TBPN - David Senra, Nichole Wischoff, Daniel Yanisse, Ryan Sandler, History of "Golden Dome", Johnson & Johnson Pivots AI Strategy, Google & Meta Facing Legal Threats, EU Delayed Penalizing Apple & Meta Platforms

Episode Date: April 18, 2025

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You're watching TVPN. Today is Friday, April 18, 2025. We are live from the Temple of Technology, the Fortress of Finance, the Capital of Capital. This show starts now. We're going to take you through some of the headlines. We want to give you the top 10 news stories that we're following. And then we'll break it down. We'll go to some deep dives. We'll get some guests. And then we'll give you some timeline. So number one, AI startups soaked up a record 58% of global venture capital money in Q1, 2025. $73 billion flowed into AI companies more than double their share a year ago as investors chase generative AI growth. Every founder, every founder has found a way to wrap their narrative in AI, and every VC has decided that artificial intelligence, put a little cherry on top. And the good thing here is that there's a lot of revenue growth across the sector, right? I don't know, you know, the investment is certainly outpacing. revenue by a long shot, but that is the function of

the companies are making money. And we have a deep dive story a little bit later about how some big companies like Johnson and Johnson tried a bunch of stuff with AI. Generative Johnson. Generative Johnson. And then they're starting to pull back and that's causing churn. And so that should give us some more kind of just insight into how the AI market and how sticky these deals are, how easy it is to get a Fortune 500 company to

buy your product, but then it's harder to get them to stick around for a long time. So the second stop story is Nvidia's Jensen Wong made a surprise trip to Beijing right after the U.S. chip curbs, the new restrictions on the H20s. Strange timing, but I'm sure he had to. Well, it makes sense, but it's an interesting signal. Yes, the headline from the age 20 news was basically like, look, it's over. It's completely over. It's never been more over.

Yeah. Stop selling anything to China at all. But he's probably over there. But that's not actually the rule. Like the rule is, you know, Invidia, we've heard this again and again. If the speed limits 55, we're going to go 54. If the speed limit's 45, we're going to go 44 miles an hour.

But we are going to go as fast as you let us. We will never break the rules, break the law. If the speed limit is walking speed, we're going to get our steps. We're going to get a steps in, yeah. And so, you know, this, this discussion could be, hey, gaming GPUs aren't banned. Can you do AI stuff on gaming? Well, can you do AI stuff on gaming? Absolutely. I trained a custom version of stable diffusion on a PC that I built with two 1080, I think 1080 TIs, like pretty old, but they had like eight gigs of RAM. It was pretty fine. there were a bunch of models that you could fine tune and run locally on on gaming graphics cards and so if if the name of the game is just just get some sort of

AI system inferencing you can distill these down pretty pretty small and I think that that might be a bit of a narrative going forward I mean Apple intelligence you know not a great product, but it's been able to run inference of LLMs on phone hardware. And so if if NVIDIA can still ship something to China, it still is an important part of the business, and they will continue to maintain that relationship, I'm sure. And they have employees and manufacturing and all sorts of stuff on the ground, I'm sure. And despite the visit, NVIDIA is down, is down, according to public, another three-ish percent today. Not great. So not great. I also want you to check how Google is doing in the markets because the U.S. judge rules Google illegally monopolized key digital ad markets.

We talked about this on yesterday's show. Down 1.3 percent. Okay. What's the market doing overall? Probably something similar. Okay. Doesn't feel super significant. Yeah.

And Google will appeal this. That was something that we talked about on the show yesterday. It does open the door to possible breakup remedies and briefly knocked Alphabet's share. before a partial rebound. Open AI and SoftBank Stargate Project. I is the UK for part of its $500 billion data center buildout. This is kind of an interesting twist because the whole pitch for Stargate was like,

we're going to spend a half a trillion dollars in America. It was announced with that. They even got the president of America to come out and basically do a keynote for them. So anyways, fascinating. I mean, it makes sense. The UK is an ally, so they should have great data senators as well. I guess.

I don't really understand exactly where this is going. We'll have to dig into that more. It could easily be a capital. Play. If they're trying to raise $500 billion, that's a huge number. If they went to a variety of institutions in the UK and say, We'll make the UK a part of Stargate so you guys can have some type of AI narrative. Yeah.

But you need to put up $20 million. Yeah, the one thing that we've seen time and time again is like these deals are extremely flexible, right? And so it can be, it can be, we're buying from you, you're buying from us, you're getting equity, you're getting tokens, you're getting all sorts of different stuff. And so could you see a world where Europe is trying to develop AI supremacy? and so they pay for a huge portion of this AI data center, but there's kind of like a rofer where they can buy it out

and use it for their own model in the future. And that it justifies, and that meets their goal of like, you know, nationalist power around AI, just having the mega project built in their country, even if it's, you know, serving an American company right now, maybe it grows into something bigger over time.

I don't know. But on the other side of the open area, yeah. Yeah, did you, were you diving into this too? Just that it could be like an EU-wide thing where everybody's kind of pitching to get a part of the project. Yeah, yeah. No, no. It makes sense. Open AI also debuted flex processing to have API costs for non-urgent jobs.

We saw this with the, with the 03 and 04 mini models. This trade slower responses and occasional downtime for a price cut. We saw Mike Knoop over at Zapier and Ark Prize talk about this a little bit with the, when they beat, when OpenAI beat Arc AGI won, the precursor, eval, it cost something like, I forget, it was like, it was like thousands of dollars per task. They had to really, really throw a ton of reasoning tokens at it to get it done. And so a lot of these models, there's always this, they're always trying to be better. and people really only care about the better models,

but they're also trying to cut the costs. Yeah, and there's a lot of work. There's a lot of knowledge work that gets done that doesn't need to be done in real time. Totally. It's amazing that these models can do like a deep research report in, you know, a minute. Yep.

But it's great. It's equally valuable to basically, you know, send a request and just say like, yeah, sometime, you know, tomorrow morning would be great. Just have it to me by tomorrow morning. But like, you know, deliver it in the most efficient way. So I can easily see that becoming a huge amount of their kind of like API calls over time. Totally.

Databricks bought incremental computing engine fennel to turbocharge real-time feature engineering. We've talked about Databricks a little bit. The goal here is to promise faster model iteration and lower compute bills for streaming ML pipelines, somewhat related to the flex processing going on in Open AI. I'll have to dig into more into Databricks as they, prepare to potentially go out. Yeah, and Fennell's only a three-year-old company. I haven't been around for a long time.

But I think we're going to see a lot more of this happening, right? It just makes sense. WindSurf is the most prominent recent example, but I can see a lot more of these deals happening where, you know, great early teams realize that they can do a lot more as part of a much bigger platform. Yep. Two Apple headlines today.

the iPhone 16E was successfully made in Brazil. And so this is kind of a leak, but there were some retail boxes that were spotted by Mac magazine showed assembled in Brazil, signaling that Foxcon's Sao Paulo plant is producing the latest entry-level model to hedge tariff risk. And so Apple and Foxcon have been on the case for a long time.

It is interesting because... Yeah, and this is a Taiwanese company going international. I think people have this idea that they always associate Foxcon, With China. With China. Yep. But Foxcon is out of Taiwan and still headquartered in Taiwan and has, you know,

global ambitions, which I think is good, right? Totally. It's easier for Foxcon to set up production somewhere new than, you know, a new kind of like subcontractor. Yeah, it's also interesting. Brazil specifically has not been in the conversation that much. People are talking about Vietnam, India. But if you go back to like the original Bricks report that was put out by Goldman Sachs.

That was Brazil, Russia, India, China. These were the emerging markets that Goldman said would be like major, major contenders in the kind of the coming two decades, right? Yeah. And then you, I think that report was probably published around 2005 or something. And it looked like they kind of got it wrong because it was just China, China, China, China, China. Yeah. Like Brazil didn't really do too much. Russia obviously kind of turned inward and India did okay, but was nowhere near on the same scale as China.

China in terms of like you weren't a big gong. Exactly. We have a giant gong in the studio now, but we are not revealing it today. Can I debut maybe the sound? No, just the. Oh, yeah, yeah.

Show the mallet. You have to show. So this is the, this is the old mallet. This is the old mallet. And that's the new mallet. It gives you an idea of where we're going with the gong, the scale of the gong. Look at the,

Yeah, I mean, this thing is... We were up at 6.30 in the morning, and Jordy was just hammering the con. I was breaking up all of Los Angeles with this con. It was so loud. That's great. Anyway, very excited to roll that into the show as we keep improving things. Anyway, the other Apple leak, a lighter Apple Vision Air headset will use titanium and launch in Midnight Black. Not a huge leak.

We kind of knew this was coming. Obviously, they need to make it cheaper and lighter. Carmack has said this. Everyone knows this. But they are working on it. And every time you see these leaks, it's just a reminder. Hey, lighter and cleaner. They're dropping the pro branding.

Yep. And they should definitely. Yeah, I wonder if titanium is really the lightest thing. Like, I, with this, I think it's just like light at all costs. Like if titanium doesn't sound super light, but I don't know, I would probably go aluminum or something. But they know more about it than I do for sure. And we'll have to have big screen back on when it drops to give his, uh, the founder

big screen to give his take as he dukes it out in the VR market. Anyway, new Dwarkesh Patel show dropped. Very interesting. Taking the exact opposite approach is the AGI 2027. AI 2027. So the AI 2027 guys came on and they're like, this is happening in 18 months, I guess. I mean, 2027 is 18 months away. It's so close.

And they forecast it all out. And it's very, you know, kind of doom and gloom. but then he dropped this three-hour episode, which you should go listen to, talking about how AGI is really more like 2050, more than 30 years away and whatnot. And it was very interesting to hear about some of the limits. And the big argument, I haven't been able to listen to the whole thing yet, is that reasoning is not intelligence. Yeah, I was thinking about that because we love to reduce these things down

into like very pithy statements. Like attention is all you need. I was thinking about that. Like the attention mechanism of the transformer, it allows the neural network to focus on specific subparts of the input. So you give it a picture. Typically most image generation algorithms,

like all the compute is spread across the image equally. But that doesn't make sense because as soon as you get an idea that it's like, oh, I'm trying to actually identify if there's a cat in the corner. So I know that there's a blurry animal in the corner. Let me zoom in on that essentially. It's essentially zooming in is kind of what attention is.

Somebody's going to correct me. But it's like close. It's this idea of like attention allows the neural network to focus on the most important aspect of the computational problem. And it's very clear that attention is not all you need when you're talking in the context of like AGI. Like just the transformer. We scaled up the transformer.

That's the raw LLM that's just Next Token prediction. We had to drop tool use on top of that. We had to drop reasoning on top of that. We have to drop memory, databases, internet queries, search engines. We have to use all of these tools together. So attention is not all you need. And same thing with scale. Scale probably isn't all you need.

You probably also need some algorithms in there, some like novel design of these things. And so it seems like there are definitely like breakthroughs that need to be, you know, worked on until we fully get to AGI. But it's fun to track. And I can see it's more definition. It's more like a debate about definition than anything else. Like they can be correct and Tyler Cowen can also be correct, which is why it's fun to debate this stuff. Yeah. And the last rumor that was going around, Elon Musk actually said this is not true, but Reuters did report.

that SpaceX, Palantir, and Anderol are talking to the U.S. government about a Golden Dome project, which I think Trump mentioned a while back. You like the idea of. We know that. I mean, it's a great brand. What's interesting, I mean, I want to dig into this because we, so the claim is that they're pitching between 400 and 1,000 tracking satellites plus 200 armed satellites. you put a bunch of satellites up in low Earth orbit.

They track missiles that are potentially coming into the United States. If somebody's sending a missile to, you know, TBPNHQ to take us out, one of the armed satellites would go into action and blow up that missile before it can blow us up, right? Pretty basic. This is one of those things that comes out in like, wait, you guys aren't already doing this? I would really appreciate if this already existed. I mean, some forms of it already exists. So we can actually go through the whole history of the domes generally, I guess,

because I think it's really interesting and we have some time. The first guest is coming on at 1230. And so I think we should run through history of Golden Dome, Iron Dome. What do you think? Let's do it. Okay. So the U.S. Department of Defense formally launched the Golden Dome plan in April of 2020. Do you want me to share this with you?

Yeah, that'd be great. Let me send this over to you. In 2025, there we go. There we go. And basically the plan is to ring the planet with hundreds of sensor satellites and roughly 200 space-based interceptors

capable of shooting down ballistic and hypersonic missiles in their boost phase. SpaceX Palantir and Anderul are currently the leading industry team, which is, I mean, it's just like a wild combo of companies, right? Because it's like all FFs. Which is why I should, I actually don't know anything about this. And, you know, I think all of these companies would decline to comment on speculation. And I have no insight information here.

But I'm excited about this. So we're going to talk about it anyway. So, of course, there are other subcontractors on stuff like this. There's more than 180 firms, ranging from Lockheed Martin, RTCs to newer startups, vying for pieces of the project that may cost well over $300 billion. So Golden Dome revives the idea. Now, Jordy's about to make the loudest gong hit in history if he can't control himself. So do you remember Star Wars? This was Ronald Reagan's 1983 Strategic Defense Initiative.

And he was like made fun of for this because everyone was like, oh, stupid president thought. saw Star Wars and wants to build laser weapons in space. But like it was actually like a good idea. Like a good idea. Exactly. And so that this and so so so so so so so so so so so so so so so so so works, and then we will contrast that with the American current situation and then where we might go.

Yeah, so I'll give some backs over here. After the 2006 Lebanon War, showered northern Israel with roughly 4,000 rockets, the Israeli Ministry of Defense Rush Development of Iron Dome, jointly built by Rafael Advanced Defense Systems and Israel Aerospace Industries with Raytheon providing U.S. co-production. The system entered service in March 2011 and scored its first combat. intercept two weeks later quick turnaround since then Iron Dome has logged over 5,000 successful kills with a claimed 90% success rate so those kills are missile kills so this is a missile defense system to be clear so US financing has been decisive

divisive yeah a lot of people don't like that America's paying for Israel's Golden Dome but of course there's like all the strategic decision making about, well, they're an ally in a very complicated area, complicated region. You back them. Also, there's a lot of Israeli citizens that come to America. We want to support them and stuff. So we're not going to go into all the geopolitics of it. But it has been about $1.6 billion between 2011 and 2021 plus another $1 billion emergency tranche in 2022. But I think what should be non-controversial and nonpartisan is that, hey, if we've invested a ton of money in this technology, we should get a claim on some of this IP.

And we should be able to bring that back and it should be able to protect Americans. Yep. And I think that that's probably something that most people would be in favor of. So in exchange, the U.S. Army gained two Iron Dome batteries for limited homeland and expeditionary use and early experiment in importing allied systems. Exactly. So they build it there, they test it there, and then they bring it back to us. And anyway, so the key takeaways for, you know, I think,

basically the takeaways that the Golden Dome will look to implement as software-first design, enables basically like rapid updates to the system. Networked launchers, radars, and battle management lets operators mass interceptors at the most dangerous threats, basically like conserving effectively ammunition. And just this constant pressure. Oh, this is, yeah, this is interesting. forcing iterative improvement in the way that a U.S. system just never would, right? Because America's famous for like the exquisite system, like the F-35 took two trillion in like 30 years because like,

it's not like, oh, F-35s are blowing up and getting shot down constantly. So we got to make them better. But it's also like we don't have Canada and Mexico constantly launching rockets into the U.S. If we did, we'd be able to iterate really quickly. We're in the, we're in what, the fat on the couch era and we're going to get back in shape. And so this is us getting back in shape. And so giving a little bit of history on how America thinks about this. I mean, obviously there's a few different layered shield systems that have built up over time. But it all goes back to that Reagan Strategic Defense Initiative, aka Star Wars, announced on March 23rd, 1983. The idea was space-based lasers, which sound crazy, but Connecticut interceptors, which actually makes a lot of sense.

and exotic sensor webs to render nuclear missiles obsolete. Congress ultimately spent roughly $30 billion in current dollars on prototypes such as brilliant pebbles miniature interceptors and alpha chemical lasers, but the collapse of the Soviet Union and severe technical hurdles led to program curtailment by 1993. So, of course, can you imagine how difficult it would be to put, how expensive it is to put technology, lasers, interceptors, drones,

anything like that into space when you don't have SpaceX launching a new rocket every single day. Like you have to use NASA for that. It's extremely expensive. You just don't have the cost to Leo so that you can't iterate or anything like that. And then also a lot of these, a lot of these like, you know, drone-based systems were not really developed yet. And so all of it was a little bit too early, but it did seed today's hit to kill, technology, infrared sensors, and the political idea that the U.S. could defend rather than simply deter against nuclear attack.

Yeah. And so the Golden Dome has this like kind of potent. This is all kind of rumor at this point, but you can think about two different layers to the Golden Dome, like, core. So two ring satellite constellations. Wide field tracking layer, that's 400 to like a thousand satellites. KubeSat class, which is like Starlink, in 500 colloquial. orbits provide a global persistent infrared coverage, PIR coverage, queuing interceptors within

seconds of a hostile launch. So basically, you put up all the different sensors and then you're seeing, are there any missiles that are launching? And then the shooter level is a larger platform to carry kinetic kill vehicles, KKVs. And this is the cool part. They are lasers. They're actually doing the laser thing. Allegedly.

This is all alleged. But yeah, it can destroy missiles. 50 to 150 seconds after boost. Yeah, and a lot of what the real role of deep tech is to turn science fiction into reality. Yeah. And so this is sort of crazy conceptually. Yeah.

But if it's, you know, if effective, it will be extremely cost-efficient way to mitigate the threat of ICBMs. And also there's this rumor that it will be offered on a subscription model. Did you see this? Elon's like, hey, Starlink's actually a pretty good model. Yeah, no.

