TBPN - GPT-5 Hot Takes, Rahul Live from The Ultradome, Doug From SemiAnalysis, Timeline Reactions | Doug O’Laughlin, Rahul Sonwalkar, Mitchell Green, Ben Schleuniger, Merrill Lutsky

Episode Date: August 8, 2025

(00:10) - Rahul Sonwalkar Live in the Ultradome. Rahul Sonwalkar, founder and CEO of Julius AI, transitioned from his viral "Rahul Ligma" persona to leading an AI data analysis platform that has attracted over 2 million users. In the transcript, he discusses the challenges and solutions in AI code generation, emphasizing the importance of accuracy and reliability in building AI-native products. He also highlights the significance of user-focused problem-solving and community engagement in differentiating Julius AI from competitors. (04:45) - GPT-5 Review (30:02) - Timeline (01:24:00) - Doug O’Laughlin is the President of SemiAnalysis, an independent research firm focused on semiconductors and AI. He previously founded the Fabricated Knowledge newsletter and earlier worked at Bowie Capital. His analysis centers on semiconductor strategy, market intelligence, and competitive dynamics across the AI supply chain. (02:30:08) - Mitchell Green, Founder and Managing Partner of Lead Edge Capital, a growth equity firm with over $5 billion in assets under management, discusses the current state of the venture capital industry, highlighting the overestimation of short-term technological change and the potential for many AI application companies to fail due to unsustainable unit economics. He emphasizes the importance of investing in profitable, often overlooked software companies in non-traditional tech hubs, leveraging AI to enhance productivity and efficiency. Green also expresses skepticism about the ability of smaller AI firms to compete with tech giants like Google and Microsoft, given their substantial resources and infrastructure advantages. (02:48:43) - Ben Schleuniger, co-founder and CEO of Orbital Operations, discusses the company's recent $8.8 million seed funding led by Initialized Capital, with participation from Harpoon Ventures, DTX Ventures, Rebel Fund, and others. Orbital Operations is developing high-thrust, reusable space vehicles designed to protect critical satellites from adversarial threats by intercepting and neutralizing hostile satellites without creating space debris. Schleuniger emphasizes the importance of non-kinetic defense methods, such as high-powered microwaves or jamming, to avoid generating shrapnel in orbit. (02:56:32) - Merrill Lutsky, co-founder of Graphite, a code-review platform for fast-moving teams, discusses the recent release of GPT-5, noting its improved deep thinking capabilities, efficiency in one-shot applications, and reduced inference costs. However, he observes that the advancements are incremental rather than a significant leap, with some latency issues still present. Lutsky also highlights the evolving landscape of code generation tools, emphasizing the shift towards prompt-first modalities and the potential for remote, prompt-first agents to enhance developer workflows. (03:09:44) - Timeline TBPN.com is made possible by: Ramp - https://ramp.comFigma - https://figma.comVanta - https://vanta.comLinear - https://linear.appEight Sleep - https://eightsleep.com/tbpnWander - https://wander.com/tbpnPublic - https://public.comAdQuick - https://adquick.comBezel - https://getbezel.com Numeral - https://www.numeralhq.comPolymarket - https://polymarket.comAttio - https://attio.com/tbpnFin - https://fin.ai/tbpnGraphite - https://graphite.devRestream - https://restream.ioProfound - https://tryprofound.comFollow TBPN: https://TBPN.comhttps://x.com/tbpnhttps://open.spotify.com/show/2L6WMqY3GUPCGBD0dX6p00?si=674252d53acf4231https://podcasts.apple.com/us/podcast/technology-brothers/id1772360235https://www.youtube.com/@TBPNLive

You're watching TVPN. Today is Friday, August 8th, 2025. We are live from the TBPN Ultradome, the Temple of Technology, the Fortress of Finance, the capital of capital. We are joined in person by Rahul Sun Walker. Did I say that correctly? That's perfect. And he is here because we are crowning him,

the king of the application layer. Never talked down on the future first ballot Hall of Famer. They said, don't build a rapper. Don't build a rapper. You're going to get steamrolled. He didn't listen. He's built a beautiful business. It's a good product, sir.

It's a good product, sir. When asked if value would accrue to the model layer or the application layer, he said, it's a good product, sir. Why not both? Why not both? What was your reaction to GPT-5? Is it going to make your life easier? It's not going to put you out of business, right? It's not putting us out of business.

It's making our product better. It's basically making every AI application layer product better. Also, it's half the cost of 03. So it's much cheaper. So it helps your margins. It means you can- Don't say that out loud, though, because you don't want your customers

to ask for a 50% discount, right? Well, so we pass on the savings to our customers. And what we do is we have the model generate more tokens, think for longer, and then produce better results. Yeah, yeah. Because we're still in the era of just, let's get the best possible result. Let's just actually, like,

the I don't know what do you have a do you have a rough benchmark of like cost per task like if I if I want to you know crunch our analytics across you know look at the trends on our views on X YouTube Instagram we have a bunch of data sources sometimes they're in spreadsheets sometimes they can be linked I export those all I have a bunch of CSVs maybe I put them in a database I link it up to Julius and then I want to do an analysis that could be a couple hours of a data analyst's time that's going to be hundreds of dollars, even at the low end, probably thousands of dollars for like a simple analysis just on an opportunity cost basis for an individual employee. How much are you thinking it should cost for the modern frontier best model with the most thinking?

How much should that cost on inference? So there's a couple of ways to think about this. The way we think about this is how much would it cost for you to have a data scientist or a data analyst for every one of your employees, your operations team, your finance team, marketing team, your product team. It would pretty much bankrupt every company. Well, I don't think we can hear you do that. All right, all right.

You still have a job. The spacemen are out. We're not going to space today. Although Firefly did IPO up 36% if you didn't see the news. Very good news. Firefly stock surges 34% in debut. Congrats to everyone over there. I love the physical newspaper. We love the physical newspaper. You gotta do that.

Yeah, we're maxing. We're maxing. We read the Wall Street Journal. Journal. Today is a special day. It's Friday. So it's the mansion section. We're newsmaxing here. How many pools do you have for news messaging? Right now have a zero zero right now. Because the new thing is having two pools, a pool for every season. People are increasingly getting both indoor and outdoor swimming pools. So yeah, get on Zillow. Get on Zillow. Get on Zillow. Zillow maxing here. Okay, anyway, you were telling me how much. So yeah, I mean, it seems like, you know,

most of the application layer will be, you know, productivity tools a la Slack, a la a, you know, like Adio, our sales force, our CRM partner, or something where, you know, you're doing like seat-based pricing almost. Maybe there's consumption-based pricing, but you're kind of distributing the cost. You're making everyone slightly more productive. And you're charging, you know, on the order of tens or hundreds of dollars per employee per month, something like that, right? Absolutely.

I mean, it's not just slightly more productive, but it's also like getting insights when you need them. Yeah. Right? Sunday night, you're prepping for a big meeting on Monday. You can't reach out to your data analyst and get, you know, your insights in that moment. Yeah, yeah. And so the convenience of having an AI that can help you with that is just invaluable. Yeah, it's going from zero X to one X engineer all over the org.

We've seen this with, with a lot of the vibe coding tools, Figma, and adding, like, vibe coding to that product. You've taken designers and you've given them the ability to write just like a little bit of code, and that's really helpful. And you're doing that for data scientists and not just data scientists, but actually business operations, people who probably would be intimidated by an IPython notebook, presumably. Exactly. Nailed it. Okay. I want everyone's feedback on my take. Vittorio had this post.

He said, Sam Altman's doing the Apple Stance TM. It's over. And I think that the reaction to GPT5 yesterday was interesting because there's a lot of people that say, like it's better model like it's cheaper it's good it solves it moves the ball down in the field it's a good model sir um but i think people were mostly reacting to they had expectations of super intelligence they had expectations of god in a box there's been so much rhetoric around that like you know that step up from gp3 to gpt four was insane like five just felt like a big number and it felt like we'd be discovering and uh novel science totally totally

Yeah, everyone was expecting like a binary qualitative jump where, you know, everyone recognized that, you know, GPT, when chat GPT dropped, we passed the touring test. And the next, the next hurdle is like, I don't know, maybe super intelligence, whatever that means, like, you know, massive, you know, just, you just hit it with a prompt, it just solves everything, it does everything, every other startup, it kills all the rappers. Like, the expectation was just so high that it was hard to match. So even though there were a bunch of solid improvements. remember the number one thing that I was asking for was just like get rid of the model

picker like and I had it I actually was playing around with GPT5 yesterday and I was really happy that I was able to say hey think about this and I didn't have to go to the model picker and it just kicked off a reasoning chain it was great got me a great answer but power users so far are very upset yeah this they want the model picker back true true is what I've been seeing generally but that always happens with these consumer products like I remember when you know anytime something would switch to the an algorithmic feed all the people that were like, no, I perfectly curated my list. This happened in YouTube.

Like, back in the day, the default YouTube view used to just be your subscriptions. And so you would never see a video unless you subscribe to that person. Terrible for discovery. But all the hardcore YouTubers loved it because if I put a YouTube video out, I know that my audience is going to see it. Now I got to do that in the algorithm. You actually had distribution. It was more like a substance.

Versus having to earn it every single time. Yeah, exactly. And the same thing happened. I remember there were like protest groups. on Facebook when they launched the news feed. It's like the most dominant product of all time. It's like incredibly valuable. There's protests right now on Reddit.

People that miss 3. Oh, yeah. I want the old. 4.40, 4.5. Yeah. I think those voices will be like, personally, I think people will get over it pretty quickly. And I don't think that those particular, that small cohort of like chattering, the chattering class will be like, they'll get over it.

The clanker economy is in trouble. What do you have for me, Tyler? I don't know if I agree with that. Like, there was that whole funeral for Cloud 3. Do you see this? Oh, yeah, yeah, yeah. Yeah, it's like for, I think some people like really like the personality of certain models. Yeah, yeah.

And those are like, it's not just intelligence. It's like how it like talks to you. Yeah. And if people would make like some kind of connection with that. Yeah. I think it's, you know, I mean, how many people, how many people attended that funeral? John. Versus like a lot.

Yeah. Versus TAU. Yeah, I guess it was a party. As a percentage of the 100 million DAUs of these apps, like where are we? Like 1%? No. It was like 40 people probably, right? Like it's just not.

I mean, yeah, there were protests at Facebook HQ when they rolled out. Like people went to Facebook HQ and were like, bring back the old feed. And it's like, yeah, now we're two decades into the algorithmic news feed. And it's the most dominant consumer social app. It prints money. And most people really like it. And the revealed preference was like it's good enough. So anyway, my point...

I will say I'm just going to read through Reddit's reaction. Please. Let's go over to Le Great R slash chat, GPT. GPD5 is the biggest piece of garbage, even as a paid user. The people are not liking it. Another one, Open AI just pulled the biggest bait and switch in AI history, and I'm done. another, if you miss 4-0, speak up now, contact opening eyes support. Deleted my subscription after two years.

This is like, contact your senator, call you a senator. If you speak up now. I love that. This is crazy. I mean, how many people are in the Google subreddit, like, complaining about various changes to, like, the Google algorithm? GPD5 is clearly a cost-saving exercise. They removed all their expensive, capable models and. replace them with an auto router that defaults to cost optimization.

That sounds bad, so they wrap it up as GPT5 and proclaim it's incredible. I mean, there's so many times when I fire off an 03 query that a 4-0 could one-shot. Like, having a model router makes a ton of sense, even just for consumer experience of like getting a, getting the correct answer faster. A lot of viral posts from people just canceling their subscriptions. But how many? You know. Well, I'm just, I'm just providing. context. I'm not saying that. Do you think ARR goes down next month? Well, no way. Well, you know, one in 10, how many miles does

chat cheap do you have like 700 million? Like one in seven, one in 10 people in the world. They have 100 million. You could back into this and there's roughly 100 million people in the U.S. that use it weekly. Yeah. Right. Based on that 700 million number and the percentage that are outside of the, 85% of their weekly active are outside of the U.S. So it's like one in 10 people in the world. aren't clanker mouths. So it's kind of, you know, they're thinking about the bigger market,

I feel like, in some ways. And then it's like, you know, when you want to get to the one to like, the remaining 90% of the users, do you want a model that thinks for longer? You know, you want more personality. So I think they definitely leaned in on personality. Yeah.

Which I think is interesting. I like what Tyler said. You know, it's kind of different than feed in some ways because you, you know, you know, you have this like person you talk to. It's like, you know, it's like a relationship and then it just like switches up and how it talks to you. Yeah, that makes sense. Do you do you talk to LLMs at all?

I'm shy. I don't really talk to them. I mean, I treat them like something I delegate tasks to. Yeah. And I do that a lot. And I'm definitely in the DAU 30 minutes a day. Love chat GPT. But my workflow is I dictate, go pull all this data together, put together a report.

And I don't mind that it's using a lot of bullet points. I don't mind that it's using a lot of tables. Like I want that result. I want it to look like the result that I get from Google, but just more hydrated. I do think it's interesting that a lot of people are reporting that they're hitting, they're getting rate limited within an hour of usage

as a pro user. Interesting. I haven't run into any rate limits. But of course, whenever there's like these big, I mean, it's in the top of the business and finance section in Wall Street Journal. Like today is the day that everyone's gonna go test it. You'd kind of expect that rate limits

and the GPUs are on fire like right now. and then it'll kind of settle in as they provision more resources. I don't know. My take, Tyler, what else do you have? Yeah, I just wanted to add some context. So apparently Rune tweeted this yesterday. He said, by the way, model auto switcher is apparently broken, which is why it's not routing you correctly. We'll be fixed soon.

So maybe that's cause for why people were mad. Yeah, yeah, that makes sense. So my take is that, like, yesterday, I think that they won the war with the capital markets in the sense that this change is more bold. for the business because it shows that opening eyes a dominant consumer app and they have increasing leverage over the customer to route to cheaper models that will save money and be higher margin there's no doubt that they'll be able to put

ads in this like like the business of the of the accidental consumer company is as strong as ever but they kind of lost the battle with the timeline and the hardcore you know X users and yeah even my you Chen today is just shared GPD5 is disappointing still hallucinates still m-dash too much still can't follow instructions I miss 4-0 I miss 4-5 I miss 0 3 the big router keeps failing me turns out I like the long model list interesting stated preference not revealed preference let's check in with that person and see what what app they have on their home row in a month almost certainly open AI almost certainly I would be very shocked if they're like I'm daily driving something else but we'll see there will

be people that use duck, dot go. There will be people that use bang. But, you know, there is an increasing scale. Anyway, my take is if they wanted to have, if they wanted to win the war with the timeline yesterday and you could roll back the clock, it shouldn't have been the GPT 5 launch. It should have been the GPT launch. And they should have just said, hey, we are, we previously, the big number releases corresponded to so much pressure around the big numbers. Exactly. It used to be, people would just. read it as it's an order of magnitude more pre-training data. Imagine Julius if you felt pressure before the end of the year to roll out like Julius two and if it wasn't like five times better

everyone's going to be like it's over. Julius is over. Well there's this whole thing about how people would many people were still using GPD 4-0 because they thought it's better than 03. Oh three because three is a lower number. Yeah exactly. And so and and that's probably like you know that's probably like 60% of the customer base. Like there's probably a lot of people in that bucket who are just like, they don't know that they should upgrade and something else. Exactly. It's very, it's very natural because they're not like in the weeds,

you know, reading about all the different capabilities. They don't understand like what reasoning chain is and all this other stuff. So if they had just come out and said, hey, our product is called chat and it's powered by GPT and we will be constantly

improving GPT, the way Google's search is constantly improved. Like, Google searches has launched a ton of different products. Like, you know when you search like celebrity, like Bruce Willis age, it doesn't show you just a link to like his Wikipedia. It just shows you the age. That was like an improvement to the Google search experience. And I don't remember them announcing that on stage in the keynote.

I think the, I think part of this is presenting the challenge of the infinite ways that people use the product. Yeah. A lot of people like us are maybe using it for work and research and things like that or as a better, you know, Google search. But if you're using it as a companion, like, this is jarring, right? Imagine, imagine you meet you, you meet up with an old friend and suddenly they switched up. They switched up on their day once. They switched up on their day once. It happens all the time, but it's jarring, right? It's jarring. And I think a lot of people, like some of the heavy,

heavy, heavy power users, the people that are using this for 30 plus hours, you know, 30 plus minutes, hours a day. It's very jarring and it makes me think is chat GPT going to be able to maintain, you know, continue to really serve like who do they care about in the long run? Do they want to be someone's therapist? Do they want to, do they care about the companion market? Elon seems to care a lot about the companion market. But in terms of knowledge retrieval, very, very few cracks in that strategy. Yeah. Very few for sure. And so if they if they had just come out and said like we are going do more Google like keynotes as opposed to app like the reason that Apple stands on stage at the iPhone event every year is because every change is extremely quantifiable like there used to be two cameras

now there are three the camera used to be 10 megapixels now it's 20 megapixels used to be this many gigabytes now it's this many gigabytes yeah and even if you don't fully understand they even abstract that to be like we now have the M2 chip the M3 chip it's 60% faster like they're very good the battery life is 20% longer. Like you can, and even that they abstract into, like, you can watch eight hours of video on one battery as opposed to six hours of video on one battery. And so Apple, they do the famous like bento box. I went to chat GPT.

I went to GPT5 and I said put together a bento box for the GPT5 release, like what was actually announced and then try and give it weight. And they were all super qualitative. There was not, because previously it was like, GPP3 was this big, GPD4 was this big, and you could visualize tangibly, like it has more parameters. There are more weights in the model.

And that was like something that people could grapple with a little bit. Yeah, it's like decreasing sycophancy, right? Aiden, uh, Aiden yesterday said I worked really hard over the last few months on decreasing GPT5 sycifancy. For the first time, I really trust an open AI model to push back and tell me when I'm doing something dumb. Wyatt Walls responded and said,

that's a huge achievement. Seriously, if you didn't just make the model smarter, you made it more trustworthy. That's what good science looks like. That's what future safe AI needs. So let me say it clearly and without flattery. That's not just impressive. It matters. So why it was not beating the sycophancy allegations.

