doesn't know what he wants to do about this sort of thing about AI safety.

And if, like, you can't even figure out what you want from a domestic regulatory perspective, like, are you really ready to, like, put all the cards on the table and have this big, you know, grand summit with the Chinese to make sure that bio weapons don't kill us all in 2029? I don't think so. I mean, it'll happen at some point, but it's just a little premature. I think maybe not from the technological perspective, but from a sort of policy perspective that you to expect much of a serious discussion. Yeah. Are you, Sebastian Malibai had an op-ed where he was sort of gesturing towards like the possibility of more collaborative. on AI between America and China, you have your hands in your face or your face in your hands.

So I assume you are skeptical that that will take place anytime soon. But I mean, also the AI 2027 folks, very good at forecasting, have predicted a lot of what's happened. Say China wakes up in 2026. Yeah. I mean, it's not impossible. I think the sort of, look, if the American political system has not yet woken up, to an understanding that you need a different regulatory strategy in order to keep humanity safe.

I think it is unrealistic to expect a strategic adversary who is, you know, six, 12, 18 months behind where you are on the sort of technology development trajectory to come to the same realization. Now, you know, it'll happen at some point. I think this stuff is really powerful and the sort of logic that America doesn't want, you know, bio-weapons to be developed by al-Qaeda or ISIS or Hezbollah just in the same way that China wouldn't want it to be done by, you know, the Falun Gong or Tibetan separatists or, you know, any group that they see as like a non-state. actor that would want to kind of take down the party applies, right? But China, I think, is

deeply, the Chinese leadership is deeply hardware pilled. I think they're deeply skeptical of these sorts of arguments on face because they're kind of sci-fi. And the sort of journey, the analogy or the journey that the

U.S. and Soviet Union went on over the course of the Cold War to start to have real kind of discussions about strategic stability and arms control happened after you had the Berlin crisis and after you had the Cuban missile crisis. So like, look, anthropic putting out a paper saying Claude Mythos is really scary is one thing, but it is different at a fundamental level than like completely shaking a society and like having the entire world realize that you were on the verge of apocalypse. So yeah. I hope we don't need that. But,

But I am not particularly optimistic that much will come of this. What do you? Before it really accelerates. Yeah. How much have you read into the theories that, you know, maybe China would fund data center, you know, pushback in the United States? I don't know that they would need to. But if they were, if they felt that was important enough, it would signal something about

how they think about the technology. I think this is cope by the labs. look like yeah and the Russians won the election for Trump okay I mean you know it is

I think Ben Thompson had the right take on this a few days ago this can be solved with money like if you really put it you know put the choice to a town saying okay we will pay

everyone within a 20 mile radius $10,000 a year to like have this ugly thing. People will start frantically trying to buy property. Yeah, wanting to live next door. Or like, look, make the data centers beautiful. Build a park on top of them. Like, give me some playgrounds.

That is the one that I'm the most skeptical of in the American society. I feel like they will be, companies will be paying dividends and mailing checks far beyond, like long before anything looks beautiful in this country. We build massive, like monolithic structures all the time. It's a lot of cement over here. I don't know. That's sad.

Turn the GPU racks into free slots. Every time I see one of these like beautiful industrial structures, it's always in the Nordics. It's never in America. Sometimes it's in China. They build a train through a mountain or something. So you have the data center. You got all the all the different racks of GPUs and you just put a slot machine attached. Okay.

Maybe that's it. Maybe that's it. And you get like three or four. I wonder we, I wonder what's that. You know those cell phone towers that look like. trees and I don't think they look any better really but I guess they do sort of blend in I wonder what the like economic mechanism was for going that direction because when I'm driving in LA I see normal cell phone towers and I see tree like fake trees cell phone towers and there had to be a reason like

it has extra cost to make it look like a tree like is that just a choice is this like a nonprofit that's funding this like who's who's lobbying for this is there a law I don't know we got every time I drive can we please get the TBPS. segment. Yeah, we need to dig into this. The tree phone pole. Come for the questions, not the answers. I'm just riffing about things

I don't know and would like to know. When I drive by and they get me, I just start slapping me. I'm like, you got me big telecom. You got me. I thought it was a tree. From the distance. You got me. You got me. Yeah. Every time. Well, the bad

ones are like when they're five times as tall as all the other trees around. Just like And like the branches only start like four fifths of the way. Yeah. Yeah, yeah, yeah. It's very, it's very half-hearted in its attempt at disguising itself. Ridiculous.