They didn't really churn. But it also makes sense that as opposed to building this exquisite system. Like, it really is, it sounds funny, but it is a reasonable way to finance this type of development. And the ongoing upkeep and the iterative improvement of it. So the missile defense agency issued its first industry sources sought notice on April 4th, 2025. I think that's probably what's driving the, news today, calling for concepts that can demonstrate initial boost phase intercept by 2026 and expanded capabilities through 2030.

The space force will own command and control. And so, like, the companies that build this stuff, whoever they are, might be SpaceX, Ballantier, Anderol might be completely different companies. But they're not going to have their finger on the trigger. Yeah. Command and control operates with the space. Yes, because we are a democracy. Yeah.

And this was something that was, it became a point of debate. with Starlink. And so there was a moment where Starlink was so dominant and there was no real path for the US government to buy Starlink in a meaningful way, like buy it as a capability,

not by the company. And so people were saying like, well, if Elon turns on Starlink in the Ukraine, that's helping Ukraine. If he chooses to turn it off, that's hurting Ukraine or Israel or Taiwan or any of these countries that are in geopolitical conflict. And so all of a sudden, the decision about our geopolitics actually rests with his business decision.

And so that is something that should, I think, be decided democratically through America's normal process for how we engage with allies and adversaries. It should not be a purely economic consideration for the company. that just wants to maximize shareholder value. Because you can imagine, you know, if you're just trying to maximize shareholder value, you're like, yeah, okay, we're going to turn Starlink on for both sides of this conflict because we just want to make as much money as possible.

But so Elon got all this intense, like, criticism. Oh, Elon's just playing like, you know, God and like, you know, he's deciding what's going on with this war. He shouldn't have that much power. But I always said, like, that's not going to be an issue because the U.S. government will just be able to buy it as a capability. and they wound up doing that, and that's Star Shield. And then it's actually like a more secure version of it.

And it's something that the U.S. government then decides. And this is going to be the same thing, where it's leveraging technology from private citizens that have been developed. But ultimately the decision of how it's used, the command and control, rests with the government and ultimately the American people, which is great. So the government will pay an annual service fee rather than buying hardware outright, which sounds funny because now it's like SaaS. But it's way better that way because, of course, then you can upgrade and you can iterate and you can improve.

Yeah. And these annual service fee proposals seen by Reuters so far, which again, Elon denied. He denied it, yeah. Suggests a 30-year life cycle that could reach $600 billion, roughly equivalent to three years of the entire U.S. defense budget. So really eye-watering numbers. Yep. But makes sense in the case. context of you know preventing full-scale you know nuclear war and having you know

hundreds of ICBMs flying through this guy is effectively in the interest of all of humanity I agree so I agree take out all of them of course it gets more complicated because like everything that's like the line between like defensive technology and offensive technology is pretty loose right so it's like if you can build this like KK vehicle or secrecy vehicle that can, or space laser that can shoot down a missile, it can also shoot down like a 747 with the president on it or it can shoot down, you know, an adversary or can conduct an assassination. So like you still have to like even if you, even if you create the best Golden Dome possible

and make nuclear war thing of the past, like you will still have the risk of conflict, right? And so you always need to come back to just like how we actually resolve these conflicts. Netflix. Interesting to hear a little bit about how all these companies could fit together, hypothetically. Obviously, SpaceX has launched the cheapest mega constellation with Starlink. And they also have the Starlink bus, which is like the platform that Starlink has built on. So they could easily swap out internet for, I guess it's infrared. And then just start spamming those up there on the subscription. Which is actually how I would describe their approach to putting up Starlink satellites.

It is just spamming them up there, but it's great. It works really well. And I'm sure there's a lot of work that goes into positioning them perfectly and whatnot. So they'd be like potentially the prime integrator. The Falcon 9R and Starship launches would be putting up these satellite buses. Yeah, but this is going to be a huge collective effort, right? There's so many different primes that are wanting to participate in this. You have the new primes, the Palantiers, the Anderals,

and then you have Lockheed Martin, Northrop Grumman, RtX, which is Raytheon, Boeing. Boeing has a bunch of heavy satellite experience. Raytheon has a bunch of relevant experience. Northrop Grumman is like very oriented around these. Hillbioch co-designed. Yeah, has built missile interceptor products in the past. And a lot of rocket motors too.

So if you want to deploy some sort of missile from like a satellite platform, actually building that rocket motor, they do have a heritage there. There's good things you can say about them. There's things where they're falling behind. And Northrop actually had a huge explosion on April 16th. Drewva had a post yesterday. I'll just pull it up on my computer. But he said, a real setback for America.

This rocket motor plant was such a pillar of national security capacity that Northrop had agreed to be a supplier to Boeing in a competition to build the LGM 35A Sentinel, a key part of the U.S. nuclear triad. So anyways, unclear if this explosion was just an accident or if there was something else going on. These types of facilities are super dangerous. But again, this is Northrop and Boeing already being a, they were basically leveraging this facility to to contribute to the U.S. nuclear sort of defense apparatus. Yeah.

It can be dangerous stuff. So more than 180 firms responded to the April Industry Day, including laser specialist, General Atomics, L3 Harris for space radars. Everyone shows up. Even AWS and Azure, Microsoft showed up, said, hey, we got the data back end covered. And it makes sense. This should be bipartisan.

It's like protecting us from nuclear war. This is amazing. And I'm very excited to learn more about this. It's always tough because they are probably not going to tell everyone everything, right? Because it's going to be classified. Because as soon as you say, this is exactly how it works, well, it's easy to start shooting them down and taking them out and figuring out what the anti-missile is, right?

So anyway, it'll be interesting. in terms of just the history of missile defense in the 1960s. We have the Nike Zeus and Sentinel. These are silo-based sites. And so we got to fire it off from the ground. 1983, we see SDI Star Wars. The tech was premature. But they did create the idea of this IR sensor and KKV field,

which is kind of the modern strategy, I think. I think that we're not reinventing the wheel on that. We're just using the latest technology. actually being able to get it to scale. And then, of course, the iron dome is kind of like the gold standard here until the golden dome becomes the gold standard, hopefully, because it's been combat validated with 90% greater success. And so, I don't know, I think we should keep following this story.

It'll be interesting to see where it lands and how much we learn. I mean, at the very least, it will be, I think it might be more of a business story than a technology story because I think a lot of the technology will be classified. effectively, but we will be start, like as, I mean, Palantir is a public company, so if there is a big award, it will show up in their earnings. And that's cool, and that will drive

the market, and that's interesting to follow. Yeah, and it's coming at a very interesting time. Obviously, Reagan's Star Wars program and campaign was made fun of in many ways, partly because of the name. Golden Dome will be made fun of too, because it's kind of

a funny name, right? It's almost... But at the same time, it's coming at a time when the commercial space economy is flourishing. We're putting stuff into orbit every almost every single day. So much more mature. And so the timing feels right. And over time, this could replace a bunch of systems on the ground that are very, very, very costly to create and maintain. Well, if you think the legacy primes are going to do well, if you think Palantir is going to do well, or vice versa, you can go express your opinion, your independently formed opinion, on public.com investing for those who take it seriously multi-asset investing industry league

and everything trusted by millions. You got pretty much every asset on there. Pretty much every asset on there. And we got to do another ad ramp. Time is money, save both. Easy to use corporate cards, bill payments accounting, and a whole lot more all in one place. Back to back, baby. But we got to move on to Johnson Johnson.

We should get a card reader here to just swipe. We have a card reader. We ordered one for. a shoot that we did. And I got some very nice cinematic shots with Ben for the card reader. There we go. Well, let's talk about generative Johnson. Generative Johnson. So Johnson and Johnson is making a shift to focus only on the highest value generative AI use cases and shut down pilots that were redundant or under delivering. And this is big news because a lot of companies have probably sold huge generative AI transformation projects into all sorts of companies,

and we'll see how many stick around. Yep. And so they used to, previously, Johnson & Johnson was experimenting with generative AI pretty broadly across the healthcare conglomerate, and now they're taking a more focused approach, and they want everyone to know. Let's try a bunch of stuff. Let's try a bunch of stuff. Make sense.

See what's working well today? What would be working on the future? and then churn. We hate to see churn. Anyway, so chief information officer, Jim Swanson, said the move insures the company allocates resources only to the highest value generative AI use cases while it cuts projects that are redundant

are simply not working. That was a pivot we made after about a year of learning, Swanson said, now we've moved from a thousand flowers to a really prioritize focus on GenAI. What a funny analogy. Golden Dome, thousand flowers. A thousand flower approach involved a number of use case ideas germinating from across the company, which made their way through a centralized governance board.

At one point, employees were pursuing nearly 9,000 individual use cases, many that were redundant or simply didn't work, he said. And as the company tracked the broad value of AI, including generative AI, data science, and intelligent automation, it found that only 10 to 15 percent of use cases were driving about 80% of the value, he added. Interesting. And I imagine, yeah, I mean, I'd love to know exactly what they're using, but you can imagine like, you know, when all you have is a hammer, everything, let's throw, generally eye, everything. But there's going to be places that are like, oh, wait, we still have a division that's just transcribing paper receipts or something. Should just get on ramp. Yeah. So here's where it's working. Jay and Jay is drilling down into

high-value gen A.I. use cases around drug discovery and supply chains. Zach Weinberg might put the drug discovery one in the true zone, as well as an internal chat bot to answer questions on company policy. So, yeah, hard to, hard to know if this is real. It's like, okay, chat with your company handbook, basically, which that's fine, but I don't think people care at all. dragged the handbook into enterprise enterprise version of chat GPT in your Azure cloud and ask it

questions. Yeah. Not probably something they're paying for a standalone product for or maybe will long term. It's hard to say. I know there's companies like Glean that have, you know, gotten to you know, multi-billion dollar valuations doing something like this.

Yeah. Anyways, so... It's also just funny because you know that like with a company like J&J, like McKinsey, was like all over this being like with like millions of decks like let's put it in this let's slot it in here let's do all this um and and and and then there's also there's just all the forces aligned to do 900 projects because yeah anyone who's at huge j and j and wants a promotion is like well yeah i'm not just a marketer i'm a technology enabled marketer and i my team is using

a i'm going to be more efficient we're going to drive more shareholder value then then you have the CEO who's like now oh i got to tell wall street an AI transformation story. Oh yeah, we're firing everyone. It's all AI. It's very interesting. We're not doing it this quarter. We're not firing everyone this quarter, but like, AI is coming, and you can price this

in the stock today. It's interesting that they use a centralized governance board to lead the thousand flowers, AI transformation. It's like the one thing you shouldn't do is just like instead just diffuse the research. I mean, I think the way you actually transform an organization is just say like, hey everyone like AI exists it's the toby look key approach it's Shopify it's like AI exists like whatever your job is like use chat GPT if you need to expense chat GPT it's the same thing as like Google exists if you hired an employee and they didn't use Google you'd be like

what what's going on with this person like they need to be Googling stuff yeah one example that is working is a rep co-pilot which helps coach sales representatives on how to engage with health care professionals about new treatments we actually use this to coach our sales reps on how to pitch the show to other people that are listening to other podcasts. Yeah. And I think we have, you know, our sales team isn't as big as Jay and Jay, but it's close. Yeah. Dozens.

As you, you know, dozens of thousands, I think. But anyways. The company is piloting this in its innovative medicine business segment, which develops new treatments for oncology and other areas and is now working to expand that pilot to its med tech segment, which sells robotics and hardware like hip, replacement and lenses. So the rep co-pilot, that sounds like AISDR, but not going all in on the agentic motion. I think it's more like an AI sales manager. Uh, maybe, but I, I would imagine that what works well in, in sales rep co-pilot is, okay, I just got an email from someone we're trying

to sell to. They ask these questions. Instead of needing to go back to the team and say, That's what I'm saying. Going back to the sales manager, how would you answer this question? Exactly, exactly. And so that's just information retrieval. It's LLMs as a knowledge engine and help with copyrighting, right? Which is like what we know these things are so great at. Yeah.

And then it has a little bit more on the internal chatbot. It says the internal chatbot ingest information about company policies and benefits to help produce the sum 10 million interactions employees have every year. with the services team. Yeah. And so this is just like, hey, am I allowed to take this day off? Yeah.

I already used 14 of my vacation days. We should actually develop something like this because I'm getting sick of everyone on our team asking, like how much creatine should I be taking? Like, is it chest day or is it back day or is it leg day? Yeah. You know, if we could just have a chat bot that they could ask all that stuff,

they would really speak things up. Am I allowed to work on Saturday? I've worked, you know, 10 weekends in a row. and I know it's required that I take one Saturday off every 10 weeks. Can I, do I have to take it off? Do I have to take it off? I want to keep grinding. This is potentially more interesting.

In drug discovery, the company is looking at whether Gen. A.I can help researchers find the optimal moment to add a solvent to turn a liquid molecule into a solid. And they're also doing stuff on the supply chain side, specifically around supply chain risk. which is relevant now given some of the shortages and, you know, trade war stuff that's going on. Anyways, the good news is if you were working with J&J and they didn't churn, probably on the right track at least, and so I think this will be a good signal. We need more companies to, like, overspend and then scale back to figure out, like, what's actually valuable. Yeah, it's also unclear to me.

maybe we should try and find some sort of like consultant or someone who has worked inside these Fortune 500 companies and kind of seen what is actually working or not. We might need to have them call in like anonymously honestly but I'd love to know like of

these like for a representative organization that's done like a thousand AI projects how many of those are just hey we had our team sign up for chat GPT Pro versus hey we had our team buy a trial with an enterprise like an AI SaaS company versus we built something internally we had our teams

implement something because obviously a company like j and j has a massive IT team they have a CIO who's commenting to the wall street journal so clearly they have you know the ability to roll out software and automation across that's entirely custom to their business and and I would be interested to see like what tools are they using because they probably haven't built their own AI co-pilot for coding but are they using wins Surf? Are they using Cursor? Are they using Devin? Like, what's sticking around? Yeah. Yeah. It's interesting. But, well, if you're looking for AGI for watches, many people have said that Bezel is super intelligence for buying your next watch. Your Bezell concieres is available to source any watch on the

planet. Seriously, any watch. Head over to Getbezzle.com. Download the app, build a wish list, and pick a great watch. recommend them enough. We can't. We got another headline here. The EU delayed punishing Apple meta just before trade talks started. They postponed an announcement that was initially planned for this week, earlier this week. So the European Union recently delayed penalizing Apple and meta platforms. They're just always coming after our big tech. I said earlier, I will defend big technology. You didn't just say that. What did you say, Jordy?

What did I say? You didn't say you would defend them. You said you would die for them. No, I said I would take a bullet. Okay, take a bullet. Yeah, I would probably hold out my arm. Yeah, yeah, yeah. And just flex as hard as I could to try to, you know,

yeah. Block it, but not. Yeah. Yeah, I mean, that is the goal of like the secret service. Like if Sundar Pichai was over there and I was wearing a bulletproof vest, I would dive in front of it for sure. That's right. That's right.

Diving in front with a bulletproof vest. Exactly. That's the level of dedicating. Still a lot of dedication. Totally. But, you know, it's not. You're going to get badly bruised by that. But you're going to look like a hero.

Totally. For big tech. Crisis. Anyways, what's new? EU coming after big technology, but they had initially planned to announce cease and desist orders targeting the tech giants on Tuesday and had formed at least one of the companies of that timing. People familiar with the matter said, they're like, hey, by the way, we're going to

to send a cease and desist. and slap you with some fines. The decision to postpone the announcement was made shortly before EU Trade Commissioner Maros, Seth Kovic, met with U.S. officials in Washington on Monday for his first in-person talks since President Trump announced a 90-day pause on some tariffs. I think this is a good call by the EU. There's kind of bigger fish to fry right now. And it says, in addition, this week, Italian Prime Minister, Georgia Maloney, met with Trump,

who said he would have very little problems. and making a trade deal with the EU. Yep. Okay, so the actual cases here, what's going on? Meta and Apple, they're both under pressure from the EU for alleged breaches of the Digital Markets Act. This is a law that seeks to make it easier for small companies to compete with their big tech rivals.

The commission opened investigations in March of 2024 and issued preliminary findings in both cases last summer. The cases carry a potential fine of up to 10% of the company's global annual revenues. though people familiar with their matter said that they expect fines would be much lower. But can you imagine that? You're you're vending, you know, the iPhone, you're selling iPhones in Italy or something. And because you're not in compliance of the Digital Markets Act that says, oh, you've got to have like open app store competition or you've got to let this API work in this particular way so someone can build on top of Apple in like a more competitive way, you violate that.

they catch you and the finest 10% of your global revenue, which is like hundreds of millions of dollars across these companies. It is an insane amount of money. But of course, this would all be negotiated. And there's a lot of leverage because regulators are basically negotiating. Regulators are basically negotiating. We saw the FTC coming after meta. Yep. Saying we want 30 Bs. 30 Bs. We see you spending on AI CAPX. We know you got it. We know you're good for it, Mark. We want We saw that cubitus on your wrist. Yeah. We saw that F.P.

Jorned. Yeah. Give us some of that. When flexing goes wrong. Yeah. Everyone just goes. Yeah. Anyways, they say,

European officials say they won't water down their tech regulations in response to U.S. pressure, but some lawmakers in the European Parliament have questioned whether the cases have become political. Hmm. I wonder if they've become political as the EU seeks to negotiate a deal with the U.S. on trade. The meta and Apple cases both relate. and you covered this already. So with META specifically, the EU is upset that META has a policy of

you either have to buy a subscription and pay for Facebook or Instagram or you have to allow META to use data for targeted advertising. And the EU is arguing this does not comply with the Digital Markets Act. Meta, they said, hey, here's an olive branch. Let's introduce an alternative

that allows you to see less personalized ads without buying a subscription. Third option, but they say that's still not good enough. We want you to just show random ads all the time, I guess. It's so wild because that's so harmful to businesses. Small businesses. It's incredibly harmful to small businesses. It's actually okay. Like Apple, Nike, you know, a big insurance company, a big bank. They have billions of dollars to spend on advertising. They can just basically spend money in a completely non-targeted way. Yep. And so policy like this over time will just hurt small businesses that you think you're trying to protect. Exactly. Even companies that would go on to compete with these big tech giants are going to struggle when they're like, hey, we have a million dollars to spend on advertising this year.