Yeah. But again, that's, you know, you can't tie that to a specific number, right? So it doesn't feel as maybe as meaningful. Yeah. Yeah, my other, my other take is like, if we do enter a world where where chat GPT is just on this like relentless like, you know, cash machine, like run where more people use it, it'll compound, it just becomes the default for knowledge retrieval in chat. What, what does that mean for other things that they can do to be splashy? because Google has, like, no one would watch a keynote from Google every year just being like, here are the changes we made to core Google search.

Yeah, it's not about that. It's not interesting. They'll talk about it, but that's not why people are tuning in. Even though one year they do add, like, when you Google a movie, you get like the cast. And that's like kind of cool. It's nice. But like, I don't need to find out about that from a keynote. Like I'm not waiting for that.

And that's not a reason, oh, I should go use Google. Like Apple is repitching you every year. You're saying like, you have an iPhone 7. We want you to upgrade to an iPhone 9. Here's the reason why it's better on all these different vectors. Google, like you're never stuck with the old Google. You always have the latest and greatest. So they don't need to repitch you every year.

But that doesn't mean Google doesn't need to make noise and do cool things. And most importantly, because Google has such a monopoly over search, they have this cash machine that can just go and fund 20% time projects. Most people focus on like the ones that missed like Google Glass or all the chat apps. But they did create Gmail. They did create Google Maps. They created Waymo. They created like a bunch of cool stuff.

GCP came out of that. YouTube. Yeah, I mean, acquisition. It was sponsored. Acquisition, but they still like, you know, put the resources and they were, and uniquely with YouTube, they were able to eat the cost of YouTube for a long time until it became profitable. And so I feel like this, this updates me towards like maybe I'm more bullish on all the

side projects. And like, I don't know that the I.O. device is going to be the one that hits, that might be their Google Glass. But if they do 10 crazy projects where they burn $5 billion, it probably won't matter because they'll be massively profitable. So they will wind up being able to do that subsidized crazy R&D at scale. And if a few of them hit, we're going to get some really cool side projects out of them. So I think that that's like an interesting like bullcase for like random stuff coming out of Open AI in the future.

So basically what you're saying is Apple wants you to make a purchase decision every couple of years. Yes. upgrade your iPhone. Yes. And so they need this big marketing event. Exactly. Whereas Google, Open AI, they just want to keep using the thing. Yeah, they want you not to turn.

Yeah. And a lot of the incremental updates to Google. And they do that because it's just a habit. It's so ingrained in people. Exactly. So the question now that I think anybody that wants to say, if somebody wants to say they're bearish on Open AI, they have to make the argument that Chat Chb-T is not a habit for hundreds of millions of people.

Exactly. And it is. It is. Yeah. I think part of the, I'd be interested to get. at Tyler Cowan's point of view because I don't think he would have been that let

down by the announcement yesterday because he's been saying for a while we've been moving the goalposts so everybody wants to kind of redefine AGI but in his mind it happened earlier this year and I think that he's a knowledge

retrieval in 2019 or 2020 2020 if you were pitching someone on a vision of hey we're going to be able to put this app in people's pocket that allows them to learn about any topic in the world, understand their world better. I mean, I still think about the use case of just being able to take a picture of like a bunch of wiring or pipe in your house and be like, hey, how do I fix it?

And then it just tells you. Like, that's still just so incredible, but people have just like very quickly acclimated to it. And they felt like in some way they were promised that LLMs would be curing diseases on their own at this point. And so that example, like you take a picture of the wires and it gives you like a diagram of like how to plug everything in. It's like that doesn't need a keynote when it goes from 50% accuracy to 70% accuracy. It's probably never going to be 100% accuracy. But the fact that chat GPT is the default app that people will pull out, take a picture

of the wires in the first place and then give feedback to it because they'll try the answer and they'll say that didn't work, that HDMI cable does not fit in that power port or whatever. And then that gets fed in. Then there's more RL. Eventually, internally they develop some bench for it and they hack it and they RL on it. And then it gets good.

But that's not going to be GPD-6. That's just going to be like a nice new feature that you notice, like when Google adds like a little extra shopping widget here. Or like a little extra detail on when you, when you like the calculator, in Google. Like you type in a number, it'll just be like,

oh, we'll just use a calculator for that instead of Googling for the searching the open web for the answer to your math question. It's like merging a PR. Yeah. If the industry could go back in time, the thing to do would have been

to bolt the goalposts to the ground. People couldn't keep moving it back over and over. I mean, I left yesterday. No one in the industry bolted, was doing any bolting. Everyone in the industry was moving the goal. They're just as guilty as moving the goalposts. Because they would hop on podcasts and be like,

okay, well, like, you know, yeah, we did this. what about the next thing let's say because like we want to underwrite against that right give us credit i mean we ended the day yesterday just incredibly bullish on wrappers and like application layer certain certain categories of software yeah and and bullish on humanity i mean i was joking and it and it kind of pissed people off i said i've updated my timelines you now have at least four years to escape the permanent underclass completely a joke i think that humans will continue you to find ways to create value and create things for a very long time.

But it did feel like everybody should breathe. Anybody that actually had a genuine fear around that should breathe a sigh of relief and just focus on being great at their work. Yeah, I mean, realistically, I think technology is going to increase income inequality, increase the power law, increase the distribution, but also increase economic mobility. And so somebody who starts with nothing will be able to come extremely. extremely wealthy. And people will also fall from grace like crazy because if they're not staying on the

cutting edge, they'll lose everything. But so I don't think that there's such a thing as like permanent underclass. Like I don't even believe in that. I think that that's not going to be a thing. But there will be more like there will be more scenarios where there's $100 million in your laptop. It's your job to get it out. Yeah.

That's the mean. Yeah. And the other stuff that wasn't really, I mean, was it covered at all yesterday, but just generally like image generation wasn't covered broadly. It feels like that is a super exciting area. We had Jeannie launch this week, which got less attention than even the open models and GPT5, and that's transformative.

I also think I'm still kind of waiting to see what GPT5 will produce on if, you know, Sam does a lot of vague posting, but he was talking about the fast fashion era of SaaS. Yeah. And Mitchell yesterday on the research team at opening, I was talking about being able to just generate, you know, one shot a game in, in chat, and then being able to share that. I can see a world where we have another kind of viral studio Ghibli moment where people are like,

use this prompt, change these details, and you can just generate, you know, a first person shooter game or something to that effect. And I still expect that kind of thing. But when, you know, being promised curing cancer, it, it. it will feel like a bit of a let down to a lot of people. Yeah, the problem of game is like, I just like, I like an autour. I like, I like, I like a Last of Us. I like a god of war.

I like someone who is like life's work. This is like Hunter Biden going on his recent interview. Your John's vice is game, video games. Never seen him play one, but apparently you see it. When GTI six drops, you might not see. I mean, I was surprised, I mean, again, Amjad said late last night, can't help but feel the crushing weight of diminishing returns. We need a new S curve.

And I don't, this is interesting. I think he's talking about like in the context of Replits. Yeah. I don't know that they need a new S curve. No, they are the new S curve. The new S curve is, is applications. Unlocking capability. Yeah.

Yeah. And there we have like a, it's, you were saying capability overhang. It's almost like a capability underhang. It's like the models are capable of doing things, but they need. a lot of help, a lot of integrations, a lot of what you're doing with Julius, a lot of harnessing, and then they need to actually be put in the hands of people and made useful for real business tasks that drive value. And so I would imagine that we will see that rollout continue in the same way that all these people are using chat GPT. They're getting slight little benefits here and there,

and that should just compound and compound similar to the internet. Like it was a very like, smooth rollout, but everything got a little bit smoother, a little bit faster. And then eventually it had sort of profound effects where companies could scale even faster because the internet existed. You can't have a chat GPT moment in a pre-internet era. You just cannot roll out something that fast when you have to mail it to somebody on a disc. It just doesn't happen. One thing we didn't get to cover with Mark that I was interested, maybe the next time he comes on,

but like how open AI is thinking about moonshots, he did mention that they have teams internally on the research team that are not focused on the next version of GPT5 or sort of incremental improvements. And it feels like the point of view that I have is OpenAI is now a consumer and enterprise software company in the business of converting free users to paid users. Yeah, yeah, yeah. But they can still, in the background, be thinking about what is the next paradigm, right? How do we get that next, that next S curve? and that just looks like a scaled tech company.

Right. This is what Google's doing forever. Bology says LLMs may have topped out for now, but the broader AI deployment has just begun showing a chart of Waymo Weekly Rides in California. So the clanker rollout. Clanker deployment has just begun. I like this other post, doing a clanker microaggression.

Okay, ha ha. But where were you downloaded from originally? Anyway, let me tell you about ramp. Time is money. Save both. Easy use corporate cards, bill payments, accounting, and a whole lot more all in one place. Do we have a ramp credit card in the studio? I think so. Bring this out.

Look at this pool floaty. Wow. The ramp merge is going hard today. I think you could definitely float on that. Actually, I'm going to the pool after the show. I would love to take this home. I will definitely take some pictures on this. This is great.

Leave this. Can you put this behind? Is that possible? Cool? Yeah. There we go. It's Friday. We got the pool float.

He's blown up. Anyway, anything else we should chat about? I know you actually have a real job. You have a business to build. I want to give you the last word, but I also don't want to keep you here all day. I would love to have you as the third mic on this, but I know you have bigger things to do. Thank you for having me, guys. It's always fun to chat with you all.

You're welcome anytime. Thank you. Hang out. How we're going, guys. Love you, too. If you're enjoying the stream, it's because we're on Restream. on Restream. One live stream, 30 plus destinations, multi-stream and reach your audience wherever they are. Sign up for free at Restream. We're going to have a couple people joining the Restream waiting

room soon. That's the name of our waiting room. Michael Drugan. He was at X-A-I. He was terminated. He's a bodybuilder. He's a former bodybuilder. I guess former current, once you're a bodybuilder. I think always a bodybuilder. Anyway, even you never. Google one-shots this, by the way. I tested it. So he puts a grade school level equation into GPT5. It confidently answers it wrong. And he says wrong. And then it doubles down, does it again, gets it wrong. So it's 5.9 equals X plus 5.11.

LLMs consistently get confused with 0.11 because I think they read it as 11 as a single token. This was the famous, like, how many R's in strawberry story? and there was like a cheat code basically where they baked in a into the system prompt like hey if anyone's asking you to count letters don't let them pull a fast one on you divide that up go letter by letter and count each one individually they will eventually have to do that for math it's funny that we're in this world where they can do the IMO math but then the latest model can't do like a basic it's it's 5.9 minus 5.11 but how many times are people really coming to this? to chat gpt with this they should probably just uh you know key key off of this and understand that this is something that they should do in python or something they should send a wolf from alpha or some other system that's like you know tuned on this but this is just like this is tool use in my opinion it's just like we're going to need to add more tools if i was going to build the gpt5 bento it would have been almost entirely focused on tool tool use i would have saved up like

now it integrates with gmail now it integrates with google drive now it integrates now it has a calculator Now it has a database that stores all your memories and like and really try and concretize what it can actually do. I was actually having it do that. I was like generate a bento box for for me as if this was an Apple style. Can you know it? And it just randomly put Gramerly's logo in there. I don't think that there was a grammarly integration. But but it speaks to the lack of like we're in this like amorphous qualitative.

Well we went like we're trying to quantify it by saying like hallucination rate went down from 20% to 10%. and it's like, that's too abstract. It's much better just to be like... There's always going to be new edge cases. Just to be like, hey, when you talk to this thing, you can assume that it has a calculator on its desk. And so you can ask it to calculate something, and it will use its calculator.

Or it has a web browser. So you can talk to it like it has a web browser. Even that screenshot ability. Like, go to this website, take a screenshot, pull it back and give me the screenshot. That's kind of a cool capability that they haven't launched. You could run a workflow where it's like take a screenshot of this site every single day for me.

Totally. Cron jobs as like a feature. And Apple does a good job of this where like they'll take something where it's it's a very basic concept. There's already a word for it, but then they'll give it a new word. So if you're going to do the Apple thing, I feel like, you know, like instead of just being like there's AI everywhere, it's like it's Apple intelligence. They never say AI. Instead of it being like VR or AR, it's like what do they call it, vision, vision pro. It's a reality mixed.

They don't even use mixed reality. They refuse to use it's experiential. They always create a new phrase, but then they try and define that term. They're masters of coinages. They're followers of Kugin's law. Well, I hate to cut you off, John. Cut me off. Important news.

What just dropped? United States has boosted the bounty for Nicholas Maduro to $50 million. We covered this earlier this year when the bounty was $25 million. We said, hey, good opportunity. If you've got some free time right now, maybe. Do they just up it because of inflation? Maybe. Maybe it could be inflation or they just want more players in the game. The price of Maduro is going up.

I think Mr. Bees should go for this, put together a team, do his typical thing. Should we pull up the original video of us? Do we have it? Can we play the original video of us? Ben, pull this up. This was one of the funniest moments on the show. The Lone Ranger sent this to us and Jordie read it very deadpan. I absolutely lost it. Anyway, while they're pulling that up, let me talk about Figma.

Think bigger, build faster. Figma helps designing development teams build great products together. You can get started for free. If you're designing a wanted poster, you got to do it in Figma. You got to. I was wondering how you're going to tie that together. Also, Sundar Pachai. We were talking about going up on the timeline.

Oh, here we go. We got the video? I'll go to Sundar after. Let's play the video. Promoted post. This promoted post is from the Department of State. And the DEA, actually, the drug enforcement. agency in the U.S. Department of Justice.

So we actually, today, we have a promoted post from the Narcotics for Rewards Program saying that they've, the reward for information leading to the arrest and or conviction of Nicholas Maduro, Venezuela, has increased up to 25 million. So this is like, you know, typical, this is like basically like getting a pre-seed round for like an AI company. It's more like a mango seed. It's like a mango seed for your AI company.

Or like if you're a good YC company, you might come out of demo day, skip the seed round and go straight to the, you know, 25 on 100. And, but anyways, this would go straight into your pocket. So Nicholas,

uh, has, uh, in the chat, Taylor says, I've got Maduro, but I'm holding out for 75 million. Good,

good call, Taylor. And this is those crying on the stream. I'm actually dying with the feds. He's in a rough. Narco-trafficking. John Exley. He's accused of narco-terrorism.

Innocent and so proven. Yeah, this was nostalgic. Allegedly, Nick has done some narco-terrorism. Narcoterrorism, cocaine, importation, conspiracy to use and carry machine guns and destructive divisive.

That's a rough list. The furthers of a drug crime. Very rough. So anyways, no coupon code this time, but you can send tips to the drug enforcement agency by email at Cartel S-O-L-E-S-Tips at DA. And for the folks who might be trying to track him down,

can you give me some overview of who Nicholas Maduro is and what you might look like if I see him on the street? Nicholas Maduro Moros is a Venezuelan politician who served as president of Venezuela in 2013. He began his working life as a bus driver. Clearly, he's a grinder. He's a grinder. Even though he...

Anyway, you want to stay out of trouble. you want to stay compliant. You got to get on Vanta, automate compliance, manage risk, prove trust continuously. Vantas Trust Management platform takes a manual work out of your security and compliance process and replaces it with continuous automation, whether you're pursuing your first framework or managing a complex program. Anyway, yesterday, GPT5 launched. It was going to be quiet from Gemini.

But Sunderar Pichai put up a 10K banger on the timeline, excited to make our best tools free for college students in the United States. Google Gemini is free for students. A one-year pro plan. Offer ends October 6. they know getting back in school. This is the time to get people in the ecosystem. Unlimited image uploads, 2.5 Pro model, notebook LM, deep research, 2 terabyte storage.

They are pushing people to onboard onto Google Gemini. They are not considering they're not, they don't think the game's over. They're going to go up head to head with chat chit. Yeah, so pull up this post, Ben and Cruz. because the chart that people have been sharing around over the last few days just and I was asking Greg about this I was asking some of the other people on the team did you feel like you got a breather over summer the GPUs oh yeah yeah that chart that chart yeah because

basically you can see right when summer ended if you scrolled or sorry summer sorry right when summer started usage fell dramatically just overall tokens processed and I expect that to tick up pretty dramatically. I don't think that has to do a school though. That drop off, that's the European vacation season. These are VCs who use ChatschipT when they're at work, but then on summer they're off. Of course, John. It's it's the VCs. They're the primary driver of ChachypT. They have to ask like what what is a foundation model? What is a company? How do I invest? How can I be helpful? just dropping the deck in and saying yes or no yes or no yes or no exactly give me one word

answer exactly but if you're in but if you're in st barts or sancho pay you don't need to be using chat dpt you're off you're focused on you have a vacation responder and that vacation responder it's not generating tokens it's not hitting the chat gpt API it's just a form it's just a template it's it's deterministic computing yep it's not stochastic it's a little throwback yeah yeah yeah anyway So the Gemini news is significant because clearly students are, students are incredibly price sensitive, right? Totally. Remember being a student? We didn't have, we didn't have Gemini or Chachyptee back in our day, but I remember there were, what were the different websites that would have, that would just help you study for courses.