On other China issues, did you see there are two sort of dueling predictions? Maybe I'm making them dueling predictions. Shemoth Polyopatia says Taiwan, not going to be a factor geopolitically in 18 months. Dan Wong has talked about how. technologists over represent the chip story in the Taiwan story. And in fact, the discussion over Taiwan goes back much further and is grounded in more of like capitalist versus communist decision making and alliances. Where do you stand on Taiwan today versus in two years? I have to acknowledge Chimov's existence. I refuse to do that. I think that Taiwan is a place

that has mattered for a while and will continue to matter for a very long time to come. I mean, first, only on the chips thing, the idea, like, I don't know, ass semi-analysis, like the percentage of chips that are going to be manufactured in Taiwan,

18 months from now is still going to be like 85% or 90%. So, yeah, it used to, you know, it was 100% for a window. I am glad Intel isn't, a flaming pile of crap anymore. And it's like nice to see Samsung also starting to get their act together. But if if really that's the only thing you care about, no, you will still have a, you know,

global economic catastrophe if the lights go off in Taiwan in 2028. Now, why should you care about Taiwan besides the chips? I mean, it's a, it's a democracy. people have, you know, deserve to have self-determination. We can set principles aside if we really have to do that. But look, I think from a sort of geostrategic perspectives, there's also this kind of concept of the first island chain. I think it makes the, you know, broader Pacific architecture

that America has built over the course of the past 75 years in Asia a lot more tenuous. if all of a sudden, you know, the kind of anchor to both Southeast Asia as well as North Asia becomes, you know, a pale and base. So, yeah, they're wrong. So, so many reasons that Taiwan will remain important into the distant future, regardless of what happens with Intel and, and TSM, Arizona, et cetera. I agree with you on that. What do you think the next catalyst might be in the rare earth story because we're starting to see rumblings about funding for American indigenous supply chains there. Eventually, that becomes at least a stocking horse, if not a poker chip on the table, on the bargaining table. But where are we on the rare earth stalemate that became an important

bargaining chip somewhat recently, as you put it in the intro? I mean, it's a really interesting question. I've read reports saying that even five years from now, the leverage is going to still exist. And I think there's a sort of broader question of like

this is the second largest country in the world and largest economy in the world and it's going to stay that way for a really long time. And the sort of ambition to fully decouple such that China does not have

leverage over the U.S. economy and can kind of squeeze it coercively seems to me to be a very tricky thing. Now, you can spend lots of money to sort of make that less acute or sort of turn it down over time or protect the particular things if you're worried about, you know, specialized inputs into fighter jets or, you know, something that would be really catastrophic, like insulin getting cut off or something. But, it is um you know this is like a this is like a generational challenge of shoring this up and b there's also an offensive side right of um you know escalation dominance uh in deterring an adversary from from squeezing on stuff like this also requires you to be able to sort of credibly sudden signals that you can take pain and

cause pain in a way that would require the um you know the other party to back down and not necessarily use these tools. So we're at this awkward equilibrium. I think there's a lot of hard thinking that still needs to be done to really conceptualize, like what's the right way to spend money and the right way to think about this relationship? We actually just ran an essay contest on China talk

about economic security. We're going to be, I have, at 4 p.m., we're doing a megapod with three of the winners. So maybe I'll have a better answer for you after that. But it's a hard one. Does Xi day trade prolifically? Who's the best day trader in the global? You know, here's the thing.

I got a piece coming out about comparing American and Chinese corruption. And the difference is that in China, they still feel like they have to hide it. Hmm. Okay. Well, we'll be an interesting piece. Shifting gears,

shifting gears, both literally and figuratively. Cars, have you driven any Chinese vehicles? Have you been outside in the B-YD? Are you planning? Do a car reviews on China Talk.

I would love to see one. Have you been in a Zika? I keep seeing these. They look amazing. Zikers? I watch a lot of YouTube. I watch a lot of YouTube and Billy-Billy reviews.

Okay. I have been in a B-Y-D. in Norway of all places. They had it like in the main like park they had a giant setup. You know, it's really impressive. Yeah. I, you should

get some American car manufacturers on Yall at them. It's pretty embarrassing. You know, one of the more interesting developments, I don't know if you guys have been tracking this. The Waymo using a Zeker body. Yeah. Yeah, crazy. And I would have thought there were important

restrictions because if Zekers not here, BYD is not here. You would think that the supply chain would be restricted, but they must have found a way around. So the trick is that it's there, it's the chassis and the battery and literally nothing else. Yeah. So they are saving

money on that, but like the rules right now are just on all of the sort of like electronics and connected anything. So Waymo is filling up the entire car with stuff that is not interesting.