And all we can advertise to on Google is just this random audience. And so the ads are going to be terribly inefficient. You know, just cack will go through the roof. And we saw this with, with, um, that sort of iOS tracking changes. And so anyways, these types of... App tracking transparency. Yeah, all of this is just absolutely insane to me. Well, some people hate small businesses and they just want to hurt them.

It's possible that the EU regulators... They just don't like small businesses. Yep, they want to support... I mean, that was the most ironic thing about the whole ATT thing was like, it just made Facebook stronger because they were the only company that could actually do

machine learning based ads and non-deterministic ads. So they didn't need to track you anymore because they had enough data that they could infer that this person wants a Ridge wallet just from what they're watching on the actual Facebook platform. But no one else can compete. Even on the consumer side, I want ads that are perfectly targeted to me. I completely agree with this. Like do not show me ads for dementia medication or like, you know, I don't know.

There's a million things that I'm not in the market for. And I just, it's a complete waste of time to show me. Like, even just products that are sold to women. Like, I don't need to see any of those. And all of that's just like a waste of time. And I actually enjoy and get value out of having ads. If I'm going to see an ad, it should be targeted at something. It should educate me about something that I'm already in the market for, considering buying.

And every once in a while, an American VC will go to Europe and make a joke about cookies. Yeah. In the past, I've made jokes about cookies. but it's still just like funny how they're like high level tech policy really works. You go over there and you will spend if you're just using the internet. I hope you enjoy cookies because you'll be accepting a lot of them. Well, if you're traveling, you should find your happy place. Find your happy place.

Book of Wander with inspiring games. Hotel Gating. Dreaming beds, top tier cleaning and 24-7 concierge service. It's a vacation home. better folks. And Wander's just been on an absolute tear. They have. Many people are calling it an overnight success, both in the speed at which they're crushing it. Yes. But every time you stay at a wander, it's effectively an overnight success, right? So we have new data on Apple in China. They're losing ground in the smartphone market as local rivals gained. The U.S. Tech Giant dropped a fifth

place with a 13.7 market share. They lost its top spot in the China smartphone market dethroned by Xiaomi as Beijing's consumption boosting subsidies help buoy demand for cheaper products. The US tech giants share of China, China's highly lucrative phone market shrank to 13.7% during the first quarter from 15.6 a year earlier. That is a pretty big drop. Apple's been facing increasing competition in China in recent years, despite claiming the top spot in the final quarter of 2024 with a marginal lead. The iPhone maker lost out to local rivals Vivo and Huawei on annual shipments that year. And it is interesting.

Have you seen any of these Chinese phones? Some of them, I mean, it feels like there's like a Cambrian explosion. Like I saw I Show Speed was over there and looking at this. It's a trifold phone that basically turns into like an entire tablet. But it's almost the same size as an iPhone. They're doing cool stuff over there. Like the tech is cool. I want a phone that's.

like a newspaper, John. I want it to basically fold up like this, and then I want to be able to unfold it like this and just, you know, you're sitting in the back of a waymo. They're getting close. That's where we're headed. I just, I would not be surprised to see Apple drop out of the top five. Yeah, I agree.

In, you know, even in the next year, it just does not seem like they are welcome there despite having their supply chain oriented around it. And the competitors are just iterating quickly. they have a cost advantage. Yep. And there's also a major cultural shift in China about, like, nationalism. Like, let's buy Chinese-made products from Chinese brands.

And it's no longer- And government subsidies. Xiaomi's returned to the top spot after nearly a decade was largely due to government subsidies. So they're just directly subsidizing. And that is resonating with just the Chinese citizens probably. Yeah, I mean, it's funny to compare Apple's experience in Europe

where it's basically like an anti-subsidy. It's like get out of here. Pay us 10% of your global revenue. Except our cookies and leave. And oh, by the way, like, what has Nokia done in, I mean, it's the only broadly European phone company and Nokia is completely out of the game.

They're not really producing new phones that are competitive whatsoever. When you go to Nokia.com, by the way, one, what do you get? They just, the name of the site is just Nokia Corporation, which is not super optimized. Apple just says Apple. But Nokia Corporation, and there's not a single mobile device on the home page.

Yeah, I think they're out of the game. So it's very odd where China has upstart companies that are competing with Apple, and they're subsidizing them and being very aggressive to push and win. And then Europe is taking the opposite approach where they're, like, Apple still is a, China hasn't banned iPhones in China. Like, you can still sell them. They are subsidizing their national champions, but at least the end result of that will be more technology,

better homegrown competitors, right? Yeah. Versus Europe is just, give us 10% of your global revenue. And, yeah, we're not going to even try and compete. We're just going to try and tax you. Yeah. It's like, yeah, it's a very, very weird strategy. Well, hopefully Harry Stebbings.

Yeah. Maybe someone in Europe will try and build a phone and take some market share, but it doesn't seem like it's happening. Yeah. And so very, very odd decisions. These subsidies are basically oriented towards 75% of the country's entire smartphone user base. So no matter what kind of product Apple releases to try to hit that lower end of the market, they're going to have trouble competing.

So basically, if you buy a phone in China that's under 6,000 yuan, the equivalent of $821.92, $821.92, the subsidy applies. So consumers can't use the benefit to buy products with bigger price tags like high-end iPhones. And so the whole push will push Chinese consumers to replace their phones with products that cost less than 3,000 yuan, a segment that makes up 75% of the country's smartphone user base. this is also a great industrial policy or economic policy because if you can get your entire country, your entire country on phones, on smartphones, you're going to increase, you know, finding jobs, doing remote work, like communication, economic activity, paying each other.

Like everything, like the smartphone is the backbone of the economy. And so getting everyone in the entire, even at the lower end of the lower and middle class on smartphones is, it's just good economic policy domestically. It's like, I mean, it's kind of like what we talked about in, in the U.S., where there's this push to get high-speed internet into rural communities. It was an absolute disaster. Instead, the focus should have just been, hey, let's try and subsidize potentially like smartphones that connect to Starlink satellites, something like that.

That would have been a much, much more, like, free market approach. We're getting out-capitalism in China recently. We've got to step in. it up. They're good. Yeah, and Europe needs to step it up too. Anyway. Apple is under threat in China. If they don't want to just give up on the market entirely, what should they do, John? I'm thinking what you're thinking. They should buy some billboards. They should get on adquick. They should buy every billboard. They should buy every billboard in China. Out of home advertising meat easy and measurable. Say goodbye to the headaches of out of home advertising. Only ad quick

combines technology, out of home expertise and data to enable efficient, seamless ad buying across the globe. Thank you, Adquick. Well, we're staying with big tech. Big tech is under attack left and right. We've, big, Google, meta and Apple are under attack in Europe. Apple's under attack in China. And then meta and Google are under attack in the U.S.

for antitrust. And we talked about this yesterday. With Adam. With Adam. Which was great. Great segment. You should go listen to it if you haven't already. But they are the two titans of digital apps.

advertising are facing unprecedented legal threats over tactics they use to reach dominance. And it's wild because I'm sure this will get into it, but basically the FTC and the Justice Department, we're basically like, let's just divide everything up and you attack and we'll attack. And they'll be facing an attack from, you know, both sides. So the key points, Google and meta are facing antitrust pressure, focused on tactics they used to grow into tech giants. Google lost its second antitrust case in eight months, moment of silence, affecting its core ad business. Meta faces a trial with the FTC, which is seeking to force the company to part ways with Instagram and WhatsApp. So two things here.

One, the case yesterday that Google lost, or is it Wednesday, losing track of time, is not really its core ad business, right? This is like the sort of display network business that was impacted. And then meta very clearly feels like they have a super strong case here because they are fighting over something that happened roughly 13 years ago. Yeah, and it all comes down to market definition. And they're trying to define the market as what? It's like meta versus Snapchat and like we, me or something. Yeah.

Mewee. Mewee. We got to have the Miwi founder on. We really do. Miwi. Miwi. If you've used Miwi. Should we be on Miwi?

Should we be distributing the show on Wii? Well, it's called the Next Gen Social Network. Oh, we gotta get on there, that. We gotta be socially networked. They've got 20 million people. That's pretty good. Yeah. Congrats.

Yeah. But yeah, I mean, the FTC is trying to force meta to sell Instagram and WhatsApp. And I mean, already, those are so intertwined. I feel like Zuck had a pretty good faith offer, half a billion dollars to say like, hey, let's just make this all go away. Right?

And they denied it. and they're pushing, the FTC is pushing forward. And again, they're trying to ignore TikTok entirely. And, you know, TikTok is not necessarily an example of completely organic adoption, right? They spent billions of dollars on user acquisition. Yep. And who knows if you could start completely independent TikTok and compete. But how do you think that would play out if the FTC forces meta-tort?

apart ways with Instagram and WhatsApp. Like, does Adam Messary become the CEO of Instagram? Do they try and bring back Kevin Sistram? Are they just, like, bringing in some McKinsey guy or some HBS search funder? No, I mean, the thing here that's interesting is Zuck made a very concerted effort years ago. Remember the meta-rebrand? Remember when they started rolling out messaging, like, you know, sort of universal messaging across the different products. And all of that was in anticipation.

of this type of, you know, kind of conflict. And so smart move to like get ahead of it and show that like, yeah, these products are deeply interconnected. They have a lot of overlapping users. Yeah. And I would just be very bearish if they spun out Instagram and it went to some like manager mode person, some manager mode CEO. Yeah.

Like maybe it could win. if they bring back a founder, but I would be very, very skeptical of it running well as a business independently without Zuck at the helm. Like that's the bull case for Vetta is that he keeps taking all these risks and building all these different tools and integrating them all in very aggressive ways. It'd be very, very odd. Maybe just sell it to private equity and just like try and squeeze as much cash out of it while they wind it down and do it for like an asset fire sale. Like that would be the outcome that the FTC would really want. It seems like there's a common thread of social network type platforms, just internet platforms in general, getting a manager mode operator and just being run into the ground.

Yeah, I don't know. AOL, Yahoo, et cetera. There's actually interesting. So Zuck inferred that Snapchat, which he tried to buy twice the second time for $6 billion, isn't as successful as it could have been if Meta had bought the disappearing photos app. And there's a, Raj Veer dropped a little history lesson on the Snapchat Facebook tragedy of 2013 that kind of backs this idea up. So Evan Spiegel turned down a $4 billion acquisition offer. Zuck asks for a counter. Evan doesn't respond and moves to close a fundraiser of a $3 billion valuation.

Zuck loses hope but makes one last ditch call. Evan hints at wanting $1 billion liquid post-tax. Mark Andresen. Just pause for a second because it's, it's, makes total sense. Why not? And it's also very funny.

It's great. It's like, yeah, could be interested, but like would need to be a liquid billionaire to even consider. Yeah, I mean, we'll go through the numbers, but achievable,

achievable with what he'd built. Like, he deserved it, in my opinion. Mark Andreessen tells Zuck to buy it at any price. Zuck tells his suits to come up with the cash and presents final offer of $6 billion. So Zuck starts at $4 billion, raises it to $6 billion. Evan says offer is good, but later turns it down, wants to stay independent.

Zuck is upset. Facebook since then, up 900 percent. Snapchat since then up 123%. Both sides would have been richer if the deal happens. But at this point, if they owned Instagram, Snapchat and WhatsApp and Facebook. Like, the FTC would be even more upset for sure. But here's the actual email that eventually leaked in a legal proceeding.

From Mark Zuckerberg. Subject, Re, Sasquatch update. Privileged and confidential. Well, not anymore. It's been leaked onto the internet because of the lawsuit. I delivered the offer to Evan, and he seemed to take it well. He told me that he could get it done and that he'd call me back quickly. Five hours later, he called me and told me he was turning down the offer.

He says the offer is what he wants, but he just wants to build the company on his own. I'm disappointed and frustrated by this. I don't know what else to say to him. At this point, we should probably prepare for it to leak that we offered $6 billion for them and all the negative that will come from that. Interesting. Cool to see the actual email. Yeah.

And, yeah, I mean, the big question is like, where would Snapchat have gone? if Zuck had been behind it. I think the easy answer is just meta has been the one company that's really, really been dominant in the post-ATT era in terms of driving higher revenue from advertising based on the AI-driven ad matching essentially. And so even if, first off, Snapchat probably would have grown, into its own thing and not been as competitive with Instagram over time. So if he buys Snapchat, does he clone stories into Instagram or does he let stories live in Snapchat

as its own thing? Like that might be it. That might have been some of the strategy. Eventually stories got cloned into everything. Like even LinkedIn, I think got stories for a while. Remember Twitter had stories for a little bit? Yeah. What were they called fleets?

Fleets. Fleets. Fleets. Yeah. They really didn't take off. There was like a three-month period where like every social app needed like stories. And people were joking like, now Excel has stories. And it's interesting to put these numbers into context.

So Mark was telling Zach to buy it at any price. And, you know, with $6 billion eventually being turned down, Clubhouse got a basically $4 billion, I believe they got a $4 billion acquisition offer, despite not having anywhere near the traction or scale that Snapchat had at that point. which they turned down from Twitter, as everyone knows at this point, and ultimately got cloned and I don't know, the latest server there. What is Snapchat's market cap right now?

They are still a $13 billion company. So, I mean, arguably, he should have taken Mark and Dresen's advice, gone back and said, seven, eight. Evan, come on. I know you want to be independent, but you must have a buy it now, price. Yeah, and they've just really, really struggled, year-to-date down 30%. They did have a crazy spike, right? Yeah, in 2021.

A lot of people were longing it hard in 2020. Yeah, yeah, yeah. They were at $74 a share at their, $83 a share at their peak. They're down at $7. $7.88 now. I mean, I still think Evan Spiegel's like a fantastic entrepreneur and has a really fascinating story. And to even compete in that, it's a net. work effects driven business. It's so monopolistic at its core. It's the classic example of like

a compounding monopoly advantage. And as soon as that snowball gets rolling, it's really, really hard to play in that space at all. Well, it's also a company that doesn't get nearly the use that many of these other platforms do among our networks, right? That's true. But I mean, probably five years. Yes, but that was because of Zuck. Like if Zuck had not. had not gone after Snapchat so aggressively, Snapchat would have kept growing and had been the app, like, most millennials, most Gen Zee kids. Just anecdotally, I was aging out of Snapchat before it was. Before it was cloned? I think that a lot of it was like you were aging out because Instagram was effectively on the defensive and it was working. It was like, yeah, like you have a stronger network over at Instagram and they have all the same features. So why would you open that other app? But I agree. I went through the exact same experience where I was on Snapchat for a little bit.

And then eventually Instagram was good enough for everything. And so I went back. And then I never really opened Snapchat again. But, well, I don't know. We'll figure it out. It is fascinating that Snapchat was able to hold on to the users that they did. It wasn't declining in user base. It was just kind of flatlining.

And that's the same thing that happened with TikTok once Zuck really moved aggressively on Reels. but they are stuck in this interesting place, which again, it's a $13 billion company. Yes. So at this point, you have to ask the question of, do they get bought by a foundation model company? Interesting. You need more distribution.

If you're not, like, Lama is aligned with meta and Instagram. XAI is aligned with X. Anthropic. Google has, you know, YouTube and Google search for distribution. Yeah, maybe. you take Anthropic and put it together with Snapchat. That'd be interesting. Dario just, no, I just wanted to work on safety. Now I have to work on viral TikToks or viral snapschats. I don't know. It does seem like it's interesting. It's like floating out there as this like pretty

solid platform and distribution and they have a lot of tech and a lot of interesting ways to push contact out. The other issue with Snapchat from an acquisition standpoint is even if you're a foundation model, let's say you're a massively lost-making foundation model. Snapchat is also losing, they lost $700 million in 2024. Wow. Despite being how many years into the business. Yeah, yeah, yeah.

Hard for a CEO that even wants, you know, massive distribution among a, you know, younger sort of cohort. Still, it's hard to say, you know, is it going to be worth it to, you know, have that be my problem now, you know. I mean, if, if AI, allows for better monetization and it turns Snapchat into a stronger engine.

Part of the reason Snapchat is not monetizing that well is because of things like ATT, app tracking transparency, harder targeting. But maybe you start inserting chatbots into the conversation and driving more personalization, better targeting, better monetization through that. I think the question just comes down to where is the consumer value for the Anthropics, the Open Eyes, the Grocks, et cetera, are really going to come from? And I think there's a good argument to say

it will come from the sort of personal assistant capacity if Snapchat is big on college campuses and with high school, you know, students and things like that is Snapchat, you know, suddenly like, you know, trying to force an LLM forcing kids to say like, hey, I know you're in here to talk with your friends, but like, why don't you use us for your homework?

Yeah. Like maybe that works or maybe. Maybe they're just like, yeah, when I'm on my computer, I use chat GBT, and when I want to talk to my friends. Yeah. It's just like. I still think like the X-XAI integration is actually a pretty good case study for AI in a social context where you see someone post something and you want to fact check it essentially or get more context around it. And so you just click a button. And so I could imagine you're watching content on Snapchat and then you click a button and you're dropped into an interface where you're discussing.

that with the LLM and that could be somewhat valuable. So you see a viral video for, you know, a handbag, click on the chatbot, get more context on the handbag industry, what the different options are. Maybe there's an agent that helps you buy that and you check out all in Snapchat and it's becoming more of an e-commerce engine. Yeah. Not sure. Maybe.