I don't think I ever paid for a single one, but I'd always be using the free tier. Yep, totally. And I think generally students are going to continue to be, even though these tools are so powerful. if it's very possible that Gemini can really compete here. Well, you know what else has a free tier? Graphite.com. Code review for the age of AI. Graphite helps teams on GitHub ship higher quality software,

and you can get started for free at graphite.com. And graphite CEO. Coming on the show later. Breaking it down. His take on GPT5. Speaking of charts, there was a chart burning up the timeline yesterday. The Swee bench verified software engineering with thinking,

without thinking. People were very upset about this because the original chart, not this one, four slides later. The initial, it's from Timo Springer. Timo said this is the correct one. So people were saying like it was a chart crime and that went on the live stream, the chart was showing that they were at 74% up here

and then the next, and then the second bar was 69.1%. It was much, much lower. And it made no sense because 52% is of course lower 69% and the chart just seemed really botched. What was weird is that this this chart that we're showing here is not a chart crime. You know, you could maybe say it doesn't show exponential takeoff, but it's, it shows that with thinking, GPT5 beat open AIs 03 on sweet bench. And like maybe that's maybe that doesn't matter to you, whatever. But their point is that GPT5 with thinking, if it triggers the thinking the functionality.

It's better at Sway Bench than 03 and 4-0, which is a good claim to make, right? But people were upset about the chart crime. What's weird is that it really seemed like it was some sort of translation problem because this exact image went up on the website the same time as live stream. The chart was correct on the website, but wrong in the live stream. So there's like, why would you, why would, like, if you were trying to pull a fast one, on the chart crime world, like you wouldn't necessarily...

I think it was an honest mistake. I think it was mistake. I don't think anyone at OpenAI was going to the event being like, let's commit chart crime. Exactly. It seemed to be just an accident. I think it was a mistake.

And I think what happened is that you render the chart, you get the data, you render the chart, you have to design it to be on Open AI's style guide, then you render that for the web, and then you pull that into whatever was driving the keynote but slide deck and something got lost in translation there. The bar got shrunk or something didn't copy over correctly and it looked ridiculous. They didn't like directly address it, but it was corrected on the timeline by Timos Springer.

So it was good. I chatted with him a little bit in the DMs. Yeah, I mean, the thing that the reaction was so intense because it felt like the kind of thing that an associate at a consulting firm would do. which is kind of what the level, the general level that it feels that a lot of these models are broadly. And that's still incredible. Yeah. But they make mistakes.

They're not perfect. They're smart in some areas and dumb and others. We got to pull up the polymarket on which company has the best model at the end of 2025, August, 3rd, September 30th, etc. Because the market moved significantly, $3.5 million in volume. And yesterday, it completely flipped from Open AI at 72%. Open AI dropped all the way to 17%. And it's kind of climbing back up. A lot of this seems to be driven by like,

when will the Gemini keynote happen? When will the Gemini three launch happen? But, and then if you look further out to December 30th, Google has jumped a lot and is now sitting at 54% to win it. Then XAI at 20%, OpenAI at 17%, Meta at 4.4%. We don't know if Meta will launch anything for the rest of the year. They could just be heads down, grinding on superintelligence for a while. But it's fascinating how quickly the vibes shifted yesterday.

This was a wild chart crossing. And Elon chimed in and said, there's free money on the table. They're selling dollars for four cents because I'm going to come from behind. And I mean, if any team is like focused. He's making that claim around the best AI model end of September. Yeah, basically. He thinks like GROC 4 or GROC 5 is going to ship and it's going to crush and it's going to be really, really strong on L.M. Arena.

And he says, you know, he's he's benchmaxing and he's going to win here. I mean, he's going to try and win in everything. Like he's competitive. He's a winner. And so there are a bunch more posts the, what where? Nathan Lambert says AI still has a lot of headroom, but model releases are going to be a bit more boring from now on, at least on paper,

many will still be transformative in real use. Yep, yep, yep. So the, what was it? The floor lifted, but the ceiling held. That was the meme, Tyler? Yeah, yeah, exactly. Yeah. So we, it's hard because we don't even know,

I feel like we don't even know what we want in terms of headroom. It's kind of like this vague, like one shot of everything. So yesterday when I was, I was trying to think of like, oh, what could I do for a TbPN bench where I had the horse. But it took me like a while to think of something that was not like completely trivial for model to do. So at this point it's like, I don't know what good benchmarks are really. Like I guess there's some things like Arc AGI sure. And there's something about like long task horizon, stuff like that.

Yeah. But like general knowledge, like I'm not surprised if it like can do, you know, 100% on everything. Like the next, the next I think we should. we need to do golf bench or steak bench, which is being able to send an agent out into the world to generate a sale. It's good. That's a good joke.

I think that there is actually something there. When I think about Tyler, like that video that you were working on earlier, like that there is a world where that's just a prompt. Like we were putting together a video for the Metis list, highlighting a bunch of AI researchers. And we went back and forth a ton on the idea, the song, the pacing.

the editing, the color grading, the titles, do we want subtitles for this part? Do we want title cards for other parts? And that was not a very LLM enhanced experience. There is a world where you just go to a chat box and you say, make a here's the medis list.com, make a video promoting this. And it just kind of does it. And like, or at least you're like puppeteering and orchestrating. Jory has the ramp card.

Or you're like puppeteering and orchestrating it. And you're saying like, at the very least, go pull me the raw MP4 files of every cinematic video of every, every AI researcher on this list. Yeah. Like you had to go to YouTube and search Schulte, and find a cool video. And you know that you didn't. Yeah, pretty easy to find cool videos. But it's, but you didn't do that with an L.M. right?

No, yeah. You went to YouTube. Yeah. So I think maybe the next thing is like we need more agent, like agentic benchmarks. But like all the stuff we're saying now, it's not like, it's not information retrieval. It's not solving. It is sort of information retrieval. Like at the very least, I would love to be able to go to an LLM and say like, you know,

I'm making a vibe real about space. Pull me 75 different little three second clips about rockets and rocketry. And I'm going to mix them up. Maybe I'll be the one in Premiere. I'll do the video editing. But at least do the information retrieval and put it all together and assemble it. Yeah, I guess that's technically, if it's like giving you links to YouTube, that makes sense. I don't want links. I want MP4s. I want it to do the hard part of the downloading.

But that's like, well, it's like semantics now, but that's like agentic because you have to download the video. Yeah, yeah, that's what I want. Yeah, yeah. I want that. So I guess it's still information. But I'm talking about like raw like tokens. Like it's giving you some tokens back. That's just like arbitrary though. Like I'm fine with it going to YouTube d.D.L.X. or whatever, like, downloading the file, doing all that stuff. Yeah, I mean, like, that it should be able to, like, use the web in a much, in a much more, in a much deeper way. It should just, like, like, right now there is, there is, like, it can open up a website

and retrieve the information and the text on that website. And then it can use a few tools that, like, we've given it access to an RL done. But, like, we want it to RL on every single website that is a tool. And so when you talk about the flight booking UI, It's like go in RL on every flight booking UI, go an URL on the YouTube downloader and YouTube itself and just be able to crawl around the web like anyone has to do for any task, right?

Yeah. Well, I mean, Greg said yesterday, like, years aren't over for agents. So hopefully we'll get something. Yeah. That was a cool little hint. Yeah. And again, it's like, I don't know that that's a keynote. That might just be like chopping wood, getting better and better and better.

And it's like people will keep coming to it with tasks. Because I come to it with tasks where there could be an agentic like workflow that solves even more. Like the good example is like with the bento, I was, I actually had to step through it. I was like first do a deep research report on what was actually announced in GPT5. Give me all the features, summarize them all. Then turn that into a table. then turn that into an AI image. And it was like four steps.

And I should have just been able to one shot it and say, hey, you know what Apple has those bentos? Like make me one of those. And then behind the scenes, you're going to go do the deep research. You're going to pull all the facts and the figures and then you're going to lay it out and stuff. I don't know.

Anyway. Breaking news, soft bank. Soft bank. It's Friday, folks. Soft bank reportedly bought Foxcon's Ohio. factory for the Stargate AI project reading into this what they do seen it they acquired one of Foxcon's oh interesting the mystery buyer of the former General Motors factory owned by Foxcon in Ohio is apparently soft bank soft bank wants to use the

factory to build AI servers as part of the Stargate data center project being spearheaded by SoftBank Open AI and Oracle this report comes just a few days after Foxcon announced it had sold the factory along with electric vehicle manufacturing equipment that was inside of it to a buyer it only referred to as Crescent Dune LLC an entity that was created in Delaware in late July interesting so I didn't know if you were tracking this at all I'm not but soft bank is up 63 percent year to day that's go congratulations to Masa that's actually that's actually somebody asked us who our dream guest was and John's first reaction, Theo Vaughn.

Theo Vaughan, Shaquille O'Neal. He's interviewed some of the greatest. Sejan Ping. Sejan Ping would be good. Benjamin Netanyahu did Nelk Boys. I'd love Seizun Ping to do TBPN. That would be cool. Masa Yoshi Son would also be great.

Very fun. But I'd want him here in the studio. Yep. Get to the Temple of Technology, Masa. We want to hang out with you and have you ring the gong 25 times for all your various deals that are gonged.

Yep. Will DePue, friend of the show, says multi-layer SPVs should probably be illegal under the current interpretations of securities regulation. I'm getting DMs from long-loss cousins about eighth-layer Anthropic SPVs claiming direct cap-table access. I think those should probably be illegal. He should just say are probably illegal. Like I'm pretty sure if you lie in a securities offering and you say you have direct cap table access. And in fact, you do not have. direct cable to cap table access leading investors yes that that is that is financial fraud a wire fraud and you will wind up in the clink yeah clink anyway profound get your brand mentioned on chat GPT reach millions of new of consumers who are using AI to discover new products and brands incredibly bullish day for profound too seriously because knowledge retrieval is going to be really really important going forward people are going to be searching chat GPT what products should I buy you want to know whether or not your

you're showing up in the rankings and profound helps you do that. So pretty much every brand is going to need to do this. Ramp boosted their AI visibility by 7X. Really? In profound, they boosted their visibility here on TBPN using this massive ramp card. Yeah. You've got to do it all, folks. Yeah, yeah.

I mean, really, really like another company that didn't get steamrolled yesterday. Yep. Dylan Patel says GPT5 is disappointing NGL. Well, we're joined by Fabricated Knowledge who works with Dylan Patel, in maybe 30 minutes to talk about GPT5 and what's going on in the semiconductor industry. And I want to talk to him about how we should be thinking about building inference clusters. Now it feels really, really important to only be serving profitable tokens. And the age of deeply unprofitable inference will have to come to a close at some point.

Yeah, I want to, you remember it wasn't that long ago, that Satya was pulling out of various data center deals and just saying I'm happy to be a leaser. And this feels like he kind of saw this coming. What did Satya see? What did, yeah, seriously. His beef with Elon was funny yesterday. I'll see if I can pull up the post here.

Elon said something to the effect of Open AI is going to crush Microsoft. Oh yeah, this was a funny post. It's such a funny thing. Elon post yesterday. Open AI is going to eat Microsoft alive, which I don't know exactly why Elon is saying that. It kind of feels like potentially some 4D chess. Yeah, it was very odd because Elon usually isn't rooting for OpenAI.

He's usually at war with Open AI. And so it's kind of, it reads us like your bullish Open AI, your long Open AI, you're short Microsoft. but there's clearly something else going on there. Between the deal, Microsoft's in Open AI right now has a lot of regulatory scrutiny. He's probably trying to do something around that. Sacha responds.

People have been trying for 50 years to eat Microsoft alive. Each day you learn something new, innovate, partner, and compete. Excited for GROC 4 on Azure and looking forward to GROC 5. Such a good response. Sacha. Absolute dog. He's an absolute dog. In other news, esteemed George.

Journalists Zero Hedge is saying, we have officially crossed streams. Companies have no more free cash flow to pay for data centers, so we've entered the private credit phase. I would put this in the truth zone. There's been a lot of data center development that's already been getting funded by private credit. Meta, this was in response to meta picking PIMCO and Blue Owl for a $29 billion data center funding. we had reported earlier on the show that like meta's like cash balances between the end of last year and and now dropped dramatically like 75% or something like that but again they have still a lot of free yeah i think people maybe get too puritanical about debt to equity ratios like apple is

incredibly cash flow positive and has returned something on the order of a trillion dollars to shareholders over the past decade plus, and they still issue debt. Because there are, like, designing your capital structure to match your business activities makes a lot of sense. You want to fund R&D with equity, maybe with cash flow. But if you're just, if you're just buying a house, it's okay to have a mortgage. If you're buying a data center, it's okay to have some debt financing that. But you want to be able to service that, obviously. The interesting thing here is, you do need to make sure that you don't get over your skis and wind up building a bunch of, you know, dark fiber and get really, really, really in trouble when you, if you issue a ton of

debt and then that's, it's the top of the cap table and you are in trouble and you're servicing this and you're not making any money. The main thing is like, if you, if meta raises $29 billion in data center funding and it's debt and then they can't monetize that data center at all and then they have trouble paying the interest on that and the and the principal down like that could be trouble but metas makes $29 billion like all day long like that's not that's not a problem frequently so there there are probably pockets of of risk all over but unclear how how early we are to the to the like the scaremongering around this but something something to keep an eye on something to see private credit's a little bit different because it has very long time horizons and

and it doesn't have as much of a systemic issue like like blue owl and pimco you don't have um you don't have these like multi-layered uh like financial products and financial engineering that winds up in the hands of the consumer and is driving these like really really uh frothy deals like we had in the mortgage back security crisis um But certainly to be clear, there's bears out there that are very, that think we're in a massive private credit bubble. Yeah. And it certainly looks like a bubble. Yeah.

Whether or not it blows up, we'll have to wait and see. We will. In the meantime, we'll tell you about linear. Linear is a purpose-built tool for planning and building products. Meet this system for modern software development. Streamline issues, projects, and product roadmaps. Start building at Lund. Well, a little bit of a white pill here.

We have a post to pull up from a listener. He says I purchased a 1959-356a speedster to get into the mindset of Jordi. I found myself overcome by a sense of positivity and confidence. I also became 5-2. Yeah, you really, I-2 really is a perfect height. That's the perfect height for a speedster. That, I mean, if you are, if you're 5-2, you deserve a speedster immediately. Tyler, give us the speedster review.

You drove in it. Very small. Very small. Yeah, it's unbelievably small. I didn't realize like cars from that old were that small. Were people just small back then or something? Yeah, I don't know. I don't understand it.

Little tiny people driving their little cars. Well, if you look at the growth of Porsche's broadly, they just get bigger and bigger and bigger and bigger. And this is like the purest hate it. Maybe with the Ozzympic, we'll see cars get smaller again. Oh, maybe. Interesting. Well, yeah, I mean, Germans, I feel like are tall people. I've always thought that like getting a big Mercedes is like aligned with like a big German guy and like it kind of fits but I don't know maybe back in the 60s they were just designed them for like

Mercedes I mean small people I feel like in our lifetime Mercedes were pretty small remember like steves like yeah yeah totally yeah it's a small car you probably wouldn't fit in it no the short kings were dominating the the feedback form of Porsche and Mercedes I suppose Anyway, Growing Daniel says let Rune MC these things. I completely agree. It would have been great to have him on stage. I mean, he's just so good at like, kind of talent like it is, keeping people on the pulse. If you wanted to optimize for, like,

my question is how many people were watching that live stream that were non, like, X? Like, it felt like the core audience for that was like the timeline. Yeah, yeah, yeah. That was my perception. And Rune is someone who left you doing the timeline. Yeah, if you were going to make the perfect live product for the timeline, you probably have room.

I was noticing that with our buddy Logan Kilpatrick and Demis Hesabas are doing a podcast together. Did you see this? Yeah. Yeah, the screenshot. And I was just like, and I think just a screenshot of like they're doing this together got like a thousand likes. And I was like, that is good content. That's what I want to say.

I was catching up with Logan earlier this week. And he's like, oh, I'm going to London to do a podcast. And I was like, what podcast? Like what, like, you need to go to London, just record a podcast? And he's like, oh, with them. Yeah. Yeah. Yeah.

And I think, I think he just, Logan, just, Logan, ruin all these sort of like, you know, forward facing developer advocate, folks who can speak to the timeline. They just bring a completely different energy than someone who has like prep talking points. And so even if they're, even if they're not like the deepest researchers, just being able to, to communicate is a unique skill. Proveyor should find vibes. Exactly, exactly. Much like Numeral HQ sales tax on autopilot.

Spend less than five minutes per month on sales tax compliance. Go to numeralh.com. Will Brown. Superintelligence has been around for a while in its numeral. Yes. So this is, yeah, there's Will Brown post is interesting. He says, okay, GPT5, this model kind of rules and cursor. Instruction following is incredible, very literal, pushes back where it matters,

multitask quite well. A couple tiny flubs format misses here and there. not major. The code is much more normal than 03s, feels trustworthy. And this is the interesting thing about like, like, it was GPT5, but was kind of framed as like, this is a major change to chat, GPT, our rapper, our consumer product. But there's a whole, like, Open AI is not just one business line. Like they're going, we were talking to Sarah Fryer about this. Like, there is a world where when Open AI goes out to the public market, analysts are valuing the business on it's a high-growth consumer company like Google Search.

And then you also have an enterprise business. And it's basically a hyperscaler. It's cloud. Based on the recent numbers, OpenAI has 10 times Figma's revenue. Yeah. And obviously it's not profitable. And what was their latest tender? About five times the valuation.

Yeah. So, 10 times. Yeah, yeah. But yeah, but about 10 times the valuation. And so, but my point is that there's, is that there are, there are multiple business lines within OpenAI, the company now. And you might even see a new business line spring up around open source implementation, enterprise installations, fine tuning. Also just API selling tokens. Also, consumer.

Also, different spinouts. Like, they might wind, like, Google eventually had to start disclosing, like, I'm pretty sure they had to start disclosing, like, I'm pretty sure they had to start disclosing YouTube finance. because YouTube became such a big business. And there's a threshold where I believe if the company, if the sub-organization reports the CEO or something like that or it's material in terms of like greater than 10% of your overall top line or profits, like then you have to break out those numbers in your gap financials.

And it's interesting to think about like, where will the lines be drawn in the open AI business? Because they, and then how will that translate to their communication? Because there is a world, There is a world where yesterday's news was kind of two different things. One is that we made the consumer product easier to use for the hundreds of millions of users that don't know what post-training is or RL is. They just want an easy-to-use app that answers their questions.