Yeah, well, that's probably, like, more reassuring that, uh, Siegian Peng won't be teleoperating. You'll have a, a Waymo employee's beaming in if you see a traffic cone out of what, uh, what do you, how much attention do you pay to their, uh, like humanoid antics? Like, I feel like they're just leaking out videos of just this, like, all this silly stuff to kind of just get us a little bit comfortable with it. But if you actually go there on the ground, it's like droid army, you know, they've got like, 100,000 humanoids marching and, you know, they've got like 100,000 humanoid's marching and in unison and then they just put out the video of it like dancing to Michael Jackson like collapsing and getting dragged off stage. You know, it's interesting because there isn't a market yet, right?

Like these are not, these are toys and these are like things you sell to universities for research. But at some point, there will be. And then there's going to be a really interesting challenge of like whether or not, I think there's like some level of consensus now that the Western makers have like smarter software. But if you can like, you know, it's one thing to fast follow the models themselves. But like if you can only, if you can apply them like at a hundred X scale, right? Then yeah, it could be really dramatic. I mean, you know, I don't, I'm not doing like the episode, you know, Star Wars episode one like

droid army. Like, well, well, that might take a, that may take a few more cycles, but just from a, can you imagine, can you imagine a Chinese humanoid company trying to distill Tesla optimists after they have a fantastic, uh, data breakthrough? And they're just having all the optimist work in cubes, like trying to farm the data out of it. Like they just, oh, like, they just feel like, is it's such a, it's such a bad guy. Yeah. Because you have to physically distill the data for, so you buy, you buy a million Tesla Optimus robots and lock them in a warehouse. house so they can move boxes for you so then you can distill it into your own robots or something. This is a company.

This is an R.L environment. Yes. I love it. I should start this. In China? Oh, no. I mean, they're just like a reseller. In the U.S.

Yeah, yeah. You need a hair dryer to remove the Optimus sticker and slap on some other sticker. That's where the money is being made these days. But you've got to hide that corruption. And it's really great that we have a software. advantage and they have a hardware advantage on this. It's really bullish for us. Yeah, because software is like

they would never be able to copy like software off of a hard drive and put it on their hardware. Well, and that's the thing is like this is the difference with AI, right? Is at least America has way more chips and way more compute as long as Taiwan still exists. But that will not be the case

for the like, you know, humanoid embodied AI takeoff is like the thing. The thing you need to actually use the fancy model is almost certainly going to be manufactured in China and manufactured at the scale that could be like, you know, multiple orders of magnitude bigger than in the West. Now, this may change, like, once this becomes economic, right? So America can, I mean, like, you look at space.

Like, like, we have multiple companies that land rockets, very capital intensive. It's an industrial process. you would assume that China would win that, but they are, but we have a lead in in master orbit still. And so it's not impossible, but we do tend to let our leads languish like we have in the car industry seemingly. And it'll be interesting because there'll be this lag where China, like, because they already have all these humanoid companies that like have the ability to scale, we'll scale faster once the kind of like economic utility of these things turns on. Yeah, definitely. If you believe in AI progress, do you have to believe in a Taiwan invasion? Because assuming, assuming, you know, we keep making progress or we have accelerating progress,

doesn't that just increase the prize for taking Taiwan? Yeah, but it might increase the defensive capabilities. Sure. Yeah, and I think there's, there's like plenty of other things you can do to be obnoxious. And there's so much, there's, look, this is, this is why Chimoth is wrong about everything. thing is because it's not all about technology. Like there are other risks and incentives and, like, institutional dynamics and historical dynamics at play. And there are a whole lot of downsides to starting something that you don't know how, like, you don't know how it's going to end, which is a lesson that

she has now got to relearn from Putin over the past five years. So what, last thing we touch on it briefly, and then I know we're over time. What happens with Manus? What's your prediction? Are they going to buy the company back from, from Meta and just head home? Is there any precedent for something like this? I don't really understand.

I mean, like, all of the employees, like, do they have to give the tech back? They weren't really buying the tech. They were buying the, it was like an aqua hire. Everyone's in Singapore, except for the two founders. So like maybe the founders, just get screwed out of all this money and, you know, the employees continue on their merry way in Singapore. I think it's a, it's a messy one and, I don't know, like META eats a loss.

Yeah. I hope Bill Gurley is. Before you go, we have an answer to the question of telephone pole camouflage. Tyler, do you want to give us a little update on this? Can we, can we do it? Yeah, let's cut to Tyler. Yeah, telephone pole camouflage basically began after the 1996 Telecommunications Act. So it basically, like, restricted the ability of local communities to regulate, like, the actual placement of the telephone pole. So a city can't say you can't put a telephone pole there. You can't put a cell phone tower there.