Snaps one of those companies that always, and Evan, I would love to get an up, like a proper. It seems like he just loves running the company still. It seems like even though, yeah, maybe financially it wasn't the best decision not to sell, like he probably could have gotten a bunch of meta stock and then 10x that. 10x that. 10x that.

It is the meme. 10x it again. If he just got the $6 it again, 10x it again. He could have gotten a billion in meta stock. He could have gotten a billion in meta stock, like for sure at the $6 billion price based on what he owns. Like he could have gotten a billion in metastock. And then he had,

And then the stock price would have actually 10xed and he would have had 10 billion. It's crazy. And then he just has 10x that three more times. And he's trillionaire. Yeah. Honestly, the math is like pretty simple. Yeah, the math is pretty simple. More people should be doing this.

No, Snap's just one of those companies. I mean, we got to get the full update from Evan sometime. Yeah, yeah. Yeah, I reached out to his team to try and get him on the show. I really think that it's a company that has consistently shown so much potential. Yeah. spectacles, VR, shopping, you know, early AI avatar, you know,

and never has like quite, they just haven't hit a home run on any of those. Yeah, it is interesting. They have like enough resources because it is a 10 plus billion dollar company. There's a lot of cash sloshing around so they can go and do a VR project. But Zuck has a hundred times more resources, right?

Because he's a trillion dollar company. And so it's literally a hundred to one fight on everything. You want to train a model? Well, Zuck has a hundred times more resources. And so Evan for a long time was, I mean, I think still on his LinkedIn, he puts like, I'm like the VP of ideas at meta because his whole idea is like he comes up with the ideas and then meta clones them. And it's like, yeah, but when you have a hundred X, yeah, but when you have 100X, the money to spend,

you can actually win in those markets sometimes. Anyway, you want to read this post from Ryan Peterson? Yes, Ryan says, Bull Market, R& for the number of business people admitting to customs fraud on LinkedIn. A lot of people are saying, oh, I figured out how to get around the tariffs, basically. It's like, no, that's not how it works.

That's not how it works. You can't just figure out a workaround. You have to pay the customs. No, I talked to somebody that works in an apparel manufacturing, and they're like everybody's just working. a way to figure out loopholes, a way to effectively show that their cogs are maybe lower than they actually are,

so the tariff is not as substantial. So folks, if you are importing products to the United States, why don't you go and just talk to the flexport team before you think you crack the code? They will help you out. Don't skimp on your customs bill. Don't skim. scimp on your sales tax, go to Numeral HQ, put your sales tax on autopilot.

You would be crazy not to use. Spend less than five minutes per month on sales tax compliance. Go to Numeral HQ. Benchmark Series A. That's my favorite line to just sprinkle in there. I love it. Well, let's move from benchmark over to Sequoia. Andrew Reed says founder to their therapist.

Hey, look, I want this to be more of a conversation than a presentation. Please jump in with questions anytime. Classic art meeting. Clearly takes a lot of pitches. Yeah. When you're pitching, I don't think you have to say that to make it a conversation. You should just actually have a conversation. But it is a little bit of an art.

Yeah, I mean, the right approach generally is explain very clearly what you're doing in about three to five minutes and then talk about it. Yeah. I told you about that founder. I got on the phone with. And he spent, I was eating lunch, and I just put myself on mute, and he just talked for 20 minutes straight. And at the end, I was like, hey, like, I'm not an investor. I'm not on the investing team. Yeah, Founders Fund.

And he just did not understand that. And I was like, I should have jumped in 15 minutes ago. But I was just eating. So I was like, okay, just keep talking. Steak doesn't eat itself. It was wild. That was very funny. So yeah, don't make them a steak.

May actually make it a conversation more than a presentation. People like conversations. People hate presentations. Stick to the conversations. Long conversations. And Aaron Harris gives a shout out to Sequoia with some best practices for VCs. I think everyone should probably follow this. The truth is isn't complicated.

One, make the calls you say you will. Two, schedule the meetings you say you will on time. Three, if you ask for a data room, actually look at the data room. If you ask for customer references, do them quickly and promptly. If you want to pass, you have to tell the founder. You can't just whisper it into your pillow. If you want the deal, chase the founder. If you want the deal, don't disappear for a few days.

Be extremely responsive. Yeah. If you can't do that, you're not going to be competing. This isn't just a Sequoia thing. I think all the best VCs follow the same playbook. And that, like, I mean, it is crazy how bad some VCs are at passing. They just cannot bring themselves to do it. And it's like, it's like a pretty easy part of the job.

Unfortunately, we're going to... The hard part's picking the good companies. The hard part should not be just saying, like, yes, I have enough conviction to say, like, I'm passing on this round, like, go find someone else. There's a million VCs. Like, no one's going to be, like, offended forever. Every now and then you'll see, like, some exchange where a VC passes, and then the founders, like, basically, like, starts swearing.

FU, all the stuff. But those founders don't tend to go anywhere at all. And usually founders are going to... going to really respect a just like really direct prompt pass yeah of course most most of the big funds now are very much multi-stage and and there's not a lot of value in making enemies yeah exactly anyway you have a post here from uh architectural digest oh you want to do this one okay yeah let's do it yeah let's pull it up um i just thought this was a fantastic house i wanted to look at this house because i was i was looking for specifically for the bed i want to

see if the bed had an eight sleep on it. I don't know if the photos docks the bed that Dan Romero, the founder of Farcaster, sleeps on, but he does have a fantastic looking house that's been profiled in Architectural Digest. I did a lot better last night, eight hours and 11 minutes, 100% sleep quality. The routine's still off because I'm all over the place, but 91. How'd you do? Let's see.

And, you know, you were talking trash to me. You beat me? Of course. You got 100. Oh, let's go. Yeah, you're talking to, oh, just beat me twice. Just beat me twice. You beat me once and then I beat you twice.

You beat me once and then I beat you twice. Well, I have twice as many children, right? Or young children. So it makes sense. Okay, okay, okay. You're trying to change the rules now. I just think, like. You have three kids.

I have two. Yes, yes. But the young ones are the dangerous ones. Yeah. The young ones are the ones that kill the sleep score. Those are the wild cards. So when you have two young, that's two extra bad nights of sleep.

And so I think the ratio of good sleep here in between me and you, it's actually completely understandable. I need a button here that just says, Giga excuse. Gigga excuse. Anyway. Anyways, Architectural Digested a fantastic future.

This was a really cool story. They bought four houses and merged them all together and some mega compound in Venice. It's pretty cool. I didn't realize Starcaster was in L.A. I used to live on the street. Same street. And this house just looks absolutely phenomenal. They did an amazing job with it.

Dan and his wife, who I haven't met, but she's a new... Julia DeWall. Julia. Founder of Antares nuclear. Very cool nuclear company. I think she was at SpaceX for a long time. And they just did an incredible job with this. And it's very cool.

Let's hear it for a beautiful house. Overnight success. Anyway, go to Aidsleep.com. Five-year warranty, 30-night risk, free trial, free returns, free show. They got the quad four ultra. Check it out. I loved how you turned an AD home feature into an eight sleep ad. That was just phenomenal.

That's all that matters. Well, I have a post here from Sean Frank. I believe Sean Frank is in the YouTube chat right now. Oh, yeah. Hanging out. Really? He says, second order effects. Talked about this on a call with Ryan Peterson today,

but ocean freight out of China is capital D-E-A-D dead. Prices should collapse, right? Well, it is so dead. ships aren't sailing. They're just canceling the voyage instead of losing money on the cargo. So ships are waiting around for weeks, waiting to fill up, driving up the cost to get on an actual departure. Ironically, freight costs out of China are peaking. So, interesting. Weird second order effects. And this, again, is just a little wordplay there, Peking. This just, king China. Yeah. This just makes it even harder if you're in, you know, manufacturing products in China and needing to get them to the U.S.

not only are your actual, effectively your cogs going up due to the tariffs, your, you know, transportation costs are going up as well. Back to three kids in a trench coat walking through TSA security with all your goods. That's the way you get stuff out of China these days. Fly there. Yeah, I don't have 75 iPhones on me. Don't worry about it. I'm all good. Trench coat with a bunch of iPhones.

Yeah. I don't know. It seems rough. I have not tried to get anything out of China. Hopefully we can manufacture all our merch in America. We did get this giant gong, which we have not revealed yet. I think it came from China.

The gong would have been hit hard, except there was a gift. We'll reveal it soon. We'll reveal it soon. There's a time and a place for that. It's so loud. It's way too loud. I was dying laughing.

Anyways, we got a post from Yassine. He says, Girl science is real. Manifestation is real. It works. What else are girls right about? I'm going to start looking into astrology. Maybe I should listen more. Yeah, I've been long on astrology for a long time. But my thesis was like you can actually get to the same conclusion via something that feels more like boy science, I guess. Which is that, so what is astrology? It's like if you're born in this month, you have a certain personality, right? And that seems like weird, random. Like, why would it be that case? Like, is it really like the moon and the stars and the certain alignment, like, makes who you, who you are, doesn't really, doesn't really track if you're like a science guy. But I always

thought about it like, well, if you're born during like tax season and your parents are stressed out about tax season and that's your main memory of like your birthday, well, could that make you more neurotic about money? Like, probably. What about if you're born during Christmas, And every Christmas season, you're probably like warm. Yeah, or, or, or, like, there's all these difference, even just being born in the winter and spending more of your life in harsh winter conditions and, and having more rain, more gloomy days be imprinted on you. Could that make you a gloomy or a person?

Like, that's certainly possible, right? You might have cracked the code. And so, and so I always thought that, like, the astrology thing, like, it's, it maybe isn't straight up, like this moon and this sun and this star at the same time, but just the idea of like when you're born, that affects you. Even you look at the NHL, the hockey,

hockey guys. Many, many of the hockey stars are born right before hockey season starts or something like that so that they're older, so they're bigger on their young teams and then they outperform again and again and then they get reinforcement on that. And so like there's a, there's probably like,

like there's there's more I remember on my high school football team the best guy was born in July and was really old for the class and the worst guy was born in September and was really young for the class or something like that you know it wasn't worse but like you know just just just being a year bigger a year older it's valuable if you really care about your children's athletic pursuits yeah hold them back right hold them back and there's all those things about like oh yeah there's a I remember there's a football player in L.A. this guy, I think he went to go play at Notre Dame, but he was driving himself to peewee football games

because he'd been held back so much. So he was 16 in like 8th grade. He was like a 16-year-old 8th grade, or he should have been like a junior. But he was like amazing because he was older. And then there was all those like all those debates about the baseball players who came from other countries and they like fake their birth certificates.

So like it's very clear that like when you're born affects like how you accelerate in different trades. trades, different things. My parents are doing that with YC. They say, don't, don't do YC until you're, you know, 60. Yeah. Like wait until you've accumulated incredible, immense knowledge in a network. Yeah. Come into YC. Get the check. Raise $200 million in the first week and just steamroll the class. Same thing about the, like the Teal fellows. Like people are always trying to, you know, kind of reinvent themselves at age like 38 and be like, oh yeah, I dropped out of college. Like, let me go through a teal fellowship, right?

And it's all just a ruse, but it's effectively like holding yourself back. If you hold yourself back and you're like, yeah, well, I had a career 10 years on Wall Street. Then I went back to college undergrad. And then I dropped out of undergrad for a teal fellowship at age 36. Like, all of a sudden, everyone's like, Wonderkin. He's amazing. And this guy is incredible. Like he knows,

he has an encyclopedic knowledge of business because it feels like he's been on Wall Street for a decade. But he's a teal fellow. He's super young. How old is he? Oh, yeah, 24, you know. People lie about their ages all the time, you know. And this is kind of, this is all related to,

it's all hearsay. To astrology. Anyway, I, I, wait around it out. I think it's, I think, I think, Yaxine is on to something.

Anyway. Well, I'll be right back. And we have our, our first guest, actually two guests, coming in to the Temple of Technology. We got Daniel from Checker and Ryan from True Work coming into the studio to discuss a very cool merger that's happening in acquisition. So Checker, C-H-E-K-R, C-K-R, C-K-R, Checker, employee background screening for companies, streamline you're hiring with the fastest, most accurate background checks.

So you probably run into these background checks, not just when you're, you're hiring for a job, but also this was a huge thing during those marketplace boom of you want to put your product on, or your house on Wander, for example, well, they're going to want to see your ID. They're going to want to know who you are. Same thing with your car on Turo. They're going to want to make sure that you have, you know, they know who you are. Even Coinbase is a customer of Checker here.

And so when you go through the KYC flow of Coinbase. Checker's the company that helps Coinbase understand the ID verification, all the document verification. Coinbase didn't have to build that in-house. Instead, Checker built it and sold that into DoorDash, Fenwick, FIFA, Harris, Hot Topic, Instacart. Wow, they're really in everything. Domino's uses Checker. That's cool. Anyway, and the deal that was announced...

It was announced yesterday morning. Yeah, let's break that down. Checker True Work deal. Let's see. Checker acquires True Work. It was an employment verification roll-up. I'm getting a paywall on Axios. Let's see if there's something else we can do.

Big news, Ryan Sandler, he writes, True Work is being acquired by Checker. Together, Checker and True Work will achieve the vision of a truly one-stop consumer verification product. When Ethan Victor and Ryan here started True Work in a back alley office in the mission in 2017. It was a dream to get to where we are today. Over the past eight years, they've grown as an incredible team to over 100 employees,

pretty big company, raised five funding rounds called six different offices home, operated in three cities, had two name changes, and most importantly helped millions of consumers get approved for homes and apartments. True Work now services thousands of customers from the smallest family-owned businesses to eight of the 10 largest mortgage lenders in the country, including rate, Penny Mac and Fairway, we've gotten to the scale only because we are obsessed with giving our customers the highest completion rate and accuracy in the industry. Today marks a major milestone, but the journey is just beginning.

I'm excited to see True Work and Checker continue pushing boundaries of what's possible. Together, we can unlock endless opportunities from Powering Checkers' Background Checks with True Work Employment Data to expanding Checker into new verticals like Mortgage and Property Management. It's going to be an incredible journey ahead. Well, looks like we got both of them in this studio now. Let's bring them in. And I'd like you to kick it off with a little bit of an intro,

get the background from them, and I will be right back. Sounds great. Yes. Okay, all good. Sorry, there was a Google Meet link in the same invite. I clicked on the Google Meet, not the Zoom. That's on me. Sorry, I messed it up.

How are you guys? Exciting week. Yeah. Great to meet and great to see you, Ryan. Good to see you. It's been a long journey. Why don't you guys give your own kind of quick intros and then John will get back and we can go from there. Great. Great, Ryan. Cool. Yeah, Ryan here, founder and CEO of True Work and Jordy, it's great to see you.

You know, we started Chewark eight years ago, grew it to quite a large company and excited to see the vision really continue and accelerate under Checker. So I'll let Dayland show himself. Awesome. Yeah, hey guys. Yeah, Daniel here, the founder and CEO of Checker. We started 11 years ago. We invented the API for background checks and verifications. And so we've been pretty big in the employment space and verifications for employment,

access to marketplaces. And I've known Ryan and the work team for many years as well. I was an investor in their B round and been following the journey. And we're excited to announce that our. teams are going to join forces and we can continue to build the product and platform together. Amazing. When did you know when you were investing in the B, did you have any idea that your guys' journeys would really intersect at some point? I'm curious when that conversation, you know, or that idea even popped into your head. I mean, we, we love, I love the space

because I love, you know, APIs and, uh, data products and verifications. I wasn't sure if it will ever intersect at some point. You know, I thought that the challenge that they're taking was great. And then I think it's only in the last, I would say maybe in less than last year that we started thinking that that could align with our long term data platform vision. Awesome. Talk about, I guess, the last, your guys' opinion in the last few years.

I know checkers, you know, more on the H, you know, HR category, true work, you know, more of a like, you know, FinTech darling. But Ryan, how was it the last few years navigating, you know, all the ups and downs to get to this point? Yeah, we saw immense growth during, during COVID with home buying screws. And once the interest rate went up, you know, we definitely had to navigate a higher rate environment that meant lower volumes for mortgage lenders. We expanded into other verticals like property management. That was a little less cyclical. But we were able to keep up really strong growth despite the market that we're really proud of. And now this is a way for us to expand it to even more verticals like Back on Shag.

Can you talk a little bit about the different tiers of verification and kind of like the different pools of TAM that you're going after together? They're like, I run a, I started a nicotine product company and we need to age verify. So we do background checks loosely. We do ID verification. But it's sometimes like a $30 checkout. So, you know, we need to be under a dollar per verification versus if you're hiring some engineer and you need to verify them, that could be hundreds of thousands of dollars in, you know, value essentially, totally worth paying, you know, I don't know, $10,000.

per verification. What are the different pools and what's most exciting? What's the biggest Tam and how do you kind of divide up the market? Yeah, yeah. So we're going after over a $50 billion tam on different types of verifications and identity products, which I could start it in the 14 plus billion dollar employment markets. Ryan and Tim, they've been going after financial underwriting, property management, which is also, you know, $12 billion plus TAM. We also are going after the risk and fraud market in TAM, which we also size at about $10 billion, you know, specifically competing with companies like LexisNexis in financial fraud and financial risk.

And then we also have a nascent consumer offering and product that's going quite well. And that's also a multibillion dollar term. So, yeah, we're quite busy. And once we start to build a consumer-driven profile with verified credentials, identities, employment, work, and formation, that can be used to sort of lots of use cases in different industries. Can you talk about the war between artificial intelligence here? I saw a post recently saying, oh, the new chat GPT images, you can generate a fake receipt. You can generate a fake ID and use that and upload that.