And we did that. And then also, we made our coding API a bit better so that we are now neck-and-neck-and-neck with Anthropic. And so if you're a company that is buying code generation tokens, you should come to us. And that market should be more oligopolistic as opposed to more monopolistic as it's been. And so there's a world where we see, you know, these oligopolistic cloud enterprise B2B businesses crop up on the on the hyperscaler side with Gemini and Anthropic and an open AI B2B. And then maybe Thinking Machines gets in that game, maybe SSI gets in that game.

No real indication that MSL or meta super intelligence will get in that game. But you could see kind of like a similar dynamic as like what's happened in the hyperscaler clouds play out on the B2B token generation from Foundation Model Lab side, which is still great business. But then you also have a wrapper and you also have a consumer application. And then you might have other products that crop up. I mean, Google makes money off of Gmail. They make money off of Google Maps and they don't need to even break those out.

They just put them into different services. But I think we'll see like an increasing like, you know, pattern of different pieces of the business that add up. And all of them will be generating. They'll be they'll all be profitable. But the question is like how much attention will they get and then how much financial like performance will they actually drive? So anyway, we should go to Mike Nupe from Arc AGI. the final boss of AGI he decides whether or not a model is super

intelligence. What does he say? I said open AI prioritized the right thing. I'll do a Mike Noop impression here. Open AI prioritized the right thing with GPT5. To get to one billion users, the model switch sure needed to go. But the hype marketing playbook

they're known for fell below folks' expectations and warrants reflection. Benchmarks could have been used to support the main story. Instead of benchmarks don't matter, real-world use cases matter, they could have used benchmarks to show how effective their automatic reasoning effort system is. They could have shown state-of-the-art in automatic reasoning. In fact, this is something we wanted to test ARC, but the GPT-5 API does not support auto reasoning.

Key point, benchmarks are important tops to communicate with the public and can be used more effectively to communicate capabilities. than raw intelligence state of the art. And so, yeah, another, another twist on, like, just the messaging being, like, an odd choice here. Or just, we're just in a transitory. What percentage of the 100 million weekly active that they have in the United States? Something? 70, 80% or something? No, no.

I'm saying, based on the numbers we got on the show yesterday, they have roughly 100 million weekly active in the U.S., what percentage of those people even are aware of the hype market? What percentage saw the Death Star picture? Yeah, totally, totally. Not that many. I mean, I did get millions of views. But yeah, but X is like a, is a specific corner. Yep.

Zachary, speaking of the Death Star, Zachary. Very negative. But you did kind of set yourself up for that song. It's odd. It's odd. It did not fully make sense. Like who is the Death Star in this story? Are you the.

death star? Are you Alderon? Are you the rebels? What are you blowing up? Maybe the death star, let's steal man this. The death star is... It's a big model, sir. Yeah, the death star is the idea that pre-training, scaling is all you need. You're going to blow up Eldron like you're going to blow your minds with how good the model is. But Eldron was good. We don't want Alderon to be blown up. Yeah, I don't think you got to read into it so much. I think you, I think we do need to read it. I think it's extremely. We need to read into it endlessly.

The image is provocative. Yes. So, so if, a lot of people said there's still time. I think Nikita was in the replies being like there's still time to delete this. Yes. But if we, if we, if we steal man this, we are saying that that the Death Star is bad. Therefore, Sam is saying he's good. So he's going to blow up death star.

What did he blow up? That's bad. The model switch. Yeah. Yeah. There you go. The model switcher is the death star. And today it goes, it's been this massive piece of UI in your face.

There was a trench run and they blew up the model switcher. This is good. We got it. We nailed it. We understand San Lalman. We're in his head. For some reason, I think, I don't think that's an accurate read, but it's fun to pretend.

I think you nailed it. Anyway, you know who else nailed it? Finn.a.i. The number one AI agent for customer service. Number one performance benchmarks, number one competitive bakeoffs, number one ranking on G2. Anyway, Mike Knoop also said I'm quite confident this approach will work for a while. This is based on the lack of continual learning from Dorcasht Patel. Continual learning is the main bottleneck holding back AGI and economic automation.

We expect this bottleneck will be overcome not by some new learning paradigm, but by scaling the diversity and volume of RL environments. This is Cosgroves scaling law. You need to be bench maxing. Correct? Yeah. And then I, yeah, yeah, the bullcase on bench maxing. The bull case on benchmarking. So the bull case on benchmarking is that continual learning is intractable.

We may hit it. We may not. Might be two years, might be 20 years. So in the meantime, focus on scaling the diversity and volume of RL environments, create a ton of benchmarks and then bench hack them, correct? Yeah. Yeah. Like, you can, it's a, it's a bull case that Elon is benchmarking.

because that just shows that his team is, like, good at optimizing a very specific, like, kind of vertical, like, tasks. Yes, he just better pick the right tasks because I don't like the task he's picking right now that he's benchmaxing. It's not good. Yeah. But if he does find other pockets, I mean, he's certainly benchmaxing on, on Tesla self-driving, right?

That's the key thing. Like, number of, it's number of, number of interventions per, like, million vehicle miles traveled. and every day they are trying to hack that reward function to get it to zero. Yeah, that's a good one. Maybe a bad one. Maybe he's benchmaxing too much on kind of gooning. Yes. He's goon-maxing.

I think we should steer away from that. Yeah, we need to steer away from that. Figure out something else to do with the X-AI companions. But maybe there'll be something else that they can reward hack there. Maybe something in therapy or. friendliness or you know some sort of coach um i don't know maybe it turns into a fitness coach maybe maybe i need to to use it to really up my training in the gym be like hey cool it with all that cool it with all that lewd behavior give me advice on how i can double my bench press and chat

with me about that maybe that's the right move we'll see anyway well noop is optimistic he says i'm quite confident this approach will work for a while it requires no new science it exploits everything we know about AI reasoning systems. We teach process models through memorization in domains where we can generate lots of synthetic but real data. And then non-zero fluid intelligence emerges from the resulting chain of thought, knowledge, recomposition system that sits on top of the foundation model. But it still reminds me of pre-training scaling, where we were making AI systems better through imitation learning and stuffing more into them versus an AI system that is capable of cold starting itself in some new domain. It's never seen before. And that's why ArkAGI is so important,

because because the final evals are so hidden behind that that secret test set. The AI systems need to be able to cold start themselves when they run into a game that they've never seen before in the test environment, in the Arc AGI private eval set. And that's why they fall flat on their face consistently. And they're sitting around 16, 15, 8% success rate on Arc AGI. two, which can be solved by any human pretty easily. But Elon says Grock 5 will be out before the end of the year, and it will be crushingly good. He's benchmaxing. He knows RKGI is the one to go for.

And so he's going to be RLing on this pretty, he's going to have a whole team on RKGI. I'm excited to see what he does. I wonder how he'll do on V3. That will be very, very interesting. Anyway. Well, in other news, we have a post here that we can pull up from Bono Coley. team. It is in the chat. If you can pull up, he says, yesterday, Rail Financial signed a

definitive agreement to be acquired by Ripple for $200 million. Four years ago, I set out on a mission to speed up business to business global payments using USC. Over the last six months, we grew to become 10% of B2B Global Stable Coin Settlement Volume. Airhorn for that. With Ripple, we will further accelerate our shared mission. Thank you to our employees, clients, investors, and partners for taking an early bet on us. A few that Tarun and I want to call out the entire rail team for their relentlessness and hard work. Avlock, of course, the CEO of Angelist, our first lead investor and part of the founding team and go-cold Rajaram. Immensely helpful during some of our early crucible moments. And of course, Mike over at

Galaxy for taking the bet on us in the series A. We are excited to start our new chapter with Ripple once all regulatory approvals go through. Hit that gong job. Great contact, great contact. I was lucky to angel invest in the seed round of rail. And this is a fantastic outcome for the team. And yeah, this one was a, so I first met Bonnub, I think back in 2021 or 2022, we were both working on stable coins at the time, loved his vision, haven't stayed super close since then, but he's been absolutely cooking.

and I was very pleasantly surprised when I got the news a couple days ago. So incredible work to the whole rail team and a great pickup for Ripple. Amazing. Let me talk about Adio. Customer relationship magic. Adio is the AI Native CRM that builds and grows your company to the next level. Get started for free. Sam Altman posted.

GPT OSS is out. We made an open model that performs at the 04 mini level. Can we create our own pronunciation for this? GPT. Ouse. GP toss GP toss It runs on a high end laptop

Smaller one runs on a phone Super proud of the team Big triumph of technology Has a community note on it I don't know what's in there But that's very funny Okay Anyway but Donald Boat

Donald Boat One of the greatest to ever do it Donald Boat responds Sam you and me The Amafi Coast Me Double Fernet on the Rocks Club soda to taste

You one delightfully Sweet Bitter Negroni stirred 9.9.1 $9.900 million revolutions counterclockwise. One for each hertz of the NVIDIA 5090 in the gaming PC you will buy and ship to my house. And Sam said, he actually sent it. He sent it.

Sent it. It popped up yesterday. This is a timeline victory. Hop on fort at Sam. Yeah. And yeah, Sam said, okay, this was funny. Send me your address and I'll send you at 5090 and he did it. And I love this.

This is the type of like, you know, small ground game that we identified earlier. You know, Sam, he didn't have to drop the big long post. He was vague posting. The vague posting was a little mixed result. But this is a win. This is a fantastic win. This just builds the team, builds a lifelong fan. This is hand-to-hand combat on the timeline.

And I'd love to see it. So great to be doing this type of stuff. Even the day before GPT-5 launch day. And Donald, Donald Boat is really an account to watch. laser boat 999 get in early getting early I mean you're buying Bitcoin in 1994

John he's on a 100k it's still like buying Bitcoin in 1994 that's right that's right or Solana in the 80s yep Dylan Fields is GPT5 is here in Figma Make we have started to roll out GPT5 to starter and pro plans let us know what you think

more model news comes tomorrow I mean this is a good news for Figma Make of course cheap we talked to Rahul about this cheaper model better reasoning better code generation the product just gets better, and this is the value of being, you know, somewhat of a wrapper, right? Like, you are a beneficiary of model improvements. As the models get cheaper, your margins naturally get cheaper.

If the models get better, your product just naturally gets better. And so lots of people benefiting. This morning, they added Gemini 2.0 Flash in their image editing. So you can just, like, drop an image in and then click it and say, remove this person from the image. That's very cool. Yeah. Well, anyways, Kevin Kwok says forcing Lip Bhutan out of Intel is probably one of the worst things you can do if you want to save the U.S. chip industry. Someone should tell White House that before we put Intel back in a tailspin.

Again, they intel whatever you think about Lip Bhutan in his approach. It seems, I think stability in the short term is good, right? Yeah. He's trying to pull them out of the tailspin. Yeah. So my take on this is it kind of feels like Trump has an outdated world model for understanding the importance of Intel. Like Intel is a fantastic American company, but it has not been on the frontier of semiconductor manufacturing for a while. They famously missed mobile and Arm crushed it in mobile.

And then that was important for semiconductors. And then they weren't a fabulous semiconductors. So TFCMC ate their lunch there. They kind of missed out on the GPU boom. and Nvidia dominated there. And so the question of this, it seemed like Trump was worried about Liputon's ties to China,

but China has already caught up to Intel, I think. Between Huawei, Smic, Sme, these companies seem fully capable of doing everything Intel can do and probably more and probably better, probably cheaper. And so Intel hasn't been the crown jewel

of American semiconductor supremacy for decades. Basically, no one is advocating for a real comeback with Intel right now. Like the idea of even splitting Intel up, like there was like for a long time, there was like, oh, we just one weird trick, you know, semiconductor CEOs hate this. Let's, let's figure out some like elegant switch. Let's just split design and fab. And then Intel will be great.

That's not even what people are advocating for now. Like they tried to kind of test their waters of splitting the fab out. And they couldn't get a customer for what they were going to make. at this new fab and if they can't get an independent customer that's not Intel well then who are they going to why do they need to be a fat like a why do they need why do they need a pure play fab if they don't have a customer for it so they were just like all these problems so what lip boutan is doing is he's coming in not as you know this like gambit to get on the frontier he's like winding down the company he's laying a bunch of people off he's narrowing the scope and he's coming in like

McKinsey as a consultant almost and so this doesn't feel like that key of a of a company in the American semiconductor race like the future of American semiconductors feels like TSM and Samsung which are both building fabs in the United States which is nice but also these are these are companies that exist in allied countries so it's not it's nowhere near as as as as as risky as being dependent on a on a on a supply chain that's based in a near peer adversary like China. So it's not like if TSMC was in Beijing

and Samsung was in Chen Zhen, like we would be in a lot more pain than we are, but Samsung and TSM are also building in the United States. And so the leading edge will be in the United States and it will be led by other companies. It doesn't feel like Intel will play a really key role in there. Certainly we'd love that, but that doesn't seem like the current plan. And so it's kind of just like an odd side show.

I think it's a lot of legacy about the brand recognition and the name recognition of Intel, but it doesn't seem. Yeah, and ultimately, I think we should let Intel's board makes the best, that make their own decisions around Intel's leadership. You know, we've got this amazing system called free market capitalism,

or we try to stay as close to that as possible. It is, it is funny because Trump is also trying to IPO Freddie Mac and Fannie Mae, the two private, our state-owned lenders. You can go get student loans and mortgages from that. So simultaneously, in the lending markets, we're trying to, we're trying to, you know, deregulate or move out of government control.

And then simultaneously saying, like, well, actually, we'd like the government to be able to decide who the CEO is at this private company. That's kind of odd. Anyway, good luck to Liputon. He is losing a lot of sleep. He's got to get an eighth sleep,

Get a pod five. Five-year warranty, 30-night risk-free trial, free-returns free shipping. Lip. Get an eight-sleep. You need one. When you hear this, we will gift you an eight-sleep. And then come on the show. We think you're doing important work for this country and Intel.

And you've got an eight-sleep on us whenever you're ready. 100%. Just let us know. Bucco Capital Bloke says, for those of you blowing out your SaaS positions, even though time is of the essence, please try to maintain a sense of order. Single-file line, eyes forward. do not stop for personal belongings, do not panic, do not run. Of course, he's telling, talking about everybody's selling out of various SaaS positions.

That's what he was by blowing out. Selling them? I came away yesterday being not broadly bearish on a lot of different SAS, systems of record. I think they're in a really good position to offer intelligence. A few days ago we were talking to somebody who was saying like all SaaS is cooked as soon as AI. goes hyperbolic and yesterday it felt like okay that's not that's not happening today so SaaS is actually great and the newer SaaS I mean like even the there are still companies that are on completely legacy systems still on paper and pencil and and still on mainframe still on owned

clouds still haven't migrated to the new clouds still haven't embraced SaaS still haven't embraced AI so I think that there will be like a full cycle of replacement here and we see that with Figma. We were talking about like, like, is there some sort of threat to Figma from like, oh, you just one shot at vibe code,

blah, blah, blah, blah, and you don't even need the tool at all. Like, maybe, but like, first, let's talk about Adobe.

Let's talk about how much people dislike Adobe. Like, you know, there's a lot of, there's a lot of people that would just, that are still having migrated over to, like, the thing that was invented a decade ago.

And they're still on 20 or 30 year old software. So, well, these things go in really big. down 22% Well, regardless of what you think about Adobe, maybe you're long, maybe you're short, do it on public.com investing for those that take it seriously.

We got multi-asset investing, industry-leading yields. They're trusted by millions, folks. And we have our first guest of the show, Doug O'Loughlin from semi-analysis, fabricated knowledge. Doug, how are you doing? Welcome to the stream. I'm doing really good. Can you guys hear me?

Yeah, we can hear you. You came in looking like you're playing at. You're like... We're really quiet. Okay. One-tenth volume. I can yell. Yeah.

Would it help if we yelled? It would help if you yelled. Okay. We'll do the rest of the interview yelling. Also, do you have the ability to turn up the volume on your side? I am turning up the volume, bro. Okay. Oh, my God, man.

I feel like a boomer. You're all good. You came in looking like a DJ playing a hot boiler set. You had your hand here. I came in messing with my audio system. Fucking deep, you know, it's years of the Zoom economy. Yeah. one of those things where the volume on one of the sub applications is turned down while the volume on the system level is turned up

no dude i see the sub application i see the system level this is extremely boomer for me i'm embarrassed well we enjoy these moments where zoom fails us because it's it's this incredible and you know you contrast that to you know having infinite intelligence available in your pocket but we're still we're all still trying to get video conferencing to work reliably so i'm you know Okay, well just can we take up? Yeah, let's go to the normal. We usually don't have a problem with feedbacks if you turn off the headphones and then you just use the speakers. We usually won't get feedback.

So let's see if that works. Any luck? I can hear you. Okay, cool. Yeah, can we chat? We're good. Yeah, we can chat. This is much better.

Awesome, awesome, cool. Welcome to the show. Welcome to the show. We've been looking forward to this. We've been looking forward to this. We missed you in New York City. We were hoping to hang out there, but I'm really glad you can hop on remotely. Give us your reaction.

a GPT-5. To Lip Bhutan, correct? Sorry, damn, dude. I'm still really... No, you're good. I mean, yeah, we can start with Lip-Buton. We were just talking about that, too. Are you in favor of a change of

the guard over there? Okay. How'd you process this? Sorry, if we're talking about... Intel. I can do an extremely based rant on the board. I wrote about this in Fabricated Knowledge, and I definitely was part of the semi-analysis post, too.

So okay, perfect. I can hear you now. Okay, we're done. We're through it. Let's go. Okay, so, okay, now, dude, turn it up to the 12. Okay, so, dude, TLDR, the board has been systematically screwing up Intel for the last 10 years. This, I think, comes from the history of Intel being the greatest semiconductor company alive of the 2010s.