But they respond. But they basically made it so, oh, wait. They made it so the local governments would say you have to camouflage it, right? So now we see there's all different forms of these. There's trees. There's cacti. There's, like, church stuff. steeples.

Yeah, yeah. Yeah, big of me. A lot of chipmunks run up and down those poles too, right? And camouflage can add over 100,000 to power construction prices, which is still cheaper than losing the site. Tree towers can cost up to double a big. Hey, two can play this game. Two can play this game. You have a soundboard too.

I got my buttons. We have a guess with buttons. Uh-oh. Let's see. Can he get it to work? Uh-oh. Oh, no. Oh, no.

another one. That's a narrative violation. Will it work? Let's find out. Your buttons aren't working. Anyway. But bring them next time. Bring him next time.

It's been too long. We'll talk to you soon, Jordan. Have a great rest of you. Hey. There we're good. There we go. Hey. Well done.

Thank you so much for taking the time. Have a great rest of your day. We'll talk to you soon. We went over time. So we will bring in our next guest immediately. we have Christina Lee Storm from Secret Level. Welcome to the show. Sorry.

What's happening? What's happening? Hey, how's it going? We're having a little too much fun with our soundboard. We're having fun with a regular. I love it. It's great. Plains sound cues, all sorts of stuff.

But since it is your first time on the show, please introduce yourself a little bit. Hi, I'm Christina Lee Storm. I am head of studio over at Secret Level, which is an AI Native studio. And I also am co-founder over at Playbook, PLBK. I identify myself as a producer, like an independent film producer. Yeah. How are you thinking about the blurry line of how AI works its way into productions these days? Yeah.

You have Toy Story with CGI. You also have, you know, a little set extension and maybe even a little CGI creeps into a Nolan movie every once in a while. But AI is very different. People are thinking maybe it'll generate the whole movie. Maybe it'll just sort of, you know, make a green screen a little bit charmed. How are you thinking about the opportunities and the trade lines? Yeah, I mean, it's interesting because we've had technology in the entertainment industry for a while. I was a consulting producer on a film called Jurassic Punk, which was about the birth of computer graphics.

It was about a gentleman who was from Canada. His name was Spaz, Steve Williams, and he actually created the first walk cycle, X-Rex for Jurassic Park. And he was a total rebel. and in the documentary, we talk about how he just felt like, you know, we could do this with computer graphics. At the time, Jurassic Park was like, hey, we're going to do it animatronics. We're going to do old school. We'll do it onset.

And there was an ability to actually now, like, wait, hold on a second, we could create this. And so when Spielberg and Kathleen Kennedy saw the first walk cycle as he was playing it on his computer screen, you know, just sort of, He knew when they were going to walk by. It changed everything, and that was the birth of computer graphics. So we know that technology has always been a part of that story. And so I think, you know, it is quite a lot of people like to use the headlines like disruptive, but I think it's just an ongoing process of how things should sort of evolve. And me being my background's traditional production producer,

have been an independent producer for a while. I think it's just, it's part of the process. And I think before, I think a lot of producers would just offline, you know, any kind of technology or any specialty to different departments or groups. And today I think anyone who's going to really survive and thrive into the new world order of this, you know, everything's sort of shifting and changing.

We have to actually lean in. And there's this interesting like technology, storytelling, you know, convergence, entertainment, that is exciting. And I think, you know, that's, yeah. On the topic of Jurassic Park,

grade this, grade this prediction. Jurassic Park, massive success. The franchise is grossed. I think billions, maybe over a billion dollars. It's a fantastic financial success. But interestingly, Jurassic Park, of course, is owned by Universal. But dinosaurs are,

are not particular intellectual property. It's not like Superman. The T-Rex is not something that a studio can own. Oddly, no other studio has created like the Superman to Spider-Man. There's not the Marvel universe to the DC universe. I would have expected a reaction series to Jurassic Park in that IP library at some point,

never really developed, but in the age of AI, where it's increasingly easy to generate images, of dinosaurs, and you don't have any intellectual property concerns because you're not recreating a particular actor. I predict that there will be a massive surge in dinosaur-themed movies. What do you think? The Dino Prize.

The Dino Prize. Is there anything here? Am I thinking about it correctly? I think that you're on the right track in terms of like dinosaurs are not, you know, there's not a particular IP, but here's the thing. And this is sort of where it does fall back to traditional methods. It's like the storytelling is everything. Like you could have, there's a lot, there's a lot of different ways, you know, that you can tell and share stories.