At the same time, I'm sure you can use AI to weed some of that out. What technologies are the most interesting to you today? Yeah, so, I mean, Ryan's product and ours, we've been more on the data sides, which is a little bit harder to fake by AI. I mean, AI can fake anything. It's just a question of cost of the bad actors, how much money are they going to spend to try to do fraud. So we're not focusing on taking pictures of driver licensees.

I think that's going to become very challenging over time. We're focusing more on verified data sources, you know, from government signals like the DMV, from payroll companies and payroll records from, you know, employee records. So we stitch together, you know, different verified data sources, also consumer-generated data. We triangulate it. We score it. We verify it. And so that's a lot of our approaches that are a little bit more resilient, I would say, to AI fraud.

We also both in our products have, you know, documents-based verification and processes in case, you know, there's no data available on different systems. And we also use AI to combat AI fraud on documents. So it's definitely a multi-prong strategy. And AI, I think, is both an opportunity because it's going to, create a lot more fraud and problems for customers. So it gives us a lot more work to do. And at the same time, it's an opportunity because we're going to use AI tools and technology to combat AI fraud. What is it like working with the DMV as a data source? When you hit the API, do they make you take a ticket and wait for the response? Or is it a little bit faster on your end?

Yeah, and I'm curious about the evolution. I imagine, you know, when Ryan started true work and Daniel, when you started Checker even farther back, I imagine there was things that you had to do with humans that you maybe anticipated that you could do with AI at some point, but more immediately possible just given, you know, now we have products like computer use that could sort of like, you know, navigate systems that don't necessarily have APIs. Yeah, I mean, for us, like we, you know, as Daniel mentioned, similar to checker, we try to get data from as automated of sources as possible, like directly from the payroll system, directly from your bank account, et cetera. But in some cases where, you know, you work at a mom

and pop store and there's just no other way to access information, we have to get in touch with the HR department. We have to get verified data back from them. And it's a mix of automation and manual work, but there are some HR departments that just only use a fax machine, for example. They will only have a respond to vaccine. It's crazy. And so we've had to kind of build a lot automated flows on top of these manual processes, AI, LMs are definitely making it easier. You can automatically send a fax, email communication, even make a phone call to these teams in an automated way. So it's changing, but there are still a lot of these businesses that are really stuck in the legacy past. It's really funny to be using like the future of technology

to like work backwards with like legacy technology. I mean, that's like every SaaS company, right? They all build on top of these archaic systems. What's your take on eyeball scanning, WorldCoin? Is this the future of, you're going to ask that? I imagine every time you guys see somebody walking around with an orb scanning eyeballs, you're like, that's cool, but you can also sort of triangulate personhood. But they're less focus on the U.S. market. But I'm curious how you guys think.

Yeah, what do you think about the far future of verification? No, I think on identity, I think we're laughing about it, but I think in person is going to become important when you want to want to have the best assurance because online will be able to be faked so much easier and cheaper. So I think there's going to be actually more, it depends. It depends on the use case. But if you have some very, very important transaction, like getting a passport or, you know, like very important points, you still are going to need the biometrics in person. And it's going to be hard to fake that. So I think we'll see more in-person use cases and probably in the identity stack, more solutions.

The other thing that I'm bullish on is electronic driver licenses and wallets. You know, like Apple and Google are starting to have your driver license in your wallet, like Apple Pay. And I think, you know, and the government, especially in Europe and other countries, they're moving to mobile driver licenses that, connect to the government. And if Apple and Google are opening their SDKs and continuing to build them right, I think that's going to be a more elegant solution than scanning your, you know, a picture of your driver license, for example. Yeah. How do you think about like, I don't know,

the cost curve on this technology? A lot of people are complaining about like the dead internet theory. All social networks will just be filled with spam and bots. Is there, is there a where you can get this to a scale where it's so cheap and effective that we can reliably put an end to the bot problem on the internet, or is that just intractable because it's like a capital fight? No, I think the cost is definitely going down. I mean, just to give you an example, you know, the verifications Ryan and I were doing, they used to cost tens of dollars because a lot of human labor. With AI and automation, we can now automate its end to ends and bring it to pennies in terms of cost, many of them.

For example, do the criminal checks. We can do it at very high scale, very low cost. And that allows us to open new use cases, like not just hiring an engineer background check, but we can, you know, provide safety on online dating marketplaces, car rental marketplaces, home sharing marketplaces for a fraction of the cost and it's an instant product. So with technology, you can lower the costs, you can make it instant. you can open new use cases. So I think we'll be able to do similar things also on risk and fraud of the time.

Yeah, we see this with like Ramp often looks at like the B2B trend report of where companies are spending more money than ever before. Do you have data like that as well? Because I see on your website like, you know, you're in gig and marketplace, staffing, hospitality, retail, manufacturing, healthcare technology. Do you have an idea of what industries are doing, like, a exponential growth in verification? I guess, like, ours quickly and I, you had, Dana, like, we have a pretty good view of the mortgage market. Sure.

Mortgage, mortgage lenders, thousands of lenders of platforms. So we will see pretty early if volumes are going up or down. Sure. I think what's interesting in these other verticals, like property management, like we are seeing a huge uptick in using technology here. 90% plus of property managers were using very manual processes. Hey, give me your pay stubs, give me a tax return. And you're seeing real momentum in that space

of folks bringing on AI and automation. There was this tweet a while back that we talked about something like you'll meet your acquirer like four years before the deal gets done, something like that. How did you guys originally meet? That's been true for us, right, Ryan? Yeah, exactly.

You know, Daniel and I got connected I believe by a mutual investor and, you know, Daniel's been incredibly helpful, which is obviously really close to the space, invested in our series B about four or five years ago. So that line up. Yeah. And we're both part of Y Combinators. So, you know, we are well connected with Y's founders. And so Gary Tan wins no matter what. Again, another million dollars for Gary. You love to see it. That's great. It's great. And it's been great to just work with other founders, you know, I think there's lots of small YC companies who, you know, some of them are going to break through. Some of them make sense to join forces and build products together.

So YC founders working with YC founders has been one of the most fun thing for me to do. I think a lot of people don't often get like the inside story of like how an M&A event comes together. Can you give us some color on like how long the deal took? Who were the parties in the room? Was it just handshakes over dinner and steaks and Dom Parangian? Or was this in a boardroom with all the lawyers and you're screaming at each other? What happened? And then I also want to go through the post-merger integration stuff. But let's talk about the anatomy of the deal first.

Yeah, we can share some story. When did we go on that talk, Ryan? July of last year. So it's pretty long process, about 10 months. Overnight success. That's great. And yeah, I mean, like, like, how do you build vision? What are the, what are the hurdles that you guys have to overcome to kind of get a deal done?

I think a lot of founders are open to acquisitions, but what are the parameters that you guys were thinking about and the discussion points that led you to think that this would make a lot of sense? Yeah, I think, I mean, one thing I was really impressed by how Daniel and team approached it is I think it really started a lot with the product. and is this a product that works really well. Is this something that we want to buy? And, you know, there was testing of the product and our completion rate and how it could potentially look like a part of the checker environment. I really appreciated that as like one of the first steps. So are you both based in San Francisco?

Yeah. Okay. So you just went on a walk. Where was the walk specifically? Around my office right here in one Montgomery. Yeah. Very cool. So the deal comes together.

What does post-merger integration look like? I imagine that there's, you know, teams can work together. You guys can merge offices. You can go into a new office together. What are you thinking? What are the hurdles that you both want to overcome? Yeah, yeah. So it's still very fresh, right?

I mean, we literally signed. It was a bit of drama getting all the signatures on Wednesday evening, like less than two days ago. Like at 2 a.m. The last few days were a lot of lawyers. your course, like more than my entire life. Like I have enough lower your cord. I don't want to do more. But on like small details that are not very important.

Like we're both sides. We're like, let's get it done guys. You know, it's fine. It's just like legalese. So it just got signed. And then we just announced it yesterday externally and to our employees and everything. So it's still very early. We've done six different acquisitions, bigger and smaller over the years.

So kind of trying to learn how to, get better at it and a lot of acquires mess up the acquisition as you know right like a lot of company it's a failure because mostly because of the acquirer just not not doing the best to welcome the team and to continue the growth and the business so our top priorities like to continue what's working at work a lot of things are working we want to accelerate their growth and give them more supports we don't want to suffocate them in a in a bigger company so i think that's been early alignment with ryan and and and victor and the team. And so also the rationale for the acquisition is both we tested their product and

the employment verifications are 10x better than what we have. So it's going to their product is going to make our product much better for all of the customers. And we're excited to expand into the financial and the writing space. Sure. So double rationale. And on that they have. Yeah, it's cool to think about, you know, I can imagine you guys are in a much better place to do this extensive diligence because you have such as, you know, similar and potentially overlapping businesses over time than even somebody that would be writing like a nine-figure check, right, on the, you know, VC side just because, yeah, who's going to be able to get into the weeds more and really understand the product. So it's a huge vote of confidence in the platform.

Yeah. I remember hearing a story from a lawyer about like getting the signature from a VC who is literally, this is not a joke literally on the ski slopes and they had to fly someone out with the paperwork to get them to sign at the top of the hill because they were on vacation. They're like, you have to sign this day. This is super important. So I'm sure there's a lot of drama and I'm sure there's going to be a massive legal bill for you, but good luck. I think it's going to work out.

Obviously, it's a lot easier when the companies are growing, right? Because this doesn't become about like, oh, let's chop it up and like you really cut costs. It's like, hey, we're all growing together. This just will accelerate things. You're both private companies. Is there like an FTC approval process for a deal like this? Or is that just something that doesn't even come into play at this level? Is Lena Khan punching the air, watching two companies merge,

even though both of you guys seem pretty happy about this? Yeah, I think this one was below the threshold. We've had it for previous bigger acquisitions. Sure. Yeah. Is there any regulatory process? How do you even think about that as a, as a startup. I mean, we've all heard the story about like, you know, the big ones, like the

Figma, Adobe back and forth. They're still litigating Instagram and meta right now. What advice would you give to founders as they're growing to think about acquisition and merger acquisition strategies broadly in the regime as it's evolved over the last few years? Yeah. Yeah. I mean, I think MNA, and I was talking to the MNA Bank, you know, last year and this year and the trends. MNA with a big, big, big four tech companies, like Amazon, Google, everything, it's been very difficult, especially in the last regime, lots of deals canceled and everything. I don't know, for right or for wrong, you know, I think it is important.

We are start-up guys, like we root for new startups to succeed, right? I think that's what we like to do. But I think in the opportunities are for small and medium startups to join four. and do MNA. I think it's a good MNA market right now. The roads to IPO is longer than ever. The bar is higher than ever. I mean, the IPO window just got shut again.

And even before that, you know, experts and friends and people are saying like, hey, even $500 million in revenue, it's not strong enough these days. You want a billion plus in revenue. Yeah. A strong growth, super strong profitability, super diversified business, a very high bar. There's very few companies to get to that level. are. And so even for us, you know, I think the opportunities, like we have a big vision, we work in the data and identity space. What other startups can kind of join the adventure and we all work together

to be a bigger, stronger company and qualify over time. Yeah, yeah, Ev Randall was talking about how he pulled up a screen of SaaS companies with over $500 million in revenue that are public and there's hundreds of them now. And so just as a public, market's investor, like, you can kind of satiate your demand for SaaS companies in, like, almost any vertical, and so the bar has never been higher. I mean, you mentioned that, like, the M&A markets are heating up. Is that, is that, are you looking backwards towards a year ago when this process started, or is this what you're feeling even this week? Because obviously, there's been some market turmoil. Do you think that the mood in Silicon Valley, the mood in San Francisco

has shifted at all around M&A, because obviously, Wall Street reacts much faster with, like, the IPO window is closed, like, as up a week ago. Well, it might be open again. It might be open again. Who knows? It changes so fast. But I feel like in Silicon Valley, the M&A market moves much more, much more slowly as VC funds scale up and scale down.

Obviously, there's still growth funds that are getting bigger than ever. What are you seeing in terms of M&A over the last, like, year? and do you think there's going to be a shift this year? Yeah, I mean, I think it's from the seller side. There's going to continue to be a lot of appetite because, again, the valuations were so high in 2021. It's really hard to catch up, especially when you're like raising at 100 times revenue multiple or things like that.

If the scale is not there, profitability is not there, companies might really struggle to fundraise more. So I think we're going to continue to see companies interested in joining forces and demand on the seller side. That started over a year ago and it's continuing today. I think on the buyer side, I have seen some anxiety in the last few weeks from investors. You know, should we really do MNA or not? It's, you know, it's scary out there.

There's anxiety. And so, you know, it's always a big investment. So, you know, people don't want to invest or take risk when things are scary out there. But from our perspective, I'm fortunate. We have a strong financial position, strong long-term investors. And, you know, we continue to win for it. we did that's MNA because it's the right thing to do in the long term. So we're really playing the long term game here. Yeah. Love it. Last question I have, Ryan, is there one investor,

maybe besides Daniel, that comes to mind as the most helpful, somebody that stands out on the eight-year journey that you would, you know, highlight? Yeah, I mean, it's hard to single out, just one. We were lucky to have many really, really great helpful investors. I mean, all three investors on our board. Alfred Lynn from Sequoia, Keither Boy from Kostla. Really stacked. Yeah, a stack board. Who is the last one? And Steve Saracino from Activant.

Yeah, cool. Awesome. Yeah, so their stat is stacked incredibly helpful, incredibly supportive from the beginning till now. I really couldn't have asked for a better board. We got really lucky. But gun to your head, Keith or Alfred. Just kidding. No, I do want to know, like maybe last question for Daniel. there's been this back and forth meme about chat GPT wrappers, GPT rappers, just we're the AI Salesforce, maybe we're the AI checker, you know, there's a lot of those companies. Some of them, they felt like they were overvalued, and then some of them ramped up revenue

really nicely, but they still feel like I wouldn't want to be building one of those companies when there's a active venture-backed company in founder mode, building in the same category, because I think that they're going to figure out how to wrap if they need to wrap. But what are you thinking about in the early, early stage of like AI empowered disruption? How important is it to do a greenfield project build something? We're seeing that windsurf is getting acquired. And I think a lot of people were saying, oh, that's just a chat GPT wrapper. Open AI is just going to build that?

Well, maybe they will buy it. And so what are you thinking about the latest crop of kind of AI-driven startups? Yeah, I mean, I think we are the AI checker in founder mode, so good luck. Good luck if you want to come, come in our space. Yeah. No, but I think AI is just the latest software, right? Like you used to say we're like the SaaS company to do CRM, we're a cloud company to do CRM.

Now we're AI company to do CRM. I think in B2B and we're in B2B, it's like what B2B problem are you tackling? Are you tackling sales? Are you tackling underwriting? Are you tackling HR? and AI is just the way to build modern products. If you think about it this way, it applies to every category, every business, and it's not enough to just be the AI rapper.

You have to come in and say, why is AI going to be a differentiator to replace all of the other players? And if you have a strong story on that and the other players are not doing and leveraging what you're doing, I think there's a chance. It's a highly disruptive. Building AI products is not the same as building the products. we've been building as product and Eng people in the last 20 years. The paradigm, the UI, the experience is different.

The stack is different. So either there's going to be opportunity because bigger companies are not going to change fast enough. But I'm racing in my company to transform everyone to be like, hey, guys, we've got to relearn everything from sign up flow to monetization to, you know, buttons and dashboards. It's, we have to rebuild products. AI first. It's different. Yeah.

Have you thought it all, we always say last question and then there ends up being more questions, but we have one minute left. Have you thought about a world, you know, maybe you've done this already, but integrating with something like a chat GPT where if somebody's using chat GPT at work and they can say like, hey, I have a new hire coming on board. Would there ever be a world in the future where you would actually like integrate into the, you know, agent layer if you're looking at something like a chat GPT as an agent? Or is that not even the right kind of workflow? No, that's futuristic, but it could be. It could be. You know, I think if you look at who is it like Clana, who's not even using workday and telecomte anymore and just like directly agents who do the workflow. Yeah, you could skip some traditional recruiting and hiring process

and go straight into the agents. Yeah, could happen. Awesome. Interesting. Well, thanks so much for stopping by. Congratulations, guys. Congratulations. Excited to watch you guys.

dominate together. Seems like it was fate. And yeah, congrats to the whole true work team on the eight-year run too. And the continued success. Thanks, guys.

Thanks, guys. Thanks, Ryan. Bye. Really rubbing it in Lena Khan's face. She hates a merger, doesn't she? She hates a merger. I'm sure she's fine with this one. Little tech,

little tech building up resources. Future big tech. Future big tech, but little tech. right now. Gary Tan at the helm. Yep. One hand washing the other on this one. Yeah. Well, we are going to be talking about... David Senator. It's coming on the show.

Big Dell. Big Dell. Big Dell. The history of Michael Dell, the history of Dell. Technologies. He asked to pull up a post. Yes. Most historic runs for a founder. Dell. Are you looking at the revenue over time? Yeah. Is that the one? Oh, man. 1984. $6 million.

This is the first 16. 1985, $33 million, $1986, $67, $159, $259, $259, $288, $389, $388, $388,000, $388 goes all the way up to $25 billion by 1999. And let's bring Senator in. What a run. How do you do, David? What's up, brothers? What's up? You're looking great today.

I like the suit. Of course, I text. you last time I came on with a hoodie and it was really unacceptable so never happened again. You look much better in a suit. You look fantastic. Everybody does. Before we jump into Dell, which is a crazy story, can we talk about the fact that Larry Ellison has now started following TPPN? Say hello Larry. Hi, how you doing? Good to have you in the audience today. And what I, and what you guys called him? Do you remember the nickname you gave him? The big technology father? Was that He's not a tech bro.

He's a tech father. Yeah. I think I texted you guys. What I love is how fast, like you are with it. You're like the original technology father. Like immediately. Basically created technology. The database, basically, the mainframe.