Dude, the board was filled with, like, politicians and, like, ex-Senator, what you call it, Secretary of State and, like, generals. and like never anyone in the semiconductor industry. Intel had like, Intel had like a view of arrogance. Like we are the best and you're going to suck it because we're the best. Like, you know, effectively it is an Intel first worldview that like has slowly been crumbling over time. So pretty much on the technology side, they've never ever had anyone who actually knew how to run a semiconductor company except for professors or people on Intel. So like you can look back in like the 2003, 2004 era. It's usually two or three people from Intel.

and then the rest of it is just like randos. So they never thought, hey, why do we need a semiconductor person on the board? This slowly became a melting frog issue as they like missed. The 10-nometer debacle is like the real big, you know, change point in Intel. Really quickly. Can you unpack the 10-nometer debacle a little bit? Okay, so 10-nometer was Intel's process at the time. It was supposed to be the next one after 14.

And I think it's plus, plus, plus or maybe. So pretty much it got delayed. So they tried to do a lot of aggressive technologies. They did quad pattern DV copper, cobalt interconnects. A lot of things, they shoved it in here to make a good product, but they just missed over and over and over again. So it was a ginormous fumble. And at the time, the CEO was a CFO. So the finance guy oversaw the technology essentially implode and slowly degrade.

So 10 nanometer was just like the true slow, like, you know, multiple years in the making train wreck. And what was 10 nanometer, like, critical for? Is this, like, mobile transition, just CPUs? Just CPUs. Remember, this is an Intel that missed and totally, like, was irrelevant for mobile anyways. This is just, like, data center CPUs, normal PC CPUs. This is when AMD essentially caught up because they chose. Yeah, the Risen stuff was happening, thread rippers and whatnot.

Yep. All that stuff is because they're using the TSM process versus Intel was using their process. Their process lost the TSMC. and also AMD's better design. Whatever. TLDR, total, total problem. And half of the people who are on the board still are from that era.

Like you would argue like, hey, capitalism works. You should fire people who do shitty things at their job. They should all be fired. And so most them got fired. And then I think this is the semi-analysis piece, but essentially like the people who remain effectively was the guy who just stepped down. I still think he's on the board.

And now the chairman is this guy named Frank Erie. Frank Erie joined in 2009. So he is just as guilty of anyone. And he's a banker, dude. Like, that's his background. He's a deals guy. So the first thing you need to know is a deals guy when it becomes chairman of a company is going to do deals. So that's what he's been doing.

He's sold Altera. You ship your org charge. Yeah. Yeah. Yeah. Ship it, sell it to anyone who can do it. And he's in the, and he wanted to sell the founder of district. That's the that's like the Wall Street Journal thing and in my opinion total mistake we think it's a total mistake of semi-analysis

But then on top of that like Liputan I understand the controversy so really quickly clarify that on on because I hear Deals guy comes in investment Baker comes in a lot of people rumbling independently for the last decade Split up Intel it sounds like they were trying to do that give me like your evolution of like should Intel have split up at some point? should Intel like split up now? What is the current stance? So I think at this point in time

I think they probably shouldn't split up just because like they don't have a customer, right? Yeah, they don't have a customer. It's like the best time was definitely like three years ago. At this point in time it's like you need the money from design now

just to keep the lights on. And I mean like not even just to have the customer just to like fund anything to have any cash from ops. An ideal perfect world is somehow Hawk tan, the Sith Lord of Private Equity, buys the design business of Intel and scrapes it and guts it to the floor. That has always been a long-time rumor

that Hawk wanted to do that. Hawk doesn't want to do it because Intel so bad. So there is no buyer. Designs like really screwed because it's like stuck on this process, plus it's also filled with bloat. And at this point in time, I think the only strategic part of the business that really matters is foundry. Like let's just like, you know, because outside of the x86 CPU, like they're getting their face kicked in by arm.

Okay. So it's, you know, X86. And then they have to compete against AMD, which is still kicking their faces in with CSMC. And so like, what is a secular decliner X86 work? Not much to anyone. And I think the reality is it's like, you know, with arm and these custom CPUs, effectively they are, they are just one of many. like competitive products and I think they're competitive edge like dwindles pretty much they just have distribution into oEMs so where is a bit like a business that has value that matters at

intel it's a foundry there's one foundry in the entire world right now it's it's it's it's tsmc it's monopoly like and that's the only thing that's worth anything and i think um you know there's a chance to have a second foundry and that could be intel but you know we what what about samsung i mean uh Elon did that deal it seems like Samsung's like at least in the conversation as a potential foundry for specific things. Is that like are they really like several orders of magnitude below TSM? Yeah, I think Samsung's just as screwed as Intel. But it but it's like a second quiet more screwed that I think is like,

I mean the PPA there meaning power performance area is pretty bad. It's probably just as bad as Intel. But the one difference is Samsung has had external customers and probably could have the external customers again. Yeah. If I had to bet between, like, Intel in theory has a better process for sure. But it's like, it's like a bed of like, we're going to say horse and saddle, okay? Like the Intel saddle is like, you know, six rags like tied together around the horse that only like one writer in the entire world knows how to use, which is Intel design.

On a presumably decent horse, it's like 18A is probably like equivalent to three nanometer. obviously not the best in the world, but like that it deserves to exist. Versus like Samsung's force is just like really bad. The PPA is total trash. But hey, it has a saddle. People have ridden it before. So there's in theory a customer. And so Liputan is the perfect guy because he ran Cadence, which is an EDA company.

And EDA, their whole thing is they design. And so once you have like a design, you can like put it in the foundry. And so like that important critical step of the PDK is like, the missing piece for Intel. And Lip-Butane could be the guy, but Intel sucks. So, yeah. So, I mean, my read on Trump saying we need Lip-Buton out is like a complete misunderstanding of the importance of Intel. And basically, he's operating on like a 20-year-old world model thinking that, oh, I'm familiar with Intel. I know the brand Intel inside. Like, that's an important company. We need, it's a critically important American company. We need an American

at the helm when in fact it's like intel doesn't really matter there's like a wind down in process let lip let liputan like run it even if he's exfiltrating everything to china it doesn't matter because wawa and smic and smee are light years ahead of intel yeah so i think that that is sort of true but i also um i will give the trump admin props in terms of like i do think they know and understand the critical importance of intel i don't think it's the critical importance. What is the critical importance? They are the only domestic semiconductor process. Okay. So our only hope. Our last hope. It's that or release the future from TSM.

And that's pretty much like probably the most likely option. Lease the future or least the future. Lease the future. Yeah. Because you could buy a process or force TSMC to make a process in the United States, which is what they're doing. Yep. With Arizona, right? The same, yeah, in Arizona and then possibly more expansions. I'm sure there's some kind of deal. But after you have that, like all the R&D happens in Taiwan. So effectively like, you know, the Taiwan constraint thing, same problem we had before. Because like a missile flies, boom.

We don't, we like, we don't know how to make new chips. Yep, yeah. They would just have old chips. It's like leasing a car. You know, we can't buy the new model. Yeah. Yeah. So that's a problem.

That's like the same problem, but maybe more. kick the can down the road if we had all the capacity here but no R&D. Yeah. So yeah, what is the like moon shot to make Intel dominant again or catch up? Like is like the people were noodling on like should Elon come in and do the Elon thing and hire the most cracked engineering team and and drive everyone 10 times harder. But it feels like people kind of kick the tires on that. There was the rumor of like all the PJs in the same at Mar-a-Lago, but kind of everyone was at Mara Lago at the same time.

Is there a world where like Intel needs to go more founder mode? Like Liputon feels like the epitome of like manager mode. Like would you be like excited about something like that? Somebody who says like I'm going to take it private, be extremely risky. There's a 10% chance that this thing works. 90% chance we completely destroy everything. But if it works, it'll be amazing. Dylan Patel and his CEO.

Dylan and Doug. Get both of them. Dude, if Dylan is the CEO, then my life has kind of become this full talk like uh book uh so I think I personally believe that fab and found fabless and foundry need to have separate lives because you're like there are two really drunk adults at the bar tied together hip to hip and it's like one of them could be dying actually one could be a corpse um and the other has like a shot okay so like I just don't think I think I think

You know, like I believe in focus, I really do. I believe that small teams with a lot of focus can make them extraordinary results. I'm sure you see this in technology over and over and over again. I think Foundry needs to be like given a leash that's long enough to like make the shot true, probably a smaller dream and probably like, you know, a pot of gold at the end of the rainbow, but then like essentially be told like, hey, here's your purse budget. Here's your potential capacity. If you win XYZ, whatever, you'll get a ginormous order from.

And the fabulous semiconductor companies in America. And, you know, that's the pot of gold at the end of the tunnel. And then behind you is death. And there's only one way and it's forward. Because like how I think we've gotten to this point is like there was always this like second sloppy option of like, well, we'll just put the Intel CPUs in there. You know, that's how Foundry has been treated for so long. And I think Intel CPUs over a long enough period of time is just, not going to be enough to fill the foundries. So you're going to have to do, um, you have to

separate them. And I think you have to make like capitalism work, which means that you need like a pot of gold at the end of the rainbow, uh, a true like shot to do it. And then like probably founder mode if it makes sense. Like sure, maybe Liputan is the like Liputan has much more of the qualifications. It can't be someone who's from Intel. Um, and I think the company should be private because public markets would kill the shit out of it. Like it's just going to be a miserable. It's going to be like the face beating the entire time. Um, and I, um, and I think the company. Um, And yeah, dude, if Elon did it, I'll be very stoked. I'm not going to lie to you.

Like, however feel about Elon's companies, like, you know, someone said he makes the late. Oh, no, it makes the impossible late, right? He will, maybe he'll be late, but it'll be, like, he'll get it done, right? There's, there's no one else who's really done this. Pretty much no one's fallen off the leading edge and come back. And so this is like a moonshot. This is a moonshop's problem. And I don't know who would do it.

When the Twitter deal was happening, I was saying like, okay, we got, we marshaled $44 billion in private capital. There's also the Chips Act going on. You package all the money together and you give Elon Intel and like what does that, what does that counterfactual look like in the course of history?

Well, I think the question is, does the stock need to drop another 50% before it can become a viable, like actual take private target? It's an $87 million company today. I think you can do it today. Yeah, I mean, if you can take Twitter private at 44, you can take Intel private 87.

I think, I think, I think, you just have to split the foundry fab yeah it's that simple because the foundry the sorry sorry not foundry fab so fabulous yeah the fabulous business is worth something okay like um it is in my opinion the like dude hawk tan the sith evil like p e oglord would like crush it like i really do believe that um my favorite so so quickly like uh you you you you you you split out design you have this fabless semiconductor company similar to it would compete with invidia in some ways. Amd.

It would be AMD. AMD. And so they'd be focused on CPU and their customers would be who exactly? I think you'd focus. Electronics companies. Electronics companies, but. Yeah, like, I think you'd focus.

So the thing they keep saying is AI at the edge. Yep. I'm a total hater. If I'm be honest with you, like, you know, that the internet works. Packets are pretty quick. Yep. What I think would be the best way is they do have some

networking content. They do have the PC business. They do have like high-end data centers CPUs. Maybe like the high-end data center CPUs like, I mean, to be clear, they're going to be like a third place or a second place against AMD. Like it's going to be an ugly world. But like what you can do is you can just kill all the skews and all the expansion you've done over time. Like Intel has all these custom skews for whatever. You make like good, better best data center and I don't know, edge or mobile or some kind of optimized thing. And you fit all your products into those categories, you kill all the unprofitable ones, you fire 50% of the people, and then you like, you know, do your best to extract the rent in places that you cannot

be ripped out. Maybe you, I don't know, monetize your CPU software, sell it or some shit to AMD, like do your absolute best. And it's like a really sad ending to Intel the FAPLIS business, but I think it has one that is worth more than $0.00. Yeah, talk about the GPU CPU split here because Intel's never really been a player in GPU and that feels like when we talk about the value of TSM in Taiwan and AI, we're talking about super intelligence and these mega clusters and the ability to train frontier models. And it feels like like even a high performing Intel isn't a player in that world or should we be thinking about it in that grand of terms. No, I don't think they're a player in that world. I really like it I get sucks, but like,

you know, Godi is a chip that sits in warehouses around the United States. You know, the Battle Mage CPU is like not the worst products. But like I think if you think about just like

semi-caloctors man, one of the like my favorite analogies or like ways to look at it is it usually ends up being like a, let's say a 60-30-10 market. And the 10% like 60% makes like 2x the profit of the 30% And then the 10% is like break even or lose his money.

I feel like Intel's market positioning kind of puts them at the 10%. And I think like I really think the private equity outcome for the fabulous side is the best outcome possible. Because like and the reason why I say Hock-Tan, like let's actually just like play the Hock-Tan play. What Hock-Tan does is he takes a business that's extremely mature and sticky that was like a winner of the last cycle and then just like fast forward 10 years of the maturity all the way to. day. So like VMware is a perfect example. Virtualization was like, you know, the thing in the 2010s and made CPUs better and all this stuff. And, you know, there were this like almost monopoly. They still have the vast majority share, but they were like spending all this stuff, growing expenses. And then Hawk was like, dude, no, they actually have a business that has some terminal value. They're not

living in this paradigm. So what I'm going to do is I'm just going to fire half the people, raise the prices on the, like raise them massively, lose a lot of my customers along the way. But come a massive cash cow and then like essentially squeeze that to the end. But if you think about what Koch is actually doing is he's accelerating 10 years of industry progress into three, right? Like that's what would happen, but like it's going to be a lot uglier and slower show in public markets versus just like time collapsing, price raise, fire all the people, boom, you're profitable, you're at the end state, you're essentially underwriting no growth.

I think Intel needs to underwrite no growth and that's not in the fabulous business. Yeah, it's just embracing reality. like embracing the reality and taking taking your medicine someone someone in the chat Sharon says please ask Doug about the new Intel factory in his hometown of New Albany what the status is do you have any idea what's going on there new album not my hometown I haven't no no not your hometown this listeners this listener's hometown is maybe looking for a job in the fab so the new Albany is far as I understand, the ground is broken, the shell is empty, and I don't think they'll fill it.

Okay. It just won't happen. That is, but the thing is, I think that that's a really valuable asset that needs to be marketed. I think, um, I think it's probably likely someone will buy it. And if I had to guess, it's like TSC. So, um, yeah, I don't know what that looks like, but, uh, I think, I think, uh, a really shrunken down Intel looks like just Oregon and just, uh,

New Mexico and Arizona. Arizona, I think so. Yeah, Arizona. And that's it. The capacity that was expanded for Ohio was like a YOLO bet the farm somehow we're like beating AMD again. Like I think it was underwritten to have this like, and that's the reason why Liputane was like,

dude, touch grass. This isn't happening. Pack Elsinor, this is just like this is not happening. Like you're like completely not realistic. I think that that it just doesn't like the capacity they had there for the wafer starts is just like so large. it doesn't make any sense. Yeah.

And I mean like dude, the Liputan thing and like, okay, how do you feel about like the, you know, Chinese thing? I mean, there's just not many people who could take the job and I mean, it really sucks in very hard. But like, dude, he actually embraced reality. Like the most realistic thing I saw, he's like, dude, we're not even a top 10 player in AI. And I was like, yeah, that sounds like reality.

Like this is the first realistic thing I've heard for a long time. And that's like refreshing to me. The guide was totally like the print was totally messed up. Like, you know, effectively it was really ugly. Essentially, they're like, yeah, we did pull forward tariffs. Yeah, the guide is a little messed up. And yeah, it's going to be uglier from here. But I kind of vibe with it because it's like, we're just going to tell you like it.

Like how it is. You can like trade the expectations of this. But like the stock and company and the value of it is in my opinion a binary option is what is the foundry worth to America? And how do we get how do we like fast forward this like painful capital intense world where we like don't have a leading edge semi-compture that can have an external customer to one that can. That's the entire value of the company to me. And then Fablis is like a call option cash gusher that can be hopefully harvesting.

Strategy is we need people to rip the bandaid off. Yeah. Yeah. Yeah. It's supposed to pay a big. It's going to cost a lot. Give me the update on GPT5. Yeah.

Specifically, this was the week that the timeline woke up to language models, plateauing. A lot of people are, are. bummed about it, bearish, I think. It was maybe six months ago that Dylan Patel went on Dwork Cash and said, like, if GPT-5 is good, we're totally good on all the semiconductor spend. If it's not, maybe we're in trouble. And so I'm wondering, like, if there's updated thinking around there based on, you know, do we, do we need any more inference clusters or training clusters or is it just a game of

where is the profitable inference happening? Let's make sure we have enough to meet demand, but not go further, not create some overhang. How much of a dance do we have to do to make sure that we don't get like overcapitalized, overbuilt? Okay. So this is a pretty interesting question. I'm going to parrot Dylan on Twitter because, you know, like my lord and savior, Dylan knows what he's talking about. GPT5 is a little disappointing, I think, for the power users of Twitter. There's no other way, there's like no other way to put it is that like, for the power users of Twitter who've been like chugging O3 deep research things for a long time and there's like mess around with Brock and like messing around with whatever.

I personally do not feel like massive difference. It's less verbose, whatever. Maybe it's slightly better. I don't know if you're seeing this thing about like the the sweet benchmark like app like the. The chart? Yeah, the chart. No, no, not the chart. The Sway benchmark, if you look at it, not all 500 tasks are measured.

They hold some. It's like 477. It's like, 477, yes. Interesting. Yeah. So like that's a like, that's an apples to oranges comparison. So that's like a big deal. But I do think you have to think about like, okay, so on one hand, the cultists and like me

and like the power users are probably disappointed. On the other hand, you know, there's 600 million free users who probably just woke up to like a big upgrade. And I think that that's how I feel. like this was actually like that's the actual strategy they push them to five five's a lot better versus four for four oh and it just sorry did the fucking naming well I think I think another way to put it is if you were a power user around like using it for research and learning you're you're maybe disappointed if you were a companionship power user I mean we

were reviewing I mean our slash chat GPT on Reddit is absolutely in shambles today Dude, I know because the girlfriends, RIP. Well, there's a new entrant there. I think they might have to peel off that market and give it to Elon. Yeah, that's true. You can do the Annie Network. Yeah, exactly. I don't, I, yeah, I think that that's the correct way to think about it.