But it's really what is the specific, you know, what are the specific things with the character? What's happening? What's the world? And so, yeah, someone could come up with a dinosaur type movie. But what is it? Why is that special? Why is that undeniable for someone to say, yes, I want to watch that. And I want to engage in that.

So I think the concept of that is good. I think, you know, potentially half-baked, but we'll get it. Well, that's the difference between really great, like, no matter what the technology is, you have to still be a really good storyteller. Yeah. Please.

Article in the Wall Street Journal this morning about a new film called Hellgrind that's, I guess, premiering it can. They're saying that it costs half a million dollars to make, and around 400,000 of that was compute. Yeah. I'm sure there were, you know, with all these things, there ends up being costs that aren't kind of captured on maybe a napkin. Sort of a deep seek moment.

Yes. But is this the beginning of, like, do you expect hundreds of these over the next year? I imagine you're hearing and seeing a lot that are in the works and working on some yourself. Yeah. Yeah. So, I mean, I think there are, you know, can. I actually didn't go this year. I usually go every year.

I knew that there was going to be a lot of announcements about different projects and things. And at secret level, you know, we actually will have an announcement next week. I was like, should I come on the show today? Because next week there's going to be, you know. I'm happy to come back. But at the end of the day, I think, you know,

it's, let's just be real. Let me just be real. There's a lot of things that are being pioneered. Like what are the costs? What's happening here? How do we align with even like guild related things that are issues? You know, how can we, it's not just like, let me just get this out. You know, I think there's something even bigger to that degree.

You know, I think people, a lot of people could say, yeah, I can make a movie. But I think it's really, again, I'm going to fall back on story. I'm going to fall back on what is the process in which that's going to happen. Like at secret level, we do, we have our own proprietary workflow pipeline. that really allows us to scale. And I think those costs, when those get flagged, it's like, yeah, what's the total costs in it? There are a lot of costs.

And so I don't think, I think it's really, I think when people talk about like the budget and they're just focused on the budget, I think they've missed the mark on the bigger. So what is your, maybe it's too early to say, but what do you think is going to be the winning formula? Obviously, it's still an experimental, time, but you said story matters a lot.

Obviously, technology matters a lot, what models you're using, but where are you thinking of taking traditional filmmaking approaches versus like reinventing your approach? Yeah, I think there's, okay, there's a couple things here. A great question,

already. I think that there will, you know, we, there was a time where, like, independent film was like on the rise. It was awesome. We saw really great filmmakers come out of that. Like, I, you know, going to Sundance and whatnot. And I think that that's really important to feed and bring about, like, creativity,

really great story. So I do believe that with the tools, we have more of an opportunity for independence to sort of bring that to the forefront. But, again, you know, story, it's about the story. Like, is it going to be a really great story? I think the other piece is will we see this? I kind of share with this because I've been as former student, surviving studio executive and also a producer. And I think that what's neat is, you know, is the chasm going to widen?

Like, how do we sort of bring that? Do we want to bring the chasm closer together? So it's not just traditional, you know, studio fair. Or do we want to, like, really see these independent voices come out? And we can see those play out. And I think as time tells and how people will refine their storytelling abilities, I think that's really important. I think there's also, to be honest, there's a way in which filmmakers who use AI tools are using it at the best abilities. Is it almost a slight variation than maybe a traditional approach from, let's just say like a studio pipeline type film?

I think, and that reminds me of like, you know, when George Lucas came out, like, you know, he was breaking new ground in technology. He was like, this doesn't exist. So how do we create something that doesn't exist? And I think we have to allow for that creativity to birth. Totally. Totally. I want to take a question from the chat. What is your favorite movie?

Oh, gosh. I have a lot. Or maybe something just with a great story that you think is unique. Inception. That's a great movie. Have you seen that? I have. Yeah.

There we go. I like to say, and I'm going to embarrass him, our founder, Jason Zada from Secret Level, I call him like the, he's like the blossoming Chris Nolan. And he's just really creative. The way he approaches story. Does he use a phone? Christopher Nolan famously no phone. It's a no phone guy.

This week, he did an interview with, he doesn't, no email either, printed out emails if somebody needs to email him. No phone also doesn't like maps because they reorient you. They don't always face north and he doesn't consider that a map. Very interesting lifestyle. Yeah. Anyway. I was inception, I would say like, let's go really old school.

It's a wonderful life. Ooh, yeah. And then if I get my like, um, like just real old school. I love like great character-based when Harry met Sally. I'm all over the place. Yeah. I'm all over the place.