Yeah. What a fantastic. What an incredible book, which you covered. What is it the difference between God and Larry Ellison. Is that? So there's actually, it's funny because I think he's going to be, I just did Michael Dell. I'm working on the founder of Sony, Akia Marita. Sure.

And I think I'm doing Larry Ellison again. I've done three on Ellison, but it's been like four or five years. So there's three books about him. The best one is probably soft war. Yep. Because he got the footnotes. Yeah. This is such a funny story.

Tell this, please. So to get to, to agree to cooperate with the author, he's like, you can write whatever you want. But I must be able to. answer on the same page and have my like counter argument. And so at the bottom, it's like L.E. writes is initials. And you, I could almost do an entire episode. Like, you might want to just read the whole book and just read L.E. Rights. Just is just. It's hilarious. But, um, and then I would say, somebody should go do that for, you know, all the major tech people today, uh, with that style. Because on the one hand, it's like, it's not what journalism is about like you're, it's not, it's not,

it's not going to drive the same narrative. It's not object. because he's like putting his footnotes everywhere, but it's just an awesome format. I think more people should do that. Yeah, we go back and forth. Like, actually, no, I disagree with it. I was there. This is what I think happens.

And then there's an even better, so I think I'm going to do software, you know, because I think the founding store of oracles told best in that book. There's only, you know, shockingly only three books on them. But then he did a book called, there's a book written about him called The Billionaire and the Mechanic. And I think when I did that episode, I was like, yeah, it's technically about Larry Ellison.

but it's about extreme winners. And I think that's when I realized like, oh, Larry Ellison has probably like more common in times of his competitive drive, but like Michael Jordan than he does with like most other like founders. And I said something like, you know, if Michael Jordan sold enterprise software, he'd be Larry Ellison. Like they're just ruthlessly competitive. And there's a fantastic scene in the billionaire and the mechanic because Larry Elson was best friends with Steve Jobs and he'd go on long walks. And so I'm pretty sure the book opens or maybe open the episode with it. with them debating who the greatest person in history was. And jobs went more like Gandhi, like peaceful.

And I'm pretty sure if I remember correctly, Allison went like conquer, like Napoleon or something like that. It's like, all right, here's your two personalities, you know, basically explained in this conversation you guys are having. So, yeah, it's fun. I hope you can uncover what, what Allison's longevity regimen is at some point. I know it won't be the focus. but to live such an intense, high stress,

you know, lifestyle. Yeah, you'd take a toll on him, but it seemed like it hasn't at all. So this is actually interesting because I feel like every time we come on there, we talk about founder mode. Sure. And one thing that was like striking

that missing from that essay is the fact like, you know, like it was like, well, there's a manager runs a company one way and a founder runs a company in one way. It's like, no. Like the founder runs it based on the personality and who they are. And so I was having private conversations about this. And it was like, well, take two competitors, Larry Ellison and Bill Gates.

It's like Bill Gates was a grinder. Larry Ellison, by his own admission, is a sprinter. He'll work excessively hard for like three weeks. And then he'll disappear on his boat with some Italian model for a few weeks. And he comes back. He literally says that over and over again. During COVID, he sent an email like everyone in Oracle just saying like, I'm on the island. I'm on love.

He's like, yeah, we're all going to work remotely. It's like, yeah, but you're working from an island that you own. He only owns 96% of it. But the important part was like he was like that. It's not really his island. Decades ago. He was like that decades ago. It wasn't just now as like an 80 year old man.

So like, you know, there's a lot of different personality types where Bill Gates was just like ripping his, you know, there's this great story that Michael Moritz tells when he, before he's a VC, he was a phenomenal writer. Still is a phenomenal writer. I just finished reading his down, his hidden book on Down Valentine, which is remarkable. But Moritz tells the story, I think at Stanford, you can see this on YouTube, where he's like, oh, you want to know what focus is. Like, I'll tell you a story about focus. Like I'm riding with Bill Gates, it's probably in the early 80s. And he's like, oh, somebody broke into your car and stole your radio. And Bill Gates, like, what are you talking about?

He's like, no, I took that out. He said, why did you have it taken out? He's like, well, it takes me eight minutes to drive from my house to Microsoft. And it takes me 11 minutes to drive from Microsoft to the airport. And he does the math. He's like, so, you know, if I had a radio, that means I would. wouldn't be thinking about Microsoft for those eight minutes or for those 11 minutes. And then I go to work every day.

So that's like 40 minutes or whatever the time frame is. It's like insane focus, insane level of grinding. That was not, Alison, by his own ambition, it was not him. Well, there was a lot, but founders podcast didn't exist back then. So no. You might have kept the radio in there and just been hearing you over the airwaves. So I talk about this. We were talking in our group chat that I'm probably going to do an episode on Jenghis Khan.

And I said on, there's a fantastic book on Bill Gates, which everybody should read. It's really hard to find. It's a biography of the first 35 years of his life. It's called Hard Drive. Bill Gates and the making of the Microsoft Empire. I've done two episodes on it. And in that episode, I said a line that now, like, years later, still gets spit back to me, like, every week.

And they're like, you realize the similarities between, like, Jengis Khan and Bill Gates. I was like, oh, Bill Gates is, like, Jengis Khan in a Mr. Rogers costume. Like, he's, like, dressed like Mr. Rogers, but he's unbelievable. unbelievably, like ruthlessly competitive, would yell. Like, when he lost a contract, a young Bill Gates lost a contract, let's say, you know, uh, you lost us a $50,000 contract. He's like, you didn't lose this $50,000 contract. There's a $100,000 contract because we lost to $50,000 and our competitor got to $50,000.

There's this great, I can't remember which one of his competitors was, but there's a great story that one of his competitors tells that Bill Gates wipes the floor with and knocks the guy out of business where he sees Bill Gates sitting in the corner at a conference one day. And he's sitting in like a foldable. chair and he's looking at something in his hand. He's like just really focused, kind of shut out the world, shut everything around him out except what he's looking at. And so he walked, the competitor walks over to Bill to like say hi to him and talk to him. And what he realizes is that Bill is looking at a picture of his face. It's like if I come to the TPPN studio and like I walk in and there's pictures of other

podcaster's face that you guys are looking at. I think we actually have a picture of you up as the godfather of podcasting. Yeah, we're still set a framed photo around here. Yeah. That's a, that's a positive thing. No, I know some other people. Yeah, yeah, yeah, yeah. You would have like fucking bull's eyes on.

For sure. Yeah, just super competitive. What do you think about the post-economic adventuring of the greatest founders? What I'm talking about is like, you know, there's a very, I mean, a lot of the, there's like a lot of commonalities. between what the founders do when they build their companies and how methodical they are about that. But once they're super rich and they're thinking about their legacy, some of them start hospitals, some of them get involved in politics. Larry Ellison is really into sailing, I guess.

Nathan Merveld at Microsoft, he owns more T-Rexes than anyone in the world. He owns the T-Rex skeletons. And he's created massive. Same. Yeah, yeah. So he actually put all of his money to go and find new T-Rex skeletons. And I think, I think, I got a Jurassic World. Yeah, and like, I saw a deck for a dinosaur fund. Yeah, yeah, yeah, yeah. And, you know, William Randolph Hearst obviously built this like unmanageable castle that became a museum.

I'm kind of beating this drum about like we need our elites to go and do even crazier things, just like build the world's tallest building, build the world's biggest house, build a castle, build a library, build a museum. And I'm not seeing it enough. but what do you think about that? What interesting kind of like side projects have you seen from the greatest founders in history? It's interesting. Like what would be the most interesting one that's done?

Honestly, I prefer them to do like what Steve Jobs did. You know, if Steve was alive today, he'd be, what, 70? So still young. The idea that he wouldn't be still working all the time on Apple to me is just unfathomable. Like I think like he, I'm all for charity and all that other kind of stuff. But like, you know, every biography is kind of written like that where it's like, you know, focuses on the early life and then the rise and then gets really boring once they're like super rich and like name it like that's not relatable to other people it's like yeah i donated a wing to

you know the hospital named after my mother or something like that yeah um i'd prefer them to not have psych quest i'd prefer them to work on what they're working on until they're debt you want you want bezos to go back into amazon now that lena con's out and the heats off uh cool it with the blue origin cool it with the no but if you're gonna have a site no that's actually a great example, if you're going to have a side quest, like the blue origin, like, then build like another company. Make it a company. Yeah.

The day's also has that clock, the Long Now Foundation. Have you heard about the clock? Yeah, of course. Of course. But like, even, even Ellison did this. He took his island and, and turned it into a sense. Four seasons. Which is like, you know, this amazing like hotel.

It's not, it's not a, it's not a mom. But, Larry, when you hear this, I love Sensei. I think your properties are from. Yeah, they're fantastic. I'm sure they're excellent. I would expect nothing else. It's also interesting. Interesting lore. So Larry has six homes on PCH. It's invested heavily in Malibu. More than that. Well, no, he's got like dozens of properties in Malibu. Okay. And I think there's six that are just in a row on PCH. And I think the fire's got to two of them. And at some point, the fireman decided to make like a last stand and we're basically like the fire's not going past this point.

And so a couple of them went down. I heard in the January fires, but four still standing. And I'm sure he's doing a ton to kind of help with the recovery effort broadly in Malibu. No, I think this is a perfect segue into what I actually want to talk to you guys about, which is Michael Dell. It's like he's 18. He starts Dell when he's 18, 19 years old. He's 60 now, right?

I talked, you had Zach Dell, his son, his co-founder. around last week for base. Base power. I talked to, I talked to, or yeah, I talked to Zach for a while before I did the episode. And, you know, he's like the idea that my dad is ever going to stop is just never going to happen. He's just like, he had so many opportunities. So like he didn't, when he took the company private, when he came back public, he didn't

have to be a CEO. It's like he's just obsessed with it. Like you go to his house. Like he will, he's working on his computer. He wants to talk to you about the company. Like he's completely in love with what he's doing. And that's probably the, the highest and best. of his time as opposed to like another side quest um yeah so i do like the response for this episode has

been really really nutty um in in terms of like everybody knows they've heard dell right they know who he is they've heard his company but the feedback i'm getting is like they didn't understand his life story and just how i think i just tweeted out like i study uncommon people uncommon like unlike stories for a living and Michael Dell is uncommon amongst uncommon people. I'm almost 400 episodes in. I can't think of another single comparable founder story to his in the sense that like this guy was a money making machine since he was like 13. You guys had just heard if I don't know if you guys put it up on the screen.

I heard you talking about it. That tweet that he has where he starts with $6 million the first year. Can you break down doing how did he manage? I haven't. I've been so focused on TBPN this week. I haven't been able to listen to the episode yet. I'm going to get to it this weekend. But how do you go from zero to netting $6 million or grossing $6 million in the first year?

Like, what does that even look like? It's even crazier than that where, like, he started the company with $1,000, no co-founder, no VCs. Okay? So, like, this is what I mean. Like, I've been getting a bunch of text messages, and one of them was, Like, I don't think there's another, like, fucking startup story like this ever. I forgot what the tech said.

It's definitely an F word in there. And I posted it, too. Because I just can't think of another, like, that successful, that fast with so limited means. And his head competitor was Compact, which was he's in Austin. He launches Dell in his dorm room. Austin's, our Dell Compact is in Houston. They raised, I think, 25 million initially. So I think 25 million at the beginning.

And then in the first early years of Dell, they'd already raised like 100 million in capital. and he smokes them. They wind up getting bought and then, you know, Dell still is thriving and Compaq no longer exists. But one of the things that is obvious in the stories is like he, a lot of these outside success is obviously like you have, you have to be the right person with the right set of skills at the right time. And, you know, in 84, the personal computer, his, the first time, the first very popular

personal computer appliance is what Steve Jobs called it, was the Apple 2. That's the first computer that I think Dell was 14 years old when he buys. And there's a crazy stories about how big of a hustler he is and the businesses he was making. He was making more in high school than his teacher was. Like just a money-making machine from day one. And he buys an Apple 2 with its own money, right? You'll love him, Coogan, because he buys a Porsche. He buys a BMW and then a Porsche.

And he gets arrested when he's like 19 for going like 92 and like a 55 and a red 9-11. Are he throwing Kierken under the bus like that? I think both of us like this. You'll love him because he was speeding. I've defended Marquez Brownlee for speeding. Yeah, yeah, yeah. I think he's fine. So he's obsessed with beautiful cars and going very, very fast.

But to answer your question, it's like a lot of this is because the market was pulling out. So a long time ago, I think it's episode 50. Have you guys ever read Mark Andreessen's blog archive? Most of it, I think. Yeah. Do you remember this? This is a long time ago, so a lot of young founders don't even know this. He was like a prolific blogger before he started A16Z.

P-Marca. That's like the blog name. Exactly. And I think you go to A16's website now and you can pull the archive. And it's absolutely incredible. And one of the most important things that Mark says in that was very fascinating because he's like, well, you know, a lot of people debate. What is the biggest predictor of startup success?

Is it like the product? is it the actual people, the founders, the team, or is it market? And he's like, if I had to pick one, my thing would be on the market. And he's like, in a great market with a lot of real customers, the market has to be satisfied. The market will pull product out of the company and the market will be satisfied by the first viable competitor that comes along. And so Dell kind of before he goes all in on it, he travels to England. He's making a ton of money, essentially just buying IBM PCs, souping them up.

then selling them to rich architects, dentists, doctors and stuff like that, right? That's how it starts. The Brabis of PC market, of IBMPCs. The AMG.

Yeah, yeah. So, and so then he goes to England and he's like, wait a minute, I thought like all this, like there was just like

computer fever in Texas. He goes to England and he's like, I'm in these stores. The product sucks. The salespeople don't know anything. And yet they can't keep the inventory in stock. And that's when he realized, it's like, oh, I need to go all in on this. He winds up dropping

out at 19 telling his parents, hey, you know, if this doesn't work out, I'll go back to school. He never goes back to school. And you see the running goes on. Was he technical at this time? Or was he just a hustler? No, he was, no, no, he was like a computer nerd. But I think he was much more like in, in the sense of like a hardware. He liked, his favorite thing to do is to take apart computers. So let me give example. Another crazy stat that people don't understand. He starts a company at 84. 88. they go public. Okay? By the time he's 26, he's in the Fortune 500.

26 years old. Like what? I'm telling you right now, when you listen to this episode, you're going to be like, holy shit, there's not another story like this. So his favorite thing to do, he recruits this older guy because we can talk about the fact that they, they made a lot of money because, you know, people give him money. They were paying on credit cards back then. So the customer pays today and then I go buy the parts, right?

and eventually he starts selling to governments and businesses and schools and everything else, so he needs to get credit. And so this where he's like, my bank will give me credit. I need to extend credit to governments and everything else. He's not paying a credit card. So he winds up partnering with this guy named Lee Walker, who is like a 45-year-old, very successful venture capitalist entrepreneur in Austin. And he played a really important role in the first like four years of Dell. But one of the most fascinating things is that what Dell then does,

Um, they, how would I, like, let me back, back up real quick. Lee Walker is the one that has a relationship with the bank to get the credit that Del needs to start selling to, uh, all of these, uh, like to, to issue the credit. Like they're selling to like US government and Monsanto and, and all these different, um, companies. He's also the one that helps Dell go, right, uh, go public. So Goldman Sachs, uh, does, recommends they, they choose Goldman Sachs to do, to, to, to, to, to, uh, take Dell public. They say, hey, let's do a private placement first. Okay. This is going to answer your question, Jordy. So the private placement, right, there's like a couple hundred private

placements that are there in the works on Black Friday, which is the stock micro crash in 1987. Okay, which we talked about last time I was on here with Sam Walton. Lee Walker goes in and is telling a young Michael Dell, we're screwed. Like they're going to cancel our private placement. The stock market drops in 23, I think it's 23 percent in a single day. And he goes and to Dell's office and he finds Dell to tell him this bad news and what's Dell doing. Dell's like, I was taking apart the computers of my competitors to see how we can improve. So I don't know if he was technical from a software perspective, but a more hardware perspective. He understood how they worked.

He liked putting them together, he like taking apart, putting them together, making them go faster and perform better. Yeah, the concept of a computer nerd almost like died off, right, in some ways. Not died off, but it was just way more of a thing. and then it became like, well, if I'm really into computers, and I'm just going to make software. He talks about now they're way too complicated. You just be able to take away that first Apple 2, the IBM 5150,

which I think is the first one he gets. You could take it apart and actually understand what every single component was doing. Now it's impossible to do that. Yeah. Can you compare Dell to jobs? Similar revenue ramp at Apple, actually, although a little bit slower in the first year. I think Apple made under a million dollars the first year, but that was 1997.

By 1984, Apple was doing over a billion dollars in revenue. So Dell comes in with $6 million. The market's a little bit more established. And then if you look at what Dell's done today, they're selling servers for businesses. That's about $40 billion of revenue. And then laptops for often computers, personal computers, but for business workers, another $40 billion or something in revenue.

He seems much less focused on product design, brand, all the different things that Steve Jobs was known for. Is he more of like a private equity financial mastermind? Is that what makes him special? No, he's definitely, this is the weird thing too, where again, not really comparable to any other people. He was upset. He was a computer nerd.

Like, he'd get in trouble in high school because he'd just sit in the back of class and read like Bight Magazine and like, which is just a stuff with his computers. But his parents were successful in business. And so every single conversation they'd have when he was a kid, like this dude was reading Fortune and Forge magazine at 12 years old. And then we didn't even get to the point where like he does,

he takes Dell Friday. By the time they go off on this crazy run. By the time they start hitting a lot of headwinds like 2005, by the time they get to 2012, 2013, he's a real big trouble. And so he takes this huge risk of doing the, the, the, the, the biggest technology. leverage buyout in history with Silver Lake Partners. So they take Dell private in 2013. The story gets even crazier.