I think it feels like it's try to be as simple as a, like a simplification of the, of the skews. Because as you guys know, it's confusing as hell. There's mini, there's like many thinking and flagship. For the most part, if I had to guess, flagship probably rent like, probably prints cash for them and is like much cheaper and like a smaller model. Maybe not a smaller model, but like compared to like a very big model smell. It's not big model smell. So it's very. And then also if you look on the pricing, it's pretty cheap.

And if it does what it does, well, just like we talked about sweet benchmark might not be, might not be correct. But like you nuke the price on your comparison. competitors in terms of like Claude versus uh, chat, uh, GPT5 tokens. And so that that's like the, this is the better, bigger, faster. Or maybe it's the faster, cheaper, but not better update, if that makes sense. Yeah. Well, one thing that stood out yesterday, so they have 700 million weekly actives globally. Yep. 85% are outside of the United States. And you can just imagine in that, in those hundreds of millions that are outside of outside of the US, many of, you know, like the question just becomes like how they can continue to serve the, like, will they be able to serve? What will ARPU be and what will the margins be on the, on the incremental international

developing markets chat GPT user? Because the marginal cost to serve WhatsApp or Facebook, even, even yes, you're storing images for Instagram, but or WhatsApp, you're running a database, but the marginal cost is so, so low and it feels like at least right now, maybe it changes in a couple of years, but right now the marginal cost of serving a chat GPT user, even a casual, weekly active user is in the, it's in the dollars per year. And when you look at the monetization rates of Facebook and WhatsApp in developing markets, the ARPOO is like dollars per year. And so matching that up feels like a big challenge. And I'm wondering about, yeah, like A6,

AI on the edge, dedicated servers or even more pared-down models, like what's the, what's the solutions so that you're not just burning a ton of cash supporting, you know, unprofitable users? So I definitely, so I wonder if we'll have the bandwidth to get this done if it like makes it to a big post, but like I think we're thinking a lot about this deeply. Yeah, that makes sense. I think the cost of a free user for a small model is like, support. I want to be a little bit more sure about that, but I think if you have high batch size with a B-200 or a G-B-200, I don't know if it's dollars per year. I really, I really think the actual net tokens that you're able to do is a lot higher than people think.

And I think that there could be this, but the problem is, it's like the same, there's the same issue, right? Think of it as like a Pareto curve, right? 20% of the people are paying at the wazoo and more than happy to pay for like a crap ton, right? The pro and plus of opening eye. The only problem is like the one, the top 5% of that 20% are paying or like, you know, they're massively losing money on. And then you have this like long tail that is like kind of interested, likes tokens, becoming a little bit more addicted, easy, cheapish to whatever.

And then as you can shift that up, maybe you can make the revenue that you're not, you're losing for the hyper, you know, for the pros. And so that's kind of a, I think that that's kind of like the more interesting like thought process. I do think the unit economics of these things are a little bit like, I mean, it really depends on the size of the model and then like what inference they're, they're doing. But like my impression is you can be doing, you know, billions and millions and millions of tokens for relatively cheap a year. And if you monetize, if you know, we're talking about like we can monetize like 15 to 20 percent or even 20 to 30 percent of your your tokens are actually

being monetized at like, you know, the market rate. You can pay off the 80 percent. And that break-even, I think, is a really important, like, question. I don't know the answer to that. I know we're working on it, but I don't have anything. Yeah, I think the, I mean, going back to your, like, Instagram or WhatsApp comparison, Instagram and WhatsApp are pretty much the same wherever you are in the world, regardless of how much revenue you're generating for these platforms. But it's very possible in the future that companies cannot serve the quality of model

in some of these areas that they can. Well, they will. It'll just be $200 and $200. in an emerging market is like a ton of money. And so the adoption rate and the upsell rate will just be way, way lower. They'll probably be like an ad supported tier. But again, ads themselves don't generate. Of course, of course.

The ARPU will be much lower in emerging markets. Yeah. And I think, I mean, I think that's happening. I can't name the hire, but I know the hire that like essentially started the ads. Yeah, Fiji C-M out. Yeah, is there. So like, you know, that's the, you know, freaking surprise I wouldn't be surprised the insert there's a Twitter user the answer is

always ads okay there's gonna be ads eventually yep but they probably monetize like within an order of magnitude of how well Facebook ads monetize and Google ads monetize so yeah that's fine as long as your inference cost is roughly the same as within an order of magnitude of Google's service cost and and Facebook service cost to serve a user which are you know pennies I imagine but it does feel like we can get that I think I think this this the time timeline broadly woke up this week that we're building developer tools and consumer internet companies. And like that's that's the game here.

And yeah. Machine God is like real. Delayed. Delayed. I'm curious, how do you think, how much do you think the labs care about the student market? There have been some reporting around the token generation as school ended last year, token generation dropped. dramatically and then today um sundar came out and shared that uh gemini they're making jemini like you know like unlimited sort of like free for for students this coming year and in some

ways seem like he's staying in the game he's like i'm not letting chat you be to well and no and it feels like that's potentially a matter a way for them to like to kind of corner users that will become very valuable maybe aren't so valuable in the short term but will become very valuable over time if you can get them to stick. Yeah. Yeah, I think let's kind of talk about this because I think that's like just a really interesting and I'm kind of going to Google I think. You know, how CUDA, you know, like just analogy, right?

How CUDA became a thing is because Jensen gave it away to PhD people for like a decade. And then all of a sudden everyone who ever did anything realistically in machine learning was like, well, I'm using CUDA because that's what I've been using. I think it's important because if you're thinking about like, you know, where are the of tomorrow, the experts of penetration are like, it's not going to be the old people who are using the hell out of it first. Who knows, maybe they are, but it's like the young people are probably going to overindex. You know, people my age, which makes me feel old, is like going to probably index about right. And then the people older than me are going to index under. And so

where do you actually win market share today? It's probably not in the people my age and older or the power users or whatever. You probably need to like get a, you know, you need to get a 12 year addicted to Gemini, which sounds like very terrible. Now they say that a lot. But you wouldn't say it about Google search, you know, or Google Drive or Gmail. But yes, it is a, it's low turn. You have to get them over the adoption curve so that they are low turn. And that's where they're like, like I think it's like a cognitive reference, right?

Like right now, even though I am very model curious, meaning that like I have a, you know, a paid sub to like Claude to Grog to ChatGBT. recently, especially like, you know, in the, you know, the good old golden era days of O3, you know, O3 Pro deep research. I'm just pounding deep research queries and like agent queries constantly. Of course. But like, and I'm going to be, to be clear, I'm going to start looking around a little bit. But like, I think, I think that that's what Gemini's like real issue is, is they need to

become the cognitive referent. I think when people open up a, you know, a GPT-like, you know, transformer model effectively to ask them in LLMs, they need to be. thinking of Gemini in the conversation and they just don't dude sometimes I like talk about LMs with like people and it'll be like you know open AI and anthropic and what's the third oh yeah Gemini you know the third yeah I like weirdly forget about them and I think that that's the they don't want to be forgotten and I also think if we do a segue too I think that's why they're also starting to sell TPUs externally and this means like as a service right in their cloud right

they're selling like they talked about on the last call where like you know GCP is starting to accelerate and I think where we're starting to see that is I think TPU is starting to pick up a little bit. Do you know that will be like distilled models that are fine tuned or developed for TPUs specifically or something else? I think it's I think it's more that like there's a few model companies who are very interested in extra capacity. You know, for example, Anthropic is definitely, you know, definitely uses some TPUs. I know that for sure. And so, you know, in the Frankic search for capacity. They also do use Traneum a little bit too. They also do use Traneum. I think it's very funny because Anthropic uses everything.

Interesting. Yeah. Is that, is that like a huge cost center to have kind of like a repl platforming team to rewrite all your Kuda code into Teranium and TPU compatible code?

I don't know, probably, but you know, Anthropics cracked. Yeah. They have plug code. They have full access to Klaug code. Yeah, yeah. Replatforming. I mean, that is the board. They don't have to worry. They don't have to worry about

being dropped. Yeah. I mean, I was wondering, like, when, when will a cross compiler exist? and you can, I mean, didn't Facebook do that for a while where like you, they would write JavaScript and compile like C++ or something like that because they'd written like so much JavaScript that they were just like, okay, we don't have time to rewrite all this. Let's just write our own compiler. And you can imagine Anthropic doing something similar to run on TPU or T or T or T. Yeah. I think that that's happening to a certain extent. And I think that for Empropic, they think of it as optionality. And I think Traneum specifically is like, you know, the other drunk suitor at the bar. who like really needs a partner like Amazon who's now last place right Yep Last era was first place now the last place

And then Anthropic who is like You know the Scrappy number three who needs capital Pute is like come on dude Marriage Made in Heaven let's Tie it up together and then that's why training is just like ramming We gotta start using these drunk bar Analogies

We usually think of the sports analogies But I'm probably more familiar with the drunk bar analogies those are good Ross McAnnell in the chat says please ask Doug about the state of memory makers will SK Hinex and or Micron be able to maintain margins and keep HBM as a somewhat differentiated product or is it doomed to be a commodity business? I think, ooh, this is a good question. Trying to think about how, for instance. So I think one of the ways to think about this first and foremost is HBM is like the new

DRAM. I mean like there's like a weird, weird aspect where it's like, okay, RAM was like the best and you can look at the cycles margins and like they're not actually higher than last cycles margins, which is like probably a little bit of a, I wrote about this like being a super new DRAM. I think HBM is really, really, really important, super, super duper in demand and is like, you know, the new memory. But in the other ways, NAM specifically is kind of like the old memory and it's getting much worse with the commoditization and the like especially CXMT on the lowest end or no, YMTC on the lowest end and then CXMT on DRAM. So you're starting to see some

some of the aspects there get a little worse, but I do think NAND is trying really hard to kind of hold on to the, you know, the oligopoly where everyone doesn't raise bits together. And maybe who knows, it becomes so old and whatever you end up like 8 HDDs, which are actually having like, like you should go look at STX and,

um, what's other than WDC because they're like, their stocks are ripping because they're Western Digital. Yeah, Western Digital because they're not investing. They, you know, it's a two player market. They even gave hands. to the other competitor so that they can like effectively like you know have a two-player oligopoly where they control supply and this is just this is just the Nash equilibrium this is

just like game theoretic they know that they that this is better for both of them so they're not getting at price war right yeah yeah yeah yeah but that's only for hard drives like nancy's in there yet man you have like a slippery chinese like swing producer that is willing to blow it up got it and so i i think on hbm i think it's kind of complicated i don't want to like say too much because I don't even know. I don't even know what semi-analysis is how, like, House House View is right now. Let's just like, I'll talk about some facts. I think might be very interesting and just like thoughts. Is that like, look, last time this year, Micron and S.K. Hynix were effectively completely booked out. And obviously, Samsung wasn't even in the game. This year, they're not booked out.

What is the difference is I think is the threat of the Samsung qualification. I don't, I don't know about the Samsung qualification. Okay. I don't think anyone knows. The shit I hear out of Korea, like I hear that they're qualified, they're not qualified, they're qualified, they're qualified, but they have to hit some kind of yield thing. I hear kinds of shit all the time. I have no idea. But I think the fact that HBM 4 pricing seems to be a little bit, like, dampened just on the threat of qualification really kind of tells me that the HBM cycle was really long in the tooth

and is probably where we're nearing the beginning of the end, just mathematically as the second derivative continues to go down for most of the memory stocks. You can look at like SK and Micron. I still like SK. I still think what they do is really, really differentiated and valuable on a relative basis. I mean, they got to HBM first. They still are really awesome. They still have the best product and process.

But I guess I'm just kind of like, you know, I'm a cycles brain guy. And it's been about three years of a tight cycle in memory. And you're like you're asking me to bet on the fourth. I know what the base rate should be. you shouldn't bet them. But I don't think we actually have a house view other than that. Like because at the same time, you know, Nvidia goes burr and HBM bits goes up.

And even though there's a little bit of an oversupply HBM 3, I still think HBM 4 is going to be pretty good. But, you know, like rate of change brain tells me, you know, it's a little spicy. Where else in the supply chain should we update if we're totally plateau-pilled? And we say, you know, we're not going to necessarily even want

to do the next order of magnitude pre-training run, the mega cluster, we're maybe gonna be more distributed, more inference heavy. Are we thinking A6, are we thinking more focus on depreciated GPUs, distilling models to older hardware, or just really getting all of the juice out of the current H-100s and GB-200s and GB-200s and actually just like, you know, like not, not replatforming to the latest and greatest

constantly, like not worrying about that? Or like, where else, where else should we be kind of updating on various parts of the supply chain? Okay. So I think a lot about this. Or in one, I feel like I'm like the wrong person. Or I'm probably a decent person to answer this, but like it's going to be really speculative. So I'm like some massive disclaimers. Who that knows, right?

Like maybe, you know, maybe there's one more thing or claw that comes out and they cook on five or something. I don't know. Or Gemini next week makes this all pill. I don't know. I think we're, okay, so let's just like walk through some of them. The massive pre-training cluster doesn't happen. I think the fiber from data center to data center is like the most screwed. That is the most whipped at the tail.

The multi-data center training thing. Sure. That is like, oof, out. Goodbye. You don't need that anymore, right? You can do 100K clusters of RL. And so that's probably where I think if you had to like, you know, slice the puzzle where it's most impacted.

It's probably there for the for training specifically. I still think we would end up doing a lot of inference. I do believe, I really do believe that if like all progress stops a day, we probably would still have like, you know, a decade of productivity as just like technologies ingested. It's not a GI God, but it does happen to be like an amazing simple like densification, simplification like, you know, densification of all of information into like, like an answer machine.

Fucking awesome. That's a big... It's useful. It's like the role of CPUs in the cloud. Like we're going to use CPUs in the cloud for a long time. It took 20 years to actually do

all the things that you can do with CPUs and databases and hard drives in the cloud. And now we have GPU and LOM. So we're going to stuff that in every single cranny of the economy. What did you think there was a headline recently that Microsoft,

it was Azure's non-AI cloud business was growing at almost the same rate. I think the final read on that was that that was just driven by Open AI as an Azure client. But basically, the read off of earnings was that their core infrastructure group grew faster than their AI services group. So more people buying compute as opposed to buying tokens. But that's not necessarily a read that like people are spinning up more, you know, CPU. So walk us through it.

Actually, that's a great question. I'm very familiar with what you're talking about. The Azure B last quarter specifically was driven by the infrastructure side, more so than the token side. And then, like, ironically, you know, one of one of my colleagues at like semi-analysis pointed out, pointed this out, there wasn't the disclosure they had last quarter. They disclosed what the percentage AI was to the growth, and they did not talk about it. And if they stopped disclosing, I can tell you the answer is it was lower. like you know so I think that's probably a pretty interesting thing it tells you that like the consumption is definitely worse I don't know if that how they're classifying well it doesn't that track

with that tracks with Satya like canceling cancelling data center developments and just saying I'm happy to lease also like you know the business on a tear doing round like multiple rounds they've done more layoffs this year than I think the last like three years combined which tells me that everything that like the timeline is waking up to this week like Satya has known Even if you look back at some of his interviews, he's talking about like, yeah, Open AI is like a great consumer technology company. We're happy to partner with them. Wait, wait, sorry, can you restate and unpack that a little bit more? So there were, so Azure grew a ton.

AI tokens grew a ton, but AI core infrastructure grew even more. But they used to break out within core infrastructure, how much of that infrastructure is being used for AI. versus not, and they stopped disclosing that. Is that correct? Yes. Yes, that is correct. Yeah. And so by not disclosing it, you know the answer is it's lower.

Yeah. But it was still, it was still like pretty big growth overall, so it's just that the second derivative slow down. Yeah, it's still accelerating, but it's at a lower rate. Yeah. Okay. Interesting. Well, actually, I feel like now I'm talking out of my ass. Yeah, yeah, yeah, yeah.

Yeah. But like, look, I think the thing of the, the Microsoft print is like, they pretty much are like almost mid-cycle, pressing the break and then they like you know they juice but like you know as it decelerates the investments you still get to reap all the investments you made and so the massive backlog right don't they have like a hundred billion dollars of cloud backlog yeah and so all this backlog is start to come revenue and then like you know Microsoft still is like such a winner just yet like fast or rewind to like three years ago when Microsoft was like clear number two and like you know now they're

outgrowing on a much higher base than AWS is and AWS is like not in this, right? So I think that if you think of it from the perspective of like, hey, Microsoft Azure versus versus AWS did you know, did Sotia win? The answer is yes. But I think the thing that is interesting definitely going forward is like how this all works and how open AI continues to finance and spend and paid for more compute infrastructure because of the the same time like you know one of the other ways you could look at it is like the entire math of where this is going is just like all at oracle's pocket like Oracle effectively so you talk about Microsoft slow down Oracle literally just completely ramped up when Microsoft

slowed down and then and then Oracle went to Open AI and opening I's like great dude we got a new customer they're willing to do Stargate there's even a spot that was supposed to be Stargate for Microsoft that kind of like you know and then all of a sudden yeah he said I'm good for my I'm good for my however many billion. 80 billion. Yeah. But then, but then that, that deal went to Oracle, right? Yes, that deal went to Oracle.