I like being that way so people can't say, oh, like sci-fi or she, you know. Sure, sure, sure, sure. Godfather. I saw when Harry Met Sally had an outdoor movie theater at one of the screenings. You buy tickets to seeing an old movie outside with a bunch of people. Tons of fun. Last question from the chat. What is your single favorite piece of full?

fully AI generated content. It could be like 30 seconds long, a minute long. I can't really expect it. Anything else. I think for us it's like Harry Potter, Belenziaga, which funny enough was like a year and a half ago maybe at this point. So if you haven't seen it, yes, you know, there's a secret level, the heist.

Okay. Watch the heist. When Jason shared his first 30 seconds. I was like, okay. Okay. We got something. We're approaching some really interesting things. So you can see a lot of things at secret level.

Yeah, I love it. At CEO. Amazing. Well, thank you so much for taking the time. Really great to meet you. It's great to meet you. Make sure to share your announcement next week with us. Yeah, I will.

Cover it on the show. Can't wait. Have a great rest of your day. Cheers. Talk to you, great. Go bye. Bye. Up next, our last guest, Eric, from Modal Labs,

with some big. It's been a minute. It's been a minute. I'm excited to catch up. How you been? Good. You been busy? What'd you do? Tell us what happened. We just announced a C round today, which is very exciting. How much?

How much? How much? 4.65 post value. Wow. Racing $355 million. So general catalyst led it together with Red Point. Fantastic. What was the specific catalyst that, to this round.

There's been a lot of stuff that's been going on. I think one particular exciting moment in the last 12 months, or really the last six months has been, we now have a product called Sandboxes that's just growing insanely fast, almost 2X every month for the last six months. So sandboxes, if you don't know, basically the idea is like you can take typically LM generated code

and execute it in a safe environment. So it powers a lot of reinforcement learning, powers a lot of vibe coding apps, a lot of background agents. But yeah, I mean, in general, we've seen tremendous growth also with inference. Models has always been kind of, we started a company five years ago

with the idea of building pretty general purpose infrastructure. We felt that a lot of infrastructure wasn't really built for AI. And so when you look at all these companies out there building sort of AI applications, they all need different things. Some of them need sandboxes, inference, training, bath jobs, like all kinds of stuff.

And our goal is to provide all of that and really kind of build a new sort of almost like a new cloud in a way that supports all these types of very cool applications. Very cool. I feel like it's been almost a year since you were on, which is like, you know, 15 years, 15 years. It's back in October.

October. Well, there we go. It feels like a year ago, even though it's maybe less. Yeah, would have been the key kind of inflection points since then. Sandboxes sounds like one. But I imagine a lot of this is the spaces. is moving so quickly, if you get a signal from two or three customers, hey, we have this problem, can you build a solution? And then you can just see tremendous growth in like a very short period

of time. And so in some ways, like you have an existing portfolio products that are all, you know, growing, but are you trying to constantly be making, you know, new bets based on customer needs? Or is it, is that maybe not even the approach? I think one of the benefits of building infrastructure is like you can sort of you know look at customers of course and see what they're doing but but I think with infrastructure you can also sort of argue a little bit more from like first principles like what are the building blocks that people are going to need in terms of compute so sandboxes was actually something we launched three years ago and it really started taken off like nuts in in the summer last year and similarly I think with with you know in France

is sort of similar we launched it almost four years ago working on some other really cool stuff around training and some other products. And I think one of the benefits of infrastructure is you can have a little bit more sort of a first principle like, you know, let's build the right building blocks and then let our customers sort of figure out what to use them for. How do you think about planning? Like planning, planning, planning demand. Add a zero to last year.

Add two zeros. Yeah, but yeah, it just feels like the best, you know, the best, this is the hardest like demand planning challenge that really any set of businesses have ever faced in history. Yeah. It's rough. Like, I mean, for us, it's like, we basically look at like the last couple of months, figure out, you know, we're growing 30, 40% every month. You just, you know, take, you know, take the power of three. That's how much you're going to need in three months. That's how many GPUs to go out and get those GPUs. You can typically get GPUs with like about three years of, sorry, three months in advance.

Sure. But yeah, that's a big part of how we think about the business today. It's like we need to get the GPUs now that we're going to need in three to six months, which is a lot. Yeah. Yeah. Yeah, in some ways it's like, you know, not too dissimilar to the challenges that, you know, consumer package goods founders facing your growing super quickly. But if you want to stay on that growth curve, it means you need to be committing to things, you know, now and committing capital. But what's exciting to you?