So he understands. He was actually preparing for the age of AI like 10 years ago. And so Jensen, I talked about this in the episode where I found an interview with Jensen Wong and Michael Dell. And Jensen's like, well, there's only one company in the world that can actually build these data centers at scale and do every single thing from the storage to compute and everything else. And that's a Dell.

And that's why there's such an important partner to us. And Dell was like moving into storage and server. and stuff a long time ago, way before AI, like the proliferation of AI, I should say. And the most interesting thing is like, so he does the largest technology that they buy out Dell, they take a private of $24.4 billion, if I remember correctly. Okay. Two years later, why he's still a private company. He does the largest technology acquisition ever. And I was at dinner tonight and we were with our wives and I had to apologize. You know, I was like, I said, I don't mean to be vulgar.

but I have no other way to say this. It's like, Dale's got balls of size of watermelons. Like, the guy is a private company. He buys EMC VMware, right? $67 billion with like $4 billion of equity. Yeah.

So it's like, there was like a special dividend and something like that, but they wind up borrowing like $50 billion. $50 billion. He's like, hey, I'm going to take this risk. I'm going to go $50 billion into debt to buy this company.

There's a great story. I talked about on the podcast. It's also on the book where, EMC is, I think, a Boston company. The board director is a little older, a little different. And so Dell is coming there saying, he's pitching this as a merger, not an acquisition, but it's more of an acquisition, I would say. But merger acquisition, whatever you want to call it.

And he brings Jamie Diamond with him, right? And there's a great story in the book where the boards, he's talking about what his vision for EMC, what he wants to do and everything else. And then they're like, okay, and they lean forward, this old guy on the board, he's like, but Michael, we're talking about a lot of money here. Do you have the money? And Michael is about to answer. And Dale goes, or in Jamie Diamond goes, they have the money.

It's like the guy running the most valuable bank in the world is telling him he has the money. We got the money. We will get you the money. So yeah. And then what happens? He buys that for $67 billion. They spin out VMware. This will go back to your question.

He's obviously technology speech also really gifted at business, the interstance, finance, and everything else. So he buys EMC VMware for $67 billion. I think in 2022, they spin out and they sell VMware by itself for $61 billion. That's insane. Wow. Like, that's insane. And then EMC, I forgot the dividends. It's in the book.

They were making like six or seven billion a year in cash flow anyways every single year. So it's like one of the most successful acquisitions of all time as well. And the foundation for all the, like building all the AI and everything they're doing now. Again, I just, I've never, I'm almost eight year, nine years into this project, 400 biographies written. I just cannot think of another comparable to Dell. Now, if you want me to contrast him with Jobs, yeah, Jobs was much more interested in, you know, there's a great clip that just went viral on Twitter the other day where it's like Steve Jobs back in 97 sitting there with Tim Cook. I think you want to mute. Could share.

Yeah. And his whole thing was like, no, no, no. Like, I'm not worried about market share. I'm worried about building products that I could be proud of. So yeah, completely different. Much less inquisitive. I mean, Apple's never. really done that opportunistic acquisition thing generally.

And it seems like it's still the DNA of the company now. They buy some IP, they buy some foundational technologies, but they're not just going to go buy a VR headset. They're going to build their own. And then if you look, I've been told by people that know way more about finance than I do, that Dell's family office is the most financially successful family office in history.

He's actually built it to a firm and like some of the things they've done around that. So like every single thing this guy does, he's just an extreme winner. And then he just owned, I think when they went public, He owned like 73% of Dell the first time when they went private and then went public again. He wind up owning like something like 45% personally.

So huge ownership. And then I think he personally profited from a friend of ours that I can't mention who that knows a lot about finance told me this. Where it's like you have to also look that when he sold VMware to Broadcom, he took a shit ton in stock. And if you look at the acquisition date and Broadcom stock, it's up like three. So Broadcom buys VMware for $61 billion. And then the stock is up like three X from that. since then. And a lot of that was his own personal money from what I understand. So it's just like win, the guy, the guy just can't help but win. It's crazy. What, uh, what's the backstory on

his broadcasting company? Did you, did you follow that at all? He started OTA broadcasting in 2011, which seems like maybe kind of a, no, so the, the book has actually a weird structure. So I read, he, uh, I read his first kind of autobiography. It's called direct from Dell. It's published in 1989. Then he publishes, um, during COVID, uh, uh, Play Nice But Win. So Play Nice. So Play Nice But Win is the one I wanted to focus on because I think it's actually like any, he like reads the audio book. It has a very interesting structure because the first chapter is him fighting with Carl Icahn is trying to steal his company from him. It's about to take private a Dell. Then every chapter alternates, right, between the fight to take his company private to the startup of Dell.

It's a very interesting structure for an autobiography. And then the next chapter will go back to the fight. And then the next chapter after that will go, okay, now we're in 90, you know, we're in 80. we're in 84, we're now in 87. It weirdly stops in like 90, I think maybe 99 or 2001. He talks about the troubles they were having in 2005, 2007, 2011, the first chapter of the book. But no, I don't even think that's in the book, if I remember correctly. Yeah, that makes sense. It's crazy to see where Adele imagining, if he was still running the company today, it trades at two-thirds of their, like the value today, the market cap is like two-thirds of their revenue last year.

Wow. So, which is just, you know. 60 billion company. What was it like? Yeah, what was it last year though? Well, they did like $95 billion in revenue last year. Yeah. Yeah.

But it was over 100. Yeah. 100 billion, right? What was it? Or two years ago. Yeah, yeah. Yeah. It was, the stock was at 118.

Stocks at 84 today. down 30% over the last year. So, yeah, they were around 100 billion last year. And it's pretty fascinating comping them to Apple. Like, Dell was significantly bigger than Apple for, like, a decade. Like, 1999, Dell's doing $25 billion in revenue. Apple's doing seven. In 1998, Dell's doing $55 billion in revenue.

Apple's doing $6 billion in revenue. Apple had a like also had went through like this really rough period of transition in the late 90s, early 2000s before having the breakout success that they've had now. And now they're up in like that 300 billion revenue. And of course, they also invented the most successful consumer product of all time. And then also built a services about and then they also built a very, very high margin services business around that. And that's something Dell has never been able to do, build like this high margin locked in monopoly on. top of the technology in the software. I remember in the early days of the making the podcast, just how disorienting like the

success, the outside success of the iPhone was because I think it's one of the first episodes I did on Steve Jobs and I've done like 10 or 15 or something. And they made the point that like Apple makes more from the iPhone. If they just had the iPhone and nothing else than like Disney does from every single thing they've ever like they everything, all their theme parks, all their movies, everything else. just like that one single product. Yeah. So, I mean, Larry Ellison is 80.

Dell is 60. He's got another 20 years in him. No, no. He's not, he's not stepping down or anything. So, I mean, Larry Ellison is in the conversation to buy TikTok now. You think Dell's got like a second, third, fourth, fifth act coming up? I got a great. Yes, I got a great text message.

somebody they said dude when you said he's only 60 i had to google it real quick because he's so young there's going to be another edition of the book for sure he has another error of domination coming yeah i think there's going to be for sure like i okay so we've talked about this last time i was on here it's like oh people say if you love what you do like you'll do it for free and i was like no there's actually another step to that it's like if you love what you do people couldn't pay you to stop yeah yeah he dell takes it another level in the book where during 2012 when he's fighting to take the company private they're like, why are you doing this?

Like it was very painful. He could have lost control of the company with his name on it. They're like, you've already made so much money. Like just go retire to Hawaii or why don't you start a new company? And he goes, I don't want to retire. I don't want to start a new company.

I want this one with my name on it and then he takes it to another level. He goes, I will care about this company after I'm dead. Legend. Founder, no. And then, hold on, I do have to say one. I do have to say one even, and again, a lot of the people I cover on the podcast are kind of cautionary tales.

They're like obsessed to the point where they destroy everything around them. No, Dell seems great. I think it's really important. First of all, it's a much longer episode that I normally do. It's really important to get to the last few minutes of the podcast because like I save what I think is the most important lesson for the very end. I'm not trying to hide it. In fact that like when I talk to Zach and the way he talked about the way his kids think about him

and how they look at their father, you know, they're, he's a hero to them. He was talking about like, you know, Dale's running one of the most complicated, largest companies in the world.

And yet anytime his son calls him or any, his kids call him, is like he'll drop everything for them. He's legitimately great dad, still married to the same wife. Like, this is what I mean. He's just uncommon amongst uncommon people.

I cannot think of another single, like, comparable to him. That's fantastic. Absolute legend. I think you kind of compare to him, actually. I often think of you as, like, the Michael Dell of podcasting. No, one thing I will say, he's got excellent, excellent taste in podcast. He sent Michael Dell a few years, like a year and a half ago, sent me the best DM I've ever got. He says, your podcast are A plus and the little trophy emoji.

I was very proud of that. And then today, he wind up tweeting. He's like, you're very good at what you do. It was like, fucking crazy that you're saying that. Real, recognized real. Real record is real. It's been great. Thanks for coming on, hanging out.

This is always fun. Jordan's got something queued up on the soundboard. Let's hear it. Brother behavior. Brother behavior. Thanks for the invite. I love you guys. I'll talk to you soon.

Have a good rest of your Friday. And Nicole Wiscoff's got some news, right? Wishoff. I mean, she put out a post. She's in the waiting room. It's brand. Nicole, loving the show. She said yesterday spent two full days

with institutional LPs can safely say that 98% of them are fed up with venture funds are too big, especially for new funds spinouts. No one does math anymore, no liquidity, Godspeed to whoever is out raising right now. You don't need to do math. We have AI now. Intelligence is too cheap to meter. Yes. Yeah, that's true. We have to take AI to meetings and let them speak. And then more funds will get raised, I think. Yeah, break it down for us, name names. Who's the dumbest venture LP in the Valley? No, I wasn't even NSF, but I don't want to throw it in a bridge. So I was in a big money hub, if you will, less probably tech companies, but a lot of capital. And I did.

So I tried to every six to nine months just to like set the stage here. I try to just go to the LP tour. Existing LPs, as you guys probably know, you want to get to know institutional folks years before they invest. Or that's the expectation that they know you for a super long time. So I do my, you know, grandal tour across the U.S., you know, twice a year. And this was one of those. So I took six, like, hour-long meetings in person over the last two days with, like, endowments, pension funds, you name it, all of which are largely pretty active in venture

or have become increasingly so. And so, yeah, just setting the stage there. But happy to either you guys, yeah, let me know what's most interesting. Yeah, break down the post. There was kind of a lot in there. But the idea that, you know, ventures clearly an important asset class, or at least we would always like to believe, even though it's a small percentage of actual dollars allocated,

I'm curious the quote, no one does math anymore. To me, that stood out as potentially, you know, you have a $200 million seed fund. You start running the math, and you're like, wait, we need to back six unicorns at seed to deliver a 2x fund. And then is that what you're kind of getting at there? It's just like, I don't want to butcher some quotes here from meetings, but I think it was along the lines of fund managers come to raise funds. I think. And what I should caveat is it seemed like a lot of the house cleaning was done on the existing kind of blue chip relationships with a lot of these institutional, like a couple over the last few years. So I think that the negative sentiment was actually towards maybe newer funds or like the funds that are on fund three and fund four. but going out and still trying to raise these like aggressively large, like over $300 million funds. It seemed less, I think they did some house cleaning already when they were frustrated with the big funds that they've had in the portfolio for over a decade and did some house cleaning there.

And so I think that feels like it's sort of settled. They've picked the folks they want to concentrate with. But I think the new relationships are getting a little bit blurry. And so from that perspective, it was a lot of how are we supposed to invest in, in like the next generation of the glue chip funds and like being in their fund two and fund three, when we have these folks coming to us who don't have a portfolio construction model

trying to raise over $100 million, which may seem small to folks, but it's a lot of money. And then they're saying things like, I forget exactly what the CIO said to me, but something along the lines of like, yeah, so I'm asking like what returns the fund. I'm like, oh, we expect, you know,

over like 25 to 30 positions that like five will be decacorns and like five will be unicorns. And that like, it's just, I don't mean you guys get it from there. And so it's like, wait, I'm sorry. Can you please back me to the math? And so they were saying that like, you know, 80% of the meetings they take. And these are folks on fund two and fund three. Like, clearly have never like opened up a spreadsheet and like walk through portfolio

construction. But I think they've been able to get away with that for their past few funds. And so part of it, part of it is that math is not commonly used in venture because you're kind of trying to predict outcomes. 10 years down the road, but then that CIO is getting pitched by some traditional private equity fund that's basically saying, we are going to invest in, you know, six companies of fund, and they need to do, we're going to exit within four years. And all we're really aiming for is to just consistently get sort of an 8% return on. Well, there's two different types of math. A VC can do. They can do math about the market size and, you know, DCF on the value of the company.

they're investing in, but then they can also do math on the portfolio construction side. And it feels like vibe investing might be okay. Just find the insane founder invest in, oh, it's one on 10 or it's two on 20, whatever. That might not matter. But if you're not thinking about the portfolio construction at all, you might turn away some LPs. And then simultaneously, the other thing that I think is interesting is venture and private equity. were always under the same, in the same category, yet they're starting to like overlap more in different ways.

I mean, I felt like one CIA that manages like, I think they're around 15 billion was saying to me that like, she's like, I would just rather, I'd rather just do private equity all day. She's like the IRA is better. She's like, I have a window into like liquidity that is not that long. And so they're obviously safer investments. I think where people are, I would say that the net takeaway is that folks are just sitting on their hands and I think frustrated that they're still sitting on their hands, as in there's

no liquidity. So there's no, no one would say this, but they're not a lot of fun that's going on right now. Like, no one's super excited about like these massive exits where they've got to think that the problem that they're thinking about is where do we deploy this cash, right? Like most folks go into every year and they have a five year plan and they know we're going to deploy a billion in a venture this year. But I think that's just been, the other takeaway was from really large folks that are active adventure. I don't know how everyone else is still investing in these funds when no one has any cash. Like they're like, I just don't understand.

There's been no liquidity for any of us. We don't have a lot of money to deploy right now. Like I don't know where this like cash is coming from. And so it just seemed like some of the bigger, I think more legitimate folks that have been around in venture for a long time don't understand maybe the newer entrance. Hasn't always been driven just by shifts away from other asset classes? Like, you know, large LPs rotating out of real estate or treasuries or the public markets. It's like anytime there's a boom in venture, it's always dwarfed by the other asset classes.

So we're just looking at like if they take, you know, two percent of their equity or their public equity strategy and roll it into venture, that will like double the size of venture, right? Yes. Yeah. Yeah. Yeah. Yeah. But it's hard. I mean, right, this is all, this is just all cyclical, right?

Like we're going to be in a world. I bet in 24 months I hope that I'm on the show and we're talking about this and everyone's going to be like, wow, we like tripled our exposure in venture. and everything's going fantastic and like poo-poo on private equity and like, you know. So I do foreshad, like I foresee that happening. I think that just for right now, it's just been like three plus years of crap. And I think everyone feels like they're taking this beating. So no one's optimistic. Well, is the three plus years of crap coinciding with a boom in AI, you know,

58% of venture funding in Q1 went to AI startups? Is part of it? Or do you feel like LPs are like, yeah, well, we had to stretch ourselves a little bit thin effectively so that we could get as much exposure here as we wanted? Or like, yeah, how do you think they're like, yeah, I'm curious like in many ways you could, you would imagine that I think over time it will become clear like, yeah, deploying into, you know, AI startups from 2020 to 2025. was, you know, yeah, there were some overvalued companies, but like some generational winners, I would hope. Yeah. What does seem to be true is that, especially with AI, and there's so many unknowns, right, like how much capital these companies actually need. We're seeing record-breaking seed rounds, for example, and insane prices, like Mirro's company, two on 10 billion, like, goodness,

you know, so I think a lot of it right now is it is actually making more sense to me that I think the data last year was that like, what was it, like, 75% of VC funds or maybe north of that went to, like, 10 funds or sorry, capital raised for venture funds went to like the biggest ones, the GCs, the Andresens. I imagine a lot of it is that one, they're clearly mastered storytellers. So they're able to say, like, here's what we estimate will happen in the market and how much we need to deploy now. And maybe those vintages will be fantastic. I think what is really confusing and some of the conversations I was having, and I actually got this data, I said, DST to this presentation for some of my portfolio companies a month ago. And it was, they wouldn't give me the slides, but I have like

burned in my brain, which was like at growth, what's super hard is that for growth funds, is that they've traditionally underwritten companies to say, great, if you're a DST, you've got 30 billion plus an AUM, you're typically a growth investor. You're looking at a company and your timer starts for their year-over-year growth once they hit two million in ARR. And so like from two million in ARR, is that if you grow, and it's kind of nuts, and I might be butchering some of this, but we can like verify it. But it was like if you're growing, uh, only 200% year over year from two million in error, then it will take you like, I think it was like 29 and a half years to be a 10 billion dollar company. They're not going to invest. That's like forever. If you're growing 300%

year over year, that I think that number was around, uh, like 14 and a half. And if you're growing 500% year over year from that two million, I think it was like seven and a half years. But what happens when that window from like one, like that that two million right now companies are going from like zero to like 70 million. I just saw in like a year or like two years. So the entire underwriting model of like a great business for growth funds is broken. So everyone now, I'm sure from an LP perspective is like, are you looing cash? Like, you know, like what is the new model that you guys are underwriting to you? Like, what is a great exit look like? And what is the big question you get in venture is like, how do you identify a great business? Like, what are the metrics that make sense for you to deploy

50 million into a business? And like, I shouldn't speak for DST, but they were like, they talked to all the other growth funds and all the guys that run them and they're all sitting around a dinner table wondering like, well, how do we underwrite these businesses? So I imagine as an LP, you're thinking, shoot, I'm going to trust the guys that have made us a bunch of money over the years versus these net new, let's say, AI funds where no one knows, right? They haven't proven that they've done anything in the past. On the AI stuff, maybe on the venture side, do you think with a windsurf rumored acquisition by opening I changed the conversation? There was a big meme. Don't build it, don't build a chat, GPT wrapper, GPT5 is going to steamroll you.