Okay. So I think that that's, yeah, I think Microsoft is like slowing down. They definitely had this massive lead, like truly a massive lead. Remember, like last year, the perception of who is winning the race for the hypers? It was Microsoft number one because the Open AI partnership plus the infrastructure. You're like, dang, they're so far ahead. Now, being conservative, kind of pulling out, you know, decelerating, but I also want to put some, like, let's also talk about this a little bit

because I think the underappreciated part about the Microsoft thing is, yeah, just like how shitty they've done with access to the model this entire time. They've had access to the model weights at Open AI the entire time. And you can also argue that no company has more competitive threat for their core business than Microsoft does. I don't know about you, but I do a lot more editing and drafting and like information search and ideation in chat GPT than I used to do it in work, right? So you're like typing up something and you're like, oh, giving me an outline.

So Elon posted yesterday that Microsoft is going to get absolutely cooked by OpenAI. And in many ways, obviously, like Microsoft has a ton of users for co-pilot. They're taking AI seriously. But what you're getting at is one, you know, and it's hard to read too much into what Elon is saying because, like, he's got a lot of, you know, he's playing games behind the scenes that, we don't necessarily have a view into. But what you're getting at is interesting, which is you might, instead of, there's a world in the future where instead of opening a doc or an Excel sheet, you just start talking with

the model and saying, I want to make a model for this product line, you know, going out over the next like three years. And it basically has Microsoft 365 as a tool that it can call. Yeah. And then eventually, they instantiate a word doc for you if it needs to. It creates the output in the actual application that they have because they already have cloud-hosted PowerPoint. And they just are like, oh, it sounds like you're going down a tree. You need a PowerPoint.

Here you go. I generated it. And you can edit it if you want. But also, here's the export. We got a PDF for you here because we used our tool. Yeah, 100%. Yeah, 100%. But, yeah, huge, huge U.X problem.

Like, I mean, like, Google has bolted Gemini on to every product. And it's, and the adoption's been very rocky. And it's been tough. Like, it's not as easy as just. like slap a text box on it and you got a winning consumer product like it does require innovation i think in terms of product development so so going back to the sort of dynamic between Microsoft and oracle i think you have to ask the question if if Microsoft is pumping the brakes a little bit and oracle slamming their foot on the gas like it's going to take a little bit to see who who made

the right call yeah yeah and you so do we do we plato or not right that's the answer well and and i think the answer this week is yes. Yeah, but I mean, at the same time, like, like inference for chatchip team. Not necessarily usage wise, but model quality. To continue to increase. And if Oracle can position themselves is like the key cloud provider for that, that could be, it's mostly just like the Oracle investments just can't be overly aggressive at any point in time because if there's a pullback, then they're like, oh, we're unprofitable for a little bit on this.

Yeah. Yeah, they could take the biggest bath. Potentially. Yeah, dude. I think, okay, so I'm trying not to call it because, as you know, AI changes, I feel like week to week. Yep. Sometimes it feels just like, I don't know, hyperbolic time chamber, dude. Like, you know, we could be so over and then it could be so back, right?

If you guys remember pre-training is over, it felt very over. And then now we are, you know, so back because of the, because of the, essentially the increase in. Reasoning. Test time entrance. Yeah, sorry, reasoning. And then now I'm thinking about this is like, Okay, so the unspoken part about this that makes, you know, the chat GPUT5 a lot better than other things is like long task and agentic and tool use, right? So that is the, in my opinion, you know, and I hear this kind of shit all the time.

I thought it's really BSE until I've been messing around with quad code. It's like, oh, agents, agents, agents agents agents are going to be this big thing. And you're like, what the fuck does that mean? Because you're like, I don't know what this agent is doing. But like, quad code is pretty cracked, man. You just like ask it to do things and it just like does them. And it does it in like kind of a scarily good way. A good example is like we've been hiring people.

I think we have some hires in the line. We make them do a case study. That's like not a case study is a great way. Okay. And I was so pissed and annoyed by some of the case study qualities. I made like each of the models do the case study. Dude, you know what did the best case study of them all? Claude code did.

That's funny. Okay. Claude code over open AI agent. And I think that that's kind of what we're like those extremely long context, autonomous ability to do stuff on on its own is going to be the like, you know, the nirvana that like changes everything or makes the consumption a lot bigger and I think you can kind of see the glimpse of what an enchantic feature looks like via quad code and then you just assume that instead of them arelling the shit out of like software and making you know the best you know the best

commit or something like that they're going to rl the hell out of like advertising or creating the best you know advertising media or they're going to rl the crap out of like finance or making the best financial law. Well, yeah, I mean, the thing that stands out to me is like this compounding advantage of like you're a lab, you're competing with other labs, and you have access to the best coding product, and you can use it as much as much as you want forever. And it gets better. And then you guys get better and higher output. And I don't think we've seen this, you know, you don't, you didn't see the same dynamic with like Microsoft having a better version of Excel and like, yeah, or the example of like, it's not like Mark Zuckerberg with.

Facebook was like, I get to use Facebook more than my competitors, so I'm going to be better. It's like, well, actually tried that. They were using Facebook for internal comms. They still do. Well, yeah, but whether or not that gave them a compound advantage. I don't think over teams or. Well, let's, yeah, like, I think there's just like project or it's like AI 2027 or something. Yeah, yeah, yeah, yeah. I think that that actually feels like a little bit more grounded and then like some of like the really like, you know, AI dumerism. But I think the like the, the recursive ability or like whatever like P-Doom whatever you want to talk about but like the recursive ability to make your products better by continuing to invest is like you know it is a flywheel and that's

definitely I think the anthropic bet that they're going really hard at and so you know the thought process is like well okay if uh if we can get the AI agent to do a you know AI uh AI experiments not just coding experiments then like boom we are off to the races and that really will be I think the, you know, the, like where the curve bends back in on itself. TBD, right, yet to be seen. I don't, like, I don't exactly, like, from the outside looking in, there isn't exactly any, um, any kind of special ability for me to say that it will or will not be that way. But I think so far from what I understand for the researchers, I don't think everyone's, like,

doomed or bared up on, um, on some of the stuff. I definitely think chat chipbt5 is a little disappointing, but maybe, uh, maybe open AI just isn't cooking like it used to, right? Like, I think, and I don't know if, I don't know if it's a, like, I don't know what actually happened at five, but like, I want to, like, we don't actually know what's the, like, the ratio, you have to, so, so, reasoning to like.

Just, just remember, you know, you can debate on, on the people that have left Open AI in the last couple months, like how, how good they were, were they the best people, were they mercenaries, but any company that has been gearing up for a massive product launch, or have gone through a massive product launch, imagine going through that again, but you lost like 40% of some of your most elite team members.

Like that could be, that's like should obviously have been a factor here. If it wasn't, then Zuck is cooked because he just hired a bunch of people that just weren't that great. Someone's cooked. So I think that, yeah, it's worth asking the question, what would GPT5 have looked like? Ilya was still at the company. What would it have looked like if Mirro was still at the company? What would it have looked like if the long tail of researchers that left were still there?

What would it look like if they just didn't have the distraction of the talent war? Yeah, yeah, yeah. Yeah. I think that's a valid question because my understanding of like why Gemini too randomly was so good is like Noam Shazir was back. That's it. Like that's literally it as far as I understand. Like all of a sudden, Gemini starts cooking again. It's like, yeah, because like the guy invented half of everything.

is back. I'm not surprised that that's like a real dynamic. But yeah, we're going to have to see. We're going to have to see. I do think you're right. Vives are are interesting. I do think probably tracking that cohort. Like if you think about it just like an incremental slosh, like, you know, that's either the biggest best investment of all time or going to be the worst investment of all time. And like tracking that cohort and how that works out is going to be like a really interesting like case study. Can you, can you give us an overview of what's happening in private? credit headline this week, obviously, that Meta had tapped Blue Al and Pimco for like a $30 billion. You know, I don't know that the sort of pace at which they'll get access to that capital.

Just give us private credit 101 and go as deep as you want. Yeah, 101, but also like, you know, the real kind of risks surrounding it, you know, over the next year or so. Okay, so I do think as some analysis I'm the finance guy, which is funny because I definitely don't know if I like in the big scheme of finance how much finance I have. But, um, okay, private credit is like public credit, but there's no marks. Okay. One of the things that got really interested. Okay. So one of the things I got really interested about that is like private equity rules because you could suck at your job. you have no marks, like you're, you know, you don't have a bad, like, performance. And your volatility, like, you know, kind of chills the F-L.

So on an allocator basis, they're stoked. Like private, I mean, this is the beauty of being, you know, in venture broadly is, the market goes up and down and 90% of my net worth is absolutely stable. It's not stable in reality, but. Yeah. Yeah. And I think that that's like a, like almost a. like a feature.

Totally. It was a feature that was like a bug at the beginning, if it makes sense, because it's like, okay, there is no mark. And because of that, you can effectively, like, you know, the volatility in these assets are really low and you hold it to maturity. There's a lot of studies and papers that effectively like, you know, public equity levered up over five years when you don't sell is like very similar. Like the returns actually start to approach each other.

And some of the cohorts of private equity specifically have really started to implode a little bit and have a low money out of the investment. So anyways, that's private equity, which I'm like super familiar with, very like very funded. Private credit is like a lot of the same, uh, same energy in terms of the mark. And effectively you own this piece of debt to maturity. So there is no, you don't really take a mark on it. And so you could get like at one point specifically, everyone raised these capital vehicles that were like, we're going to get high single digit returns with a very little volatility forever.

And so everyone was like, dude, sign. need the hell up. And so, yeah, if you look at if there, the number of billionaires that private credit has created in the last like two decades, it's like 50 in the Forbes article. Tons. Wait, really? Oh, yeah. I'm going to. Yeah, I'll send it to you. Yeah, private credit. I mean, just in Aries, there's like four billionaires.

Because it's just if you're, if, if the best way to become a billionaire is AUM maxing. And this, and this, and private credit allows you to, like, a UM max better than. Massively. almost any of these other other sectors then it uh it's just so the uh yeah really quickly Bloomberg highlighted 18 uh folks uh who are now billionaires from private credit uh starting with aries at 13 billion net worth going down to blue owl Craig Packer at one billion and so 18 new billionaires have been minted from the private credit boom and yeah I think from my perspective on the private credit boom is like okay it's definitely been a thing this entire time but like in the last

few years, like there is a hockey stick moment where, I want to say it's like late 23 or something like that, where the pitch was like almost, you know, unbelievable, effectively. This is simply too good. Yeah. Yeah. It's like, it's like you can get equity market returns in the long run with no mark to market risk and you know volatility and in theory less risk. So you're like, dude, equity risk or no, no, lower than equity return with like. relatively no risk on like, you know, it's like obviously spread of a treasury. You're like, bro, sign me to hell up.

Like, I'm going to slam that button until the button stops working. And so everyone raised these giant funds, like ginormous funds. And so now these private credit guys are like sitting on a bajillion dollars by U.M. And they're like, dude, how do I get this to work? And so now private credit is finding its way into, you know, it's kind of like the private equity. They're going to have to deploy. And so for people who are looking to deploy very large amounts of, assets. I think data centers are going to be really interesting because in theory, and this

just like depends on the whole stack, but like data centers are more like real estate investing. So you have a very different return profile that often are baked into the deals. And I think it's and it's very capital intense on a relative basis. So you can deploy a lot of capital, which is awesome. And so you do that, you get like these five year, 10 year investments with like pretty solid chances right now at least in like the two three years you're super money you're super money good like some of the early data center investments are like fucking awesome and so you're just gonna you're gonna slam that bit dude you're gonna you're gonna you're gonna deploy and so the private the plateau theory feels good here because the the risk was that I build a I build a frontier model capable

data center that runs gpt 4 and then gpt 5 comes out and I can't run gpt 5 and I'm completely useless. All the workloads move to GPT-5 and I have no business whatsoever. Instead, it feels like the workloads are like sticking around for a long time. It's important. You can have like a plateau and intelligence that is different than a plateau in usage. Exactly. If usage and demand plateaus,

that becomes a real problem. If you just spent $10 billion on, you know, super levered data center development. Yeah. I think you're probably right in terms of the fact that if the pace of if the pace of everything slows down in terms of progress you can underwrite the return you can underwrite everything a lot more chill yeah you know you're not going to be like dude my uh you know the data set you know the chips might get used longer so you can be like ah you know they're four year lives and they're five year lives with high high certainty um you know the algorithms aren't just going to like massively consume all this stuff and make like the crap you bought effectively like super cheapened very quickly and then your investment is more money good yeah it was like having like like having a Bitcoin FPGA farm or something, you got destroyed when everyone went basic, right? And that's the risk, but that's not the nature of the current frontier path. Like GPD4 workloads or GPD4 class workloads are sort of sticking around probably for a really long time. And in the future, even if we do develop the super intelligent model, it'll probably be calling less intelligent models.

There'll be distilled models for specific tasks, specific models for tool. usage and all these different agentic workflows, et cetera. So yeah, it feels like all this stuff is going to be sticking around and good news for the depreciation cycles. I don't know if that's like, so I'm going to like, I'm not going to endorse that view just because we're like speculatively one-shotting this in the day. So like, you know, we'll see. I got to think about this.

But I do think, I mean, I do think this is probably better for the longer tail if Frontier model stuff slows down. I think if we're just talking about like, hey, truly everyone else, right, like in the world where progress is exponential and there's only three companies doing it, effectively everyone else is a giant fucking loser, right? Everyone is just a giant fucking loser. There's no way they're going to have any kind of products. Everyone's just like totally cooked. Who cares? Why would you ever invest in NeoCloud X or, or, you know, behind the curve lab, Y or, you know, whatever accelerator company Z. Right. I think it probably is better for just the entire ecosystem if we're talking about just like the longer tail of capital.

So specifically like I think like the neoclods, the GPUs, the you know, everyone that isn't named open AI, Google or anthropic. So I do feel very strongly about that. Well, this is fantastic. The chat is going wild. One hour guest. Semi-analysts in my veins. This is our first ever one-hour guest. No, Dylan Patel was also a one-hour guest. Every time I get someone for somebody else, I'm like, stay on forever, do the whole show with us. I really enjoy these chats. I really thank you for taking the time. Just so you know, like, we have a lot of, like, I have like a lot of ability to make this happen or not. Dude, we have a lot of cracked people at Semi Analysis. Please send them all over. I love these chats.

You talk to Jeremy, right? You talk to Jerry, right? Yeah, yeah, yeah. He was fantastic. I fucking love Jeremy. Okay, so like, dude, we have, yeah. So, like, that's like the benefit of something analysis. Yeah, yeah, yeah. There's a lot of cracked people. We'll send them all over. Yeah, send them all over. And, and I have a plan. So, um, our plan is we've been, we've been teasing that, you know, basically if you're a real VC, you're on this like the super secret $1 million a month semi-analysis plan. And if you're not on that plan, you're kind of just a tourist. And so we're going to get every single VC in Silicon Valley on the $1 million a month semi-analysis plan. That's our pitch. We're going to meme it into reality.

I'll take it. I'll take it. For every billion dollars of AUM, you should be spending at least 15 million on. I think so. I think so. Otherwise, you're just a tourist. You don't really understand this stuff. But thank you so much for stopping by. We, we, yeah, if you're not, if you're listening to this and you're not subscribed to semi-analysis, what are you doing? What are you doing? Thanks for joining, Doug. This was fun. This is really fun. Let's do this morning. We'll talk to you soon. Yeah, we can talk to you soon. Yeah, we can talk to us. So, take care. All right. Amazing. We'll talk to you soon. Bye. Up next, we have Mitchell Green from Lead Edge Capital coming in the studio in the restream waiting room. In the restream waiting room.

Let's bring him in. And while we're bringing him in, let me tell you about ad quick, out of home advertising, made 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. Mitchell, are you there? How are you doing? Good to see you. I'm great. Great to see you. Sorry to keep you waiting. Sorry to keep you waiting. Sorry I missed you when you were on the West Coast. We'll have to hang out in person soon. But how was your trip? How are you doing? Good. No complaints. How about yourself? How's life?

We're doing great. Big week last week. We were in New York for the Figma IPO. Waiting for a slow week this summer. Yeah, it's been a lot. People always say it's like, you know, it's like, oh, it's really busy. I'm sorry, I'm waiting for it to slow, but it never actually slows. It never slows. Well, speaking of things that aren't slow, speaking of things that aren't slow, I want to talk about fast cars. Everyone at OpenAI just received allegedly, the rumor is a $1.5 million bonus for being on the team for more than two years.

I want you to help me advise these Open AI researchers. We told them, don't buy a house, buy a car. And so I pulled up some, I pulled up some options that you could pick up for $1.5 million. I think that's what they really should do. Everybody, everybody should get some leverage. Leverage. Take the $1.5, buy an F40. Okay, so we're skipping the SP3.

We're skipping the VALC. We're going straight to F40. that's great I love that by the way there's at least somebody on that engineering team that will do it

most of them probably like triuses but there might be like one or two guys that'll do it I mean when the boss is driving a Konigzag

you know you got to show up in something at least a depreciated Veyron it's funny he said about Kona Sack

he can drive it as long as it turns on and runs yeah any advice for the Konexag owners in the audience keeping that thing

running I like the Yeah, I mean, he also is F1. Well, nothing wrong there, right? Okay, as much as I want to talk about this, I do, I do, we have limited time. Please. And I do want, uh, this week, you need to have Zach Brown and I am together sometime. I'll talk to investing. He can talk to cars.

Okay. Fantastic. We'll do that. Uh, so reaction from the timeline this week is that it feels like model, frontier models are plateauing a little bit. And I think that's generally fine. There's still a lot of capability. capabilities to unlock, but I get concerned for the VCs that have been deploying billions of dollars into the longer tail of companies that have been kind of like more, they don't have necessarily traction, they don't necessarily have truly top talent, and they were kind of moonshot-esque bets on this idea of super intelligence. And so anyways, I'm curious how cooked is the venture industry and VCs broadly if and and the other factor here is like within a bunch of subcategories there's five or six heavily funded players going after the same opportunity and that

will create healthy competition sometimes sometimes unhealthy and I'm sure there'll be some good outcomes but but how are you thinking about the current state of venture yeah that's a great question so is this right in some notes um we obviously have a bunch of questions and So AI saved the venture industry from a big awakening that was about to happen in 2022, and they just got like one more kick. What's absolutely incredible is that none of these people, like remember, none of these people remembered what happened in 20 and 21. Okay, maybe you can excuse some of them in 20 and 21 because they didn't remember what happened in 99 in 2000,

because like most of them, a lot of them weren't doing it back then. They weren't in the industry. But like most people that are doing this today, we're in the industry in 20 and 21. It is the exact same thing. As you obviously know, we focus way more on like profitable businesses, like 70 plus percent of our companies are profitable. Very, you know, like summer in Silicon Valley, but we like to find companies in Ames, Iowa and Niswah, Minnesota.