Well, luckily, we have capital now. Yeah. Yeah. Well, what's exciting to you across the, like, semiconductor ecosystem? There's a whole bunch of ASIC startups that have been on the show, Cerebrus IPO'd. Every hyperscaler is working on different chips at this point. What's most interesting? What's underdiscust? What's on your roadmap or what have you already sort of sunk your teeth into?

Yeah, I mean, there's some, like, really cool alternative accelerators. I'm quite bullish on TPUs, AMD. trinium, like all of these things. Yeah. We see zero demand from our customers for any of those things, to be clear. Because only the really big labs, Anthropa, can actually go and figure out how to run it. Is that the issue? Yeah, I think the cost today of rewriting your software to run on those stacks is just, like, very high.

Sure. So while I remain like very bullish on this sort of, you know, two, three of horizon, you know, I do also want to like temperate expectation a little bit. Like this is sort of has a fixed cost to rewriting for that chip stack. And if you're not doing billions a month in revenue, it's hard to amortize that cost. That's exactly right. It's just not worth it unless you're operating at a very large scale. But I think that cost is going to go down over time.

We're going to have software that basically lets you take existing Kuda compatible stuff and run in another alternative accelerator. So I think it would be good for everyone to have a little bit more competition in a space, but we also love Nvidia and that's what our customers want today. That's great. Do you have a view or any opinions or predictions about the compute futures market that's been talked about any, I've seen like these price charts of like B200s going up and down. Everyone is trying to read the tea leaves, understand, you know, where we are in the various

AI cycles based on it. But is that something that's relevant or important at all? Do you do you look at that data? Do you have your own internal data set that's more relevant to you? We look at it a lot. I mean, also like, I feel like we're very plugged into the market. We talk to NeoClauss all the time. We get capacity all over the place.

So we have like a very good like pulse. of the market. I think the market is going to remain quite tight. I think fundamentally, also, like, that's a big part of what we do is, like, we offer, you know, that as a product. Like, don't think about capacity come to us instead. Yeah. And so that becomes now our problem is, like, managing that capacity for thousands of companies at the same time. Like, we built a multi-tend product that sort of aggregates all that demand. So if you need a thousand GPUs, you can come to us and we'll give you to that, give you those GPUs, like, often within minutes, because we have, like, a very big pool we can sort of tap from. Yeah. But, yeah, like, I, you know,

I think GPUs are going to be tight. We look at the prices. They keep going up. At some point, obviously, I think it's going to normalize like most markets do, but it might remain tied for the next year or two. When I think about the big applications of a big pool of compute, I think, training and inference of LLMs, coding models, agentic workflows, I think image, video, audio generation. What's next?

What do you think the next big driver of demand is? Is it world models? Do those fit in? Are those structurally different? Is there something else that you're tracking where you're seeing customers come to you with sort of like a different product, but it fits in the same shape

so you can work with them as a business partner? Yeah, we have a very wide range of customers. So we have everything from Suno, which generates using AI, cognition is training, coding models using reinforcement learning, Ramp uses us for background agents. We have a lot of vibe coding platforms

like lovable. We also have, you know, drug discovery companies, like Chai using us to simulate, you know, molecular dynamics and weather forecasting companies, robotics. So we have, you know, very general, you know, look across like a lot of different verticals. Obviously, like the big application in the last couple of years has been LM inference, and that keeps growing a lot. But we've also seen some really cool applications with diffusion models. In terms of what I look forward to, like I think that probably personally the coolest thing I kind of expect to happen in the next couple of years is,

speech to speech, like imagine just like talking to a computer in order to figure that out, we need to get the latency down, you know, for all the three components of speech to speech to speech, you know, doing the LM and the, you know, text to speech and stuff like that. So that's something very cool. But I also really cool about, I think it's incredibly cool if we can, I don't know, cure cancer or something like that. Yeah. Yeah, it's interesting because I'm with you on that timeline, speech to speech being, you know,

somewhat impressive, but you're often not actually hitting a real reasoning model. There's so much speed up. You know, we could be, we probably need to be 100x faster, a thousand X faster on the response time to really have a breakout moment. And then you watch Google I.O. this week, and you see with Omni a glimpse of, okay, it's more like a FaceTime call with the AI, and it's generating a video in real time. And you know how long it takes to crank on video models to get an 8. second clip. It's minutes and minutes. And they're still have airs and stuff. And we're still not even at