Well, it looks like Sam might be opening up the piggy bank and shelling out for some companies that could be described as somewhat as wrappers. And if that trend continues and all the foundation model companies are buying a ton of consumer products that are built on top of them, well, those could be some really great exits. Well, one thing is we don't, we don't necessarily know. We don't have details on that acquisition. It might not be a liquidity event, right? it might just be like, you know, our windsurf investors getting rolled in.

You know, I'm sure there's people are doing great. Yeah, yeah, nonprofit. Yeah. I have too many questions there that I have answers, right? Like, I actually don't even know who most of wind service investors are and how much. It's a green oak steel, actually. Green Oaks of the seed and the Series A. Of course.

You're amazing. No, that's amazing. Look, I hope that people make, look, we are all incentivized to see some cash, right? like to see some liquidity. I think I would summarize all the sentiment to being just like obviously, as you guys know, lack of liquidity. And so people are looking for new reasons to get angry.

Like I was hearing even things like I hate the two and 20 model. It's such BS. And then big funds asked for more than like 20, you know, if they hit like over a 3X net, you know, then it becomes 30. And like I feel like a few CIOs were like,

F this market, you know, but that sentiment's going to change as soon as they see liquidity. And then it's going to like, oh my God, it's amazing. Our exposure's like tripled. And so I just can't wait for that to happen.

I just think people are grouchy. Grouchy. Are you telling an AI story to LPs that mirrors cloud or mobile or fire or electricity around AI? You kind of pick your metaphor. And depending on how bullish you are, you pick a more extreme metaphor. Look, I think me co-founding a business to build next gen AI data centers shows where my heads at. It's in the infrastructure, like the physical infrastructure and the power. And so like, and that's obviously non-Wish Off Ventures related, though I've told you guys, like, I've gifted my shares into the funds.

Yeah. But I think that like that's, but that's like a non kind of LP pitch from that perspective. I think the, from a Wish Off Ventures perspective, I am very bullish on the vertical AI applications. I think I can't, I don't know who can. I can't really predict where everything goes at all on the AI front, whether it's horizontal, it's foundation. Like, I don't know. What I will say is the more specialized you are in your vertical and the more you can enable a home services business, for example, to, you know, hire less people and bring in more business.

I think the more, like, you know, insulated you are, it's harder to rip you out. And so I'm really, really all in on like these vertical applications or folks are specialized and they can kind of walk their users to this type of automation. I think people like really, really like don't think deeply about how hard it is to get people to adopt this. I know the idea is to like decrease headcount, but like no one understands this stuff. No one knows how to. implement. No one knows how to think about it. And so I just think it's like down to the folks that know how to like tangibly articulate the value of an offering. And being an SF and it's kind of why I'm grateful not to live there, though I love it, not knocking it. But like you just kind of get

sucked into this like, oh my God, of course it's like so obvious. Like everyone's going to adopt and pay a million dollars for this. And enterprise value is like going to balloon. And like we're forgetting that there's a whole world out there that's like never even heard of like GPT. And so yeah. Are you staying away from. consumer AI. I talked to a founder yesterday that pitched me like a what was like a great idea and application

of the tech, but I just like immediately, he was like, tell me why I shouldn't do this and I was like, I believe that this is like not something that Open AI has like explicitly said is on their roadmap, but it's like an obvious thing that

agentic, you know, like an agentic assistant would just do automatically. Yeah. And so how are you thinking, are you feeling like, you know, a lot more confident in these like sort of B2B verticalized applications versus like a lot of consumer right now if it's not. Like anime filter was not on the open AI roadmap, but they crushed it just by working on images long enough, right? Like NFTs. They come in and they're so cool for like five minutes and then it's like, wow, we spent a lot of money there. I mean, that's probably not fair.

And I've watched NFCs come back in like 12 months. Like I think that the, honestly, I don't know. I mean, I toy around with a lot of this stuff. Like the great thing about consumers that I can just mess with it and like try and figure it all out. I don't know that I found anything even personally sticky enough that I'm like every day like, you know, like messing around with it. And I guess it's not fair. Like obviously like open AI like Claude and perplexity. But I think like on the every day I haven't really, I always have an open mind.

Some of the YC companies I've seen have been super interesting. but I haven't really found longevity for myself using them as like a, you know, personally. But maybe my mind's not open enough. I just try to think, I realize this is a pretty irrational business, but in some, you know, like I try to take more of a rational lens around like, could this make it 10 plus years as a business? You're hiring in San Francisco looking for two to three folks that are operators. Why did you settle on that language operators?

We've talked to VCs who have been top of their class. at Goldman, come in and just work the spreadsheets for a decade and put up historical runs. Also founders, you know, but operators specifically, why do you think that's the key to success in venture? Look, I think for my style of what we do and like where we try to like add value to companies is absolutely saying like, oh, Ben there, seen that. Like, here's what worked for us. Here's what didn't. And like just being fast to that response because things have to get done. I have hired. So I have Neil on my team as a senior associate and who he comes from venture doesn't have operating experience. And so this July, when it's quiet of DC, Neil is full-time

at one of my portfolio companies in LA as on the biz ops team operating. Like that's important to me. Like, I'll cultivate it. Like, that's the thing I want in our DNA. If you don't have the operating experience, I don't want to lose you to it, but you're going to go get it. And so I want to keep that DNA. I think it matters. In SF, we need exposure there. Over half the deals done last year, you know, we're in California. We do a ton of deals in SF. We see a lot. But I want folks. folks that are boots on the ground. It's sort of kind of like to start. I want to hire someone there full time, but for now sort of like scouting, people that are excited about venture, but still really like operating that are writing small checks. But I want to pull them in.

So unlike scouting now where you just source and then ideally get some carry, I want them to see a whole deal through. They source a deal that we do it. They're joining every call. They'll learn how to we underwrite the deals, how we do the work. And then eventually they can put that on their resume if they want to, but we'll see. And ideally I can hire one that's fantastic. But just an approach I want to take. I don't know how these venture firms do their thing and do their scouting stuff. I don't care. But it's something that I just want to test out and see how it works.

Very cool. No, this is great. I wanted to just get a gut check for, I mean, we have a lot of managers that listen to the show that maybe aren't fundraising right now. Hopefully they're having, you know, doing little mini checkups. Doing some math. Doing some math. Open up that calculator app. We need to answer the question.

How do you return? 50 million or every fund sizes, you know, like literally. And then walk through tangible examples. And apparently no one does that or can do that on the fly. You see one trillion dollar company in the portfolio. Exactly. Just get out of the unicorn decicorn thing. Just buy 10% of the next Facebook.

Seriously. For 100K. Yeah. It's easy. No, and the other thing that was interesting is a lot of, I was actually, I didn't mention this, but I was asking about spinouts. There's a lot of great people, I think, great, you know, spinning out of notable funds and raising funds.

And I think what's confusing for them is they were like, look, a lot of these guys took the strategy, even though they, even the blue chips do this. And this is why they're so active in seed. And this is coming from the LPs. They're so active in seed because the individual investors are like, well, hey, if we take 30 million and divide that out by a ton of two, three million dollars checks, if we lose a few, it's not such a blow to the reputation of that, of that, you know, partner at the firm versus taking a $30 million check and putting into one company and saying like, hey, like, I'm a pretty good picker. that works out. And so I think it's made it really, really hard to underwrite these guys because they've just done whatever they wanted and candidly haven't taken a lot of risk or maybe have been able to. So it's going to be interesting to see specifically. I think right now we're seeing the most probably good quality spino outs. It sounds like over the last six months raising funds. But I think it's also, I thought that like shit, it's just hard for me because I've never been in venture before and I'm trying to like do something substantial. But it turns out that like even the folks that spin out are still getting kicked in the teeth. So I think that's what

you were saying go meet LPs really early and be able to answer these like tangible financial question. I mean, it seems obvious. It's not, but like it really, that matters. Yeah, it's funny to look at if you just ignore like, you know, looking at a spreadsheet of portfolio construction and you just look at somebody and you look and you say, if this person has a hundred million dollars to deploy in the next three years, do I think they're going to be able to give back hundreds of millions of dollars? And when you really just like look at somebody and just like ask yourself that question, Sometimes I look at a manager, you know, I'm an LP in a fund here in L.A. And you didn't do any math.

It sounds like that was a vibe LP investment. It was a vibe LP investment, but I look at, you know, I'm talking about a buddy of mine, Jack Dreyfuss, and like he's got a $30 million fund. I look at him and I'm like, yes, I believe he's going to get back around $100 million to his LPs. And like it's not like it's purely vibes based, but the guy knows how to, you know, knows how to do deals. Yeah. Well, the other, yeah, and I'll leave you guys this, I know we're over is like, so I was

talking to like a managing director at a pension fund that's got like over $55 billion and they're super active in venture. And he was actually saying he's like, go after the pensions because he's like endowments will actually leave you. Like they will turn. But he's like pensions don't. So if you get in, it's like pretty sticky. But they do have a high bar for like emerging folks. But he was like, I almost, he's like, I could make a killing if I left here and just advised managers that are trying to basically institutionalize because he was like, Like the hard stuff are things like when to exit. He's like, you could be, you could have great access.

You could actually pick the right deals. And you could just never exit at the right time. And he's like, that is just like a lot of what we see. So there's just an art to how do you institutionalize your firm that he's like a lot of folks miss. So if emerging managers you're listening, that's like the big chasm that is really hard to cross. Like have you hired appropriately. Even if you're a solo GP, like you have. Wait, but when you talk about when to exit, are you talking about, let's say, a breakout company in the portfolio is raising around at,

$5 billion and there's a lot of enough demand for the round and you're saying like when to exit those positions or what did you mean by that? I would say that largely most folks, especially emerging managers, at least as far as I know, are tell LPs and this is what I do as well. I'm not a public markets investor. When my companies go public as soon as we're out of lockup, like that that's ideally around the time then we sell. And then it's your responsibility to do what you want to do with the shares. So I think a lot of it is on the way there, especially. I mean, and this is probably a lot of what we're seeing because of 2021, a lot of folks should have probably sold secondary on the way up because people got priced at like sky high valuations and there was secondary happening all over the place in an insane

premium. And I think they're referring to VCs never selling secondary. And then those rounds go from being a $5 billion series D where they could have sold secondary in 21 to like a billion company right now. And they're sitting on these. And it's like just still on the books. And so I think it's a lot more of that that never happened. But that's hard. Well, that's another reason to keep your fund small. Because if you have a 50, million dollar fund and you get an opportunity to sell or you know uh secondary like that could return the fund potentially but if you're uh you know 500 million dollar fund it's hard to ever figure out an opportunity to sell secondary that's going to like meaningfully you know you know uh return the fund

or or anything along those that stuff can haunt you too because i'll hear stories of people selling facebook when it was like you know 20 but i think i heard the craziest story from tiger once which like, I don't know. Actually, never mind. I was like, I don't even know if that's on the record. They love doing PR, actually. Tiger loves just like, they're an open book those guys. That is not my story to tell.

There's definitely not a book about them where all the names are changed floating around. Actually, no, it's got to be public knowledge. They sold, they, oh my God, they sold so early at Facebook. That's all I'll say. It hurts because they didn't believe. I mean, Sequoia sold Google and we've talked about this. Like they, you know, IPO and then they just distribute. And it's like, oh, like they sold Google at like 50 million or 100 million or 500 million.

Like way, way, way too early. Finally, I have no idea that. Look, I just think it's the angle, it's the approach you want to take. If they want to take that capital and their returns, they made a dump it right back in, then they should do that. But yeah. Yeah. Anyway, this is great. This is great.

Thanks for squeezing this in and have a great weekend. Y'all too. See you soon. Thank you. Talk to you soon. Bye. Let's go to Zach Kukoff. He says, know your audience, Chief of Staff Edition in D.C.

They're either 24 or 45. and there's the second most powerful person in the room. They run the show in San Francisco. It's a new grad, the glorified associate best case or EA base case, and they run the slack. It's funny. Very real. SF stole the title chiefs staff. The co-opted that language, yeah.

It made it extreme in the opposite direction. They did, yeah. Got to bring it back. Sheel says thoughts and praise for our glasspreneurs. The business is down 75%. SF. Gary Tan is cooked so hard. It's incredible.

Glass is not getting broken. So San Francisco auto glass shops are now suffering as car break-ins plunge. It really does seem like San Francisco's cleaning things up. There's a new mayor. There's a lot of new investment and obviously the AI boom, but I think just a general vibe shift, not even around the federal election, but just around enough is enough.

And so they're mixing things up there. and seems like good progress. And also, anything bad happens, somebody tags Gary Tan, who's Batman. I kept telling friends who live in the Bay, I'm like,

you realize that like, like, 2023 was the time to be buying an SF because the vibe ship was happening. Yes. Homes were, when I compared home prices in prime central SF

to like suburbs outside of L.A. Yep. I was like, how does this make any sense? The only reason to make sense is people had gotten so depressed. There was not, not a lot of people saying, you know, people saying, you know, certainly less people going,

I'm going to move from Austin to SF. Yeah. But people did get dramatic with the moves out of SF. It's like, you could have gone to Marin. You could have gone to Atherton. But instead they were like, I need to go to Mogadishu, Somalia. I have to leave the hemisphere. I have to be so far away from San Francisco because it's so bad.

I have to go to North Korea. I would rather be in Pyongyang than Inclined Village in Tahoe. Yeah, there's so many. options, even if San Francisco, the city is rough. Like, Sunnyvale is fine. Like, there's so many places in the Bay that are great. You can go to Sand Hill Road. You can go to Menlo, you can go to Palo Alto.

None of those places were ever bad. But it got really, really dramatic for a while. Anyway, here's a rumor from TechCrunch expense management startup ramp is being considered for a charge card pilot program by the U.S. government's general services administration. Well, we're going to take a little credit for this one. Did they plant this in our head and then we joked about it or did we joke about it and plant in their head? I don't remember.

No, we were just joking about it. We were joking about it in a serious way. Yeah. And then we got a deep dive on it. Eric put out a longer post, started taking it more seriously. And it sounds like it's actually being considered, which is crazy. But you love to see it. And it would be very cool.

I mean, we always have the question of like, where does the money go in the government? why not have some insight in that? Why not have the receipts actually categorized? That makes a ton of sense. There's some debate over whether or not... Instead of having to set every card to a dollar, like what they've been doing. Yeah, yeah, yeah, very, very bizarre functions. And I mean, you can just imagine that if there's no oversight,

there's going to be more like just looser spending, and that hurts the taxpayer. So very excited about this. I hope it happens. Anyway, let's move on. We talked about the Golden Dome. anything else in here we should talk about? Should we close out with Wilmanitis? Talking about Don Valentine?

Don Valentine. Don't do it. Don't Valentine. He says on pricing and 25-year-old entrepreneurs, Valentine says maybe we should go back and forth here. I'll be Valentine, I guess. Can I make an observation before we switch? Sure. Absolutely. Because John and I were talking about this in the car and one of the great things about that venture business is that you're in an opportunity to learn constantly. One of the large number of things that were brilliantly recognized and executed was the pricing of the product. We have, in general, at Sequoia, lots of trouble and difficulty in persuading 25-year-old entrepreneurs that you've got to price the product higher. And our agenda for that conviction was the fact that a 25-year-old

cannot run a company on 35 or 40 percent gross margin. They need 60 percent. 65% gross margin in order to compensate for the mistakes that we know they're going to make, not specifically no, but in general, we know they're going to waste a great deal of investment capital. That's a great insight. Like they're going to over hire. They're going to get over their skis on CAPEX. They're going to be excited and say, oh, yeah, let's just pay up for this talent. And if you are making a lot of money, you can afford to make mistakes. It's fine. Yeah, it's fine. And Cisco was early on no and no influence from me or other investors able to recognize the need of first of all, pricing the product very high,

sustaining a very high price, and continuing to make enhancements to the product that provided them with the opportunity to continue at a high gross margin level or increase the high gross margin level. So one of the miracles of the launch of Cisco was the creation of an enviable cash flow that was early on very positive

when most companies are negative. And I remember conversations not seriously had, but not often had either about what we were going to do with all this cash we are accumulating. Now, startups do not have accumulation problems. They have the opposite problem. So they need to persuade the founders.

Yeah, and I love where Will pulled this from, Cisco Oral History Panel Part 2. I love it. He's got the PDF. Esoteric Valley PDF. Big PDF guy. But I think that's a good place to end the show. Yeah, this was fantastic.

Hope everyone has a fantastic weekend ahead. Thank you to Polymarket. If you're trying to monitor the news in real time over this weekend, head over to Polymarket. They've got a bunch of markets to check out what's going on. Yeah, the Polymarket news platform never stops. I shared earlier this chart, the largest company end of April. And Apple and Microsoft were neck and neck. And then Tim Cooked.

And Apple is now sitting at 92% with almost a couple weeks left in the month. So who would have thought that Apple would be still on top in a trade war with China, their primary supplier? You're doing great. Tim is goaded when it comes to supply chain management. So anyways. We were in one of those interviews. I just looked over at that stupid giant gong and we started laughing. When we roll out this gong, it's going to be insane.

We keep going to the wide angle and the gong is not even, it's too big to fit in this shot. It's such a tease. Anyway, have a great weekend, everyone. Happy Friday. We will see you soon. Goodbye. Looking forward to Monday. Cheers.