the super the superhuman element. So lots to do, lots of servers to rack, lots of GPUs to set on fire, I'm sure. Yeah. And what? Any, any plans to actually, you know, go full stack, get your own, you know, land, power powered shells, et cetera. Is that like not the highest and best use of your guys is talents. We think of our values, like adding a big software layer on top of the underlying computer, on the underlying compute layers. We think of ourselves as almost like a cloud, like one layer up from the existing clouds. The existing clouds are very good at running computers in the cloud and offering that through

an API. We would love to keep tapping that as much as we can. If you can't get the capacity we need, we might have to build it ourselves. Ultimately, it's like, you know, it's a kind of an economics question or, you know, practical question, I wouldn't draw a lot any sort of move. The idea of racking computers and plugging in cables and dealing with, you know,

fires and data centers and whatnot, like to me, that's not super appealing, but at the end of the day, we'll do it if we have to, absolutely. Yeah. Makes sense. Well, congratulations. Yeah, congrats to the whole team on an awesome milestone and incredible progress. It felt like a year. It had only been since October.

Only a couple months. Yeah, it's like 10 AI years. I love it. Congratulations. We'll talk to you soon. Thank you so much. Cheers. Have a great rest of your day. Let's click through the time on, see if there's anything that we missed before we jump off. DJ Kavs has an idea here.

Found a $10 bill. It took five seconds to pick it up. That's $63 million in annualized ARR. This is the thinking you need to be deploying if you're going to be raising money potentially. No, don't do that. I didn't know that Messi, the football player, had a prime copycat called Moss. Moss.

And it's shutting down after 23 months in business. I wonder if that has to do with the logistics of shipping internationally because he is an international icon, but setting up distribution and retail presence across many countries very quickly. It's not quite as easy as dropping it on Amazon and fly enough. the shelves. A lot of those are sort of one country by country, and I wonder if that has a piece of what happens. So this is shutting down fully. Moss Plus. Interesting. Well, Mitchell Baldridge recommends setting up a Vanguard account, not Fidelity, not Schwab, Vanguard. Smart advice,

you might think. They do have the lowest fees. If you want to get up to speed on Vanguard, listen to the latest episode of the Acquired FM podcast. But he says wrong. It's not because they have the lowest fees. It's because their interface is so awful you will never trade. It has made his clients millions. Let's close it out with this video. What you got? Client Catan with a billionaire.

Yes. I think you'll like What is this face? Is this a face filter or a background replacement or both? Something funny is going on here. Face filter. Okay. Face filter. My turn I'm going to put down a data center. That's against

the rules. How else am I supposed to AI generate my Christmas card? Not popular. I'm not joking. Do you like it? No, it's blocking all the land. Wait a minute. Are you one of those paid protesters?

The way you know, the way you just whisper. Next turn, I'm going to use seven water on my data center. That's not how that works. That's not a resource in the game. How else am I supposed to power it? The water stuff is really, it's so interesting that no one has moved to energy. Like natural gas. There are natural gas turbines that would be opposed and yet people are focused.

Stop giving them ideas. I know. I'm doing their job for them, I suppose. But it's like I don't know how I don't know why the water. I think it's just because like water's delicious and electricity is is vague and abstract and you don't think about it. Like you can visualize a glass of water. It's hard to visualize a battery in the same way. But yeah.

What is it? It's like it's like does it? of LLM queries every day for a full year is equivalent to eating a single almond, something like that. But Matthew Ball is back at Xbox. Congratulations on the move. He announced it yesterday. We're going to try and get him on the show because he's one of my favorite people,

favorite authors. If you haven't read his book or his blog, he has a fantastic mind for future of technology. And I could not be more optimistic about the future of Xbox with him on the team. Tay Kim says this hire is a literal game changer. Matthew Ball knows gaming and what needs to be done. This news makes me the most bullish I've been on Xbox in seven years. And I completely agree.

And to close it out, the White House is awarding $2 billion in grants. Oh yeah. One billion of directly to IBM to nine quantum computing companies in taking an equity stake. Equity stake. Their grants overtaking an equity stake. It's an investment.

It's an investment. It's an investment. And you, American taxpayer will now own a basket of quantum computing companies. Spaghetti computing is up. That's not spaghetti computing. It's rigetti computing. Shaggetti computing is up 30%.

Who calls it that? Who came up with that? That seems like a Trump, like something he would say. I created that. You created that, okay. Just now. I'm sure I'm not the first person to think of it. But anyways, folks.

Thanks for watching. Leave us five stars on Apple Podcast and Spotify. Sign up for our newsletter, tbppn.com. and we will see you tomorrow Friday. Goodbye. We love you. Have a wonderful evening.