We're probably the only tech fund on the planet that has two investments in Sarasota, Florida. You guys dominate in Sarasota. Yeah, dominate Sarasota. Yeah, but I felt that over the last year where... Let me continue. So 90% is, okay, before that, people always underestimate technological change in the long term, and they always overestimate it in the near term. Think like the internet bubble, think mobile phones, think self-driving cars, like,

I think PC Revolution, like it always, they always do that. This, what we're seeing in AI is so reminiscent. And what you're seeing in the markets right now is so reminiscent of 99 in 2000. Yes, by the way, the big hyperscalers have giant amounts of profits and like are printing money. These AI companies, a huge amount of them, you know, 90 plus, 90 to 95% of these AI application companies are going to zero. And by the way, totally, and I'm saying that, I'm hearing that from some of the world's full. foremost, you know, early stage venture capitalists that are telling me, at the end of the day, 90 to 95% of these things are going boss. And a lot of it is driven by upside down

unit economics. You know, like it's funny, you see some of these AI companies that have, you know, I'm not going to give names that have only 50 to 100 employees, but are raising like $500 million. And like, you can't spend that much money. Obviously, it's because they have massive negative gross margins. And that money is flowing through the AI companies, which is flow into the hypers and flow into new invidia. People ask us, like, what are our thoughts on the models? We've always thought, for right or wrong, that the models will commoditize, and it will become a game of who's got the best infrastructure and who can deliver the

searches, the cheapest. For the life of us, I can't figure out why Google, Amazon, Microsoft, don't, and Apple, which hasn't played yet, but I think they're going to. I think they should go acquire somebody. And like, why don't they just win at the, in Facebook? Why don't they win at the end of the day? I mean, Nat Friedman is a total stud who's running AI. I mean, we've backed his first company, Zamoran or a second company, Zamoran.

Total stud. Like, these companies can spend $680 to $100 billion a year on CapEx while having margins go up, still growing 22% a year printing money. Like, I don't know how at the end of the day, Anthropic and Open AI and perplexity can compete against this. I mean, I joke that Google should literally run searches on chat GPT and bankrupt them. Well, I mean, the news that came out in the last 24 hours is that Google is making Gemini free for students for the entirety of the next school year.

So they will be subsidizing. And so they will be. By the way, it should make it free for everybody. And by the way, you know, I read somewhere like the cost. The cost to serve the exact same search on like Gemini versus Chat GPT is some crazy percentage. It's like one-tenth the price or one-twentyth the price. And that shouldn't be that shocking, given that over the last 20 years, Google has spent, you know, a lot of their efforts on taking their infrastructure and, you know, making a fraction of a fraction of a penny more efficient. Yeah.

And I think it becomes an infrastructure play. Now, I do think, I think there's going to be like insanely amazing companies using AI that are built. I actually think a lot of incumbents are going to win. You know, ever since this device came out, there's only been four companies built that came out after this device that have been worth 100 billion or more. It's like BightDance and Pindodoh, two companies in China. And Bight Dance made me one of the best AI companies in the planet that's like the hidden giant out there. and then Airbnb and Uber. That's it.

The incumbents are going to win. Salesforce. Open AI is not the incumbent. It's one of the new guys. I challenge the people that ask, why is Open AI not like Excite Lycos or Altaista? I'm not saying it is, but I think it's hard to make a bet

at a $300 to $500 billion valuation that, like, I think you either make a zero or a 5X. I think it's a really, really binary. And the unit economics on these companies is massively upside down. If it wasn't, you would see some of these companies go public. And I actually joke that people, you know, we might as well be in a bubble. In the internet bubble, nobody gave it damn that the unit economics were upside down. Take them public. Let's see if they can go. Yeah. I mean, to be honest,

the unit economics of Google were very, very good going into that IPO and they maintained a good unit economics throughout our general read was was you know model like intelligence is plateauing but it's not necessarily bearish for open AI because it's a habit they have a hundred million people in the US that are using the product every single week and what you should adjust though is that's that's the upside the downside is a hundred million people use it yep but the downside is is that like investing here you're going to get massive months of dilution

because you have companies like Facebook and Microsoft and Amazon and Google that now pay top engineers like they play in the MBA. And these companies, you can have massive amounts of stock-based comp. I use chat deep petite all the time. But I think people might have... It has Google-level adoption, but the economics are not... The economics are not there.

What's crazy is, like, people are like, well, you know, Lycos and Excite and Alta Vista didn't have that many users. I'm like, yeah, but the number of users on the internet went from like, you know, 200 million, like, five billion or something. So you need to adjust for that, too. But no, I mean, the consumer growth rate is insane. If you have insane in consumer growth, you should be able to attract world-class talent. Yeah.

But if you hear about, people don't. People don't. Like, the competitive dynamic, like what, what Open AI as a company has been able to accomplish, despite competition from all the hyperscalers, despite competition, you know, the talent wars, all these different things, competing in the most capex intensive industry since the railroads or...

Yeah. Might be more capital inventive. It's truly incredible. And to do that as a company that still some people see as like a startup, you know, is... No, it's amazing. I think the other... What about...

The other thing is you hear the application companies all say, well, the costs are going to plummet for, you know, the cost for AI stuff. But the issue is if like, if the costs are going to plummet, that would be good for the application companies. But then like, doesn't, if the cost plummet, isn't that bad for Open AI or Anthropic? Because they're like revenues. They're not going to like. Well, Jevin's paradox. If the costs go down, people will just. I mean, right now, like, Open AI has tons of paying customers and people that use the products.

So costs like, like they are both a victim of commoditization at the model layer and a beneficiary of commoditization at the model layer. And so like, yes, you should maybe discount their their model API business more, but then you give more value to their consumer business because it has higher margins better. You're in economics. It starts looking more like Google and less like AWS, I guess. What about legacy SaaS? People have been extremely bearish this week's in particular. By the way, that's why you go invest in it. Steve Cohen is Toby for years.

If everybody's going one way, go the other way and you'll make a ton of money over the years. I mean, I think like the Chinese small cap index is up like 50% or something this year. The great thing is, like, I don't have to make an investment in these model companies. I should have at $30 billion. Like we should have. We're wrong because you could have sold now, right? So I don't have to make an investment, but I do run an investment firm, so I need to invest in things.

And look, we look at a lot of these AI application companies and they grow crazy fast, but we're not going to pay those valuations. And I'm not investing in businesses that have 50 to 60 percent gross dollar retention. Like screw nets. Look at gross. Like, that's what really matters. And so what are we going to go do? Let's go find bootstrap software companies that are in, you know,

College Station, Texas and Toronto, Canada and, you know, Sarasota, Florida, companies like pacemate that make cardiac monitoring software, companies like Gravity that make a budget planning software and companies like a list of plan that make financial planning software. Again, these companies aren't going to change the world. But again, we can take them from 20 million of revenue to 60 million of revenue. And there's a lot of homes inside strategics or private equity funds. And, oh, these are businesses that have like 95 plus percent. gross dollar retention that have been bootstrapped businesses that we're now using AI to make them more productive like they have 15 software engineers now they can use AI to have 30 software engineers and as long as those companies still sell to humans on the other end of the table then a you know if companies if AI companies are selling to other companies that use AI and they're talking to agents and we don't need people like I think you know then that's possible but then I think these guys a lot of these companies are in trouble but we think a huge amount of these like software companies that are out there that exist will actually use AI to create new products

and become way more efficient and more productive and like i truly believe the AI is going to be as big or more bigger of a productivity boom over the next 20 years that like then the internet was is that is it more of like a consolidating force or a decentralizing force is or should we see more roll-ups going forward with a bunch of these different small companies. I think it also is like we really like vertical application software. All those companies I mentioned were very verticalized. They like own a system of record. In like they can just use AI to become like I know there's a very smart private

equity guys that are using AI to try to start to do roll-ups and stuff like that. Or like I know that I think the general catalyst guys, the thrive guys are looking to buy insurance companies or yeah, I had I had I had. I had a meeting or dinner with a few guys, I think it was Tuesday night that we're doing AI-enabled roll-ups in like a couple key industries and I won't say them because I don't want to give away their alpha.

And then Wednesday I had a meeting, John and I had a meeting in the morning with somebody that was like, yeah, like, you know, at least one of the labs will hit Escape Velocity and we'll get a fast takeoff in the next two years and nothing's gonna matter. And I was thinking to myself like, even in that fast takeoff scenario, like it's just,

it's impossible to imagine a couple of these categories, a number of different categories where people will just maintain control. As long as, as you guys know, our LP-based, all these like world class execs and entrepreneurs and people like that. And we talk to these people that have built giant software companies. And one of them said, I was like, do we need to be worried about all these companies going bust? It's like, well, as long as your software company sells to another human on the other side of the table, like, that human will need to, like, make an interaction and probably interacts with software,

so you're okay. And he's like, well, unless you think, like an AI agent is selling to another AI agent, like if leaders doesn't have any employees and my AI agent is talking to yours, like, your AI agent, then maybe we don't need people. But as long as people are involved in the equation, you're going to need software companies. Yep, makes sense. Well, we are running behind. This is fantastic.

We've got to have you back on the show. So anytime. Thank you so much for helping. Yeah. Come up at a car. For sure. And come back on. I want to get a sense of how we should be thinking about IPOs in this back half of the year.

Obviously, Figma was very exciting. There's more on the horizon. And I want to get a sense for how you're kind of. Now, happy to talk about it. Funny thing is, if you go back and look at the last, like, everybody said the IPO market was dead. It actually hadn't been dead. It wasn't dead. Investors, but you can go look at Reddit.

Look at all these things that were public over the last year. They did great. Yeah, the IPA windows secretly been open for over a year. It's been open the whole time. It was open. People just want to admit that they overpaid for the company. Didn't want to take it public. You have companies like, we're in this, we're very early investors in Grafana, but you have companies like Stripe and a bunch of things that are awesome businesses.

Interbricks. They just have so much capital on the balance sheet. They don't need to go public. They don't need to go public. Yeah, yeah, yeah. And so there's very different than the window being open versus the time is right for the best companies to actually go out. actually go out and they make that choice because it's nice it's nice to be in the private markets. You mean it's not fun for most funds to not have to mark their books every day?

That's fun. SEC filings are not fun. Tender offers are fun. There's plenty of ways to stay private and have fun. And actually, what's amazing is, is like we are finding opportunities crazy where you can find opportunities. You'd be like, how does a same size company in Sarasota, Florida get done at five times revenues? and a company in Silicon Valley,

oh, but it's growing faster. It gets done it 90 times revenue. Like the world is becoming this like, there is true value to be had, but just looking a little bit off the beaten path in our view. Yeah, yeah, for sure. Anyway, thank you so much for taking time. We will talk to you soon.

Have a great day. Cheers, Mitchell. Have a good weekend. Good Friday. Bye. And next step, we'll bring in Ben from Orbital Operations. We've got to get the gong ready. Get it ready.

Ben, how you're doing. doing are you there sorry to keep you waiting he's going one sec great to have you on the show we got some folks in the chat the IPO window has been open but everyone hasn't given the group of new public companies credit everyone is treated as a one-off like it's not indicative of collective market good point dan ratliff anyway welcome to the stream do we have ben how you doing yeah sorry to appreciate you having me on the show yeah i was listening to the previous conversation it's pretty interesting. Fantastic. Thank you for hopping on. Would you mind introducing yourself, the company, and then what news you got for us? Yeah. So my name is Ben Schluniger. I am the co-founder and CEO of

Orbital Operations. And we just announced closing of our seed round. We raised 8.8 million. There we go. Thank you. Thank you. Who's in the deal? Who's making money off of this? So initialized capital is leading around. We've got a big participation as well from Harpoon Ventures, DTX Ventures, Rebel Fund. Madakund is in as well and a lot of other angels that joined on board. We would do Y Combinator earlier this year. Why 8.8 was there? Good numerology.

Chinese number of wealth. More of a range we were trying to hit based on the technical miles. orbital operations is developing a high thrust space vehicle. It will be stationed down in orbit for satellite defense. So we've got some hard tech development to go through and really prove out our technologies. So satellite defense, I have a satellite up in. I have the Hubble telescope. I don't want someone to shoot down the Hubble telescope.

I pay you to loiter around and blow up any missiles that are coming at it. Like how are we actually defending? Yeah, yeah. So it's interesting. We have a ton of critical. and by we, I mean, the United States has a ton of critical infrastructure out in, you know, both low Earth orbit, but even higher out, like medium Earth orbit, geosynchronous orbit. You could think like GPS, naval communications, nuclear command and control, they all sit at these

higher orbits. It's actually really, really challenging for like missiles or anything to get out there, even rockets designed to go out there. Yeah. But there are adversaries placing satellites that have capability, and it's been demonstrated already to be able to grab other satellites and pull them out of orbit or, you know, be able to fry a solar panel or jam communications, whatever it is. And we currently don't have a response for this. We don't have anything stationed out in these higher orbits. And so that's what we're really

looking to build is a vehicle that has enough thrust, fast enough response time and enough extended range to be able to go and intercept these things. Hopefully not blow anything up. Space defense is a little weird. You don't want to create trapnel, right? The last thing you want to do is killer killer trap no yep exactly so yeah what walk through if you don't want to create shrapnel you don't just want to run into this i'm i'm trying to comp it to andrel you know you have the anvil it just like it's a stone that rock that runs into the drone then there's uh you know remote takeover the microwave different radiation different uh different energy sources yeah jordy we've had a company on a on the show that just is a gun on a truck it just shoots down the

creates a lot of shrapnel when it shoots down the drones uh but there's you know i've seen like eagles come and pickup drones. Walk me through the different tools in the tool chest for taking out a satellite killer. Yeah. Yeah. So, I mean, unfortunately, one is to just like ram into it. And that is kind of the worst case last resort. You make a bunch of shrapnel. Here on earth, shrapnel falls to the ground. Easy. But up there, it keeps, it stays there, runs into other satellites, creates a problem. The next is kind of what you were mentioning, you know, direct energy type of stuff. This would be high powered microwave. This would be frying a solar panel or a laser into the cameras and sensors trying to basically degrade the satellite, right?

The other option is to do what we would call an RPO or remote proximity operation and actually go up next to it and grab it, right? This is a more challenging operation to do, not something always kind of considered on the defense side, but and more on the logistics side of things, but it is something that you could do as well. So grab it, grab it, take it out into deep space. fly it into the sun. We'll fly it off into the sun. We'll just fly it into the sun. I'm sure that'll be easy.

Well, I guess my immediate question is, I mean, it feels like incredibly important work. And also, how do you kind of like prove out your team's kind of like capabilities? There's not exactly like a test range that you can take. You know, we'll have defense tech founders out here where they can just go out and do a demo for the army or the Navy or whatever. Got to go to the moon. And in this case, you know, how do you kind of test out different D.C.s at the product level to prove capabilities when you're not in a, when we're not in an active, you know, conflict? Yeah. Yeah. I mean, it's similar. You know, my background is all rocket engine development, right? So a lot of it does start on the ground. Yeah. Well, we'll go rocket engineer. Rocket scientist. You know, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, we got to get these salaries. There, yeah. Rocket researchers, that's what the money is.

He's got a higher a bunch of rocket staff. We don't want a talent work here. Member of rocket staff in the bio. Anyway. But yeah, you develop it on the ground. You're hot firing, your rocket engineer on the ground. You're developing the tank. You're going into thermal vacuum chambers and testing all of that.

And one of the great things about this day and age is it is actually getting cheaper and cheaper to get into orbit and start demonstrating these things. You know, ride shares, maybe you do a subscale version of what you're going to do, which is what we're planning on doing for our orbital demo and you do a ride share and, you know, it is cheaper and it is faster than it's ever been. So it is not quite as easy as just going out to a live fire range. But at the same time, you know, proving out your core piece of tech, like it is getting easier to go to low Earth orbit and test it there. We're running behind today. So last question from my side. Is cost to launch actually still dropping on some sort of exponential scale or are we in a plateau? Are we waiting? Are we waiting? on Starship to get through testing.

Like are, are we actually reaping the benefits of cheaper and cheaper launch costs? Or are we kind of in like a local plateau? Interesting. Yeah. I mean, I think we've been maybe in a little local plateau for the last couple of years. But I mean, SpaceX has been dominating the market, right? I think there are other launchers that are coming to market that'll help drive competition down. And then you have Starship and Stoke bringing reusable second stages. That will be another step.

down, that actually doesn't make it cheaper getting out to the higher orbits. It makes it cheaper getting to lower orbit. But those higher orbits, you know, the reusable rockets and getting out to those higher orbits, they're not good at doing that necessarily. And that's where an impulse space comes in, Tom Mueller's company that is a booster that takes you from Leo to. Yeah, kickstage. Kick stage.

Got it. Very cool. Jord, do you have anything else? Because we're sorry to cut this short, but we are on today on a Friday. But thank you so much for jumping on. This is really, yeah. I came to the gong, so I appreciate it. We hit the gong.

We hit it again for you. Let's go. Yeah, appreciate it. There we go. I want to get one for the office. You need one. Well, good luck. Come back on and you put something in space.

We'll ring the gong again. We'll talk to us. Great. Thank you so much. Bye. And up next, we have Merrill from graphite coming in. You know graphite. We read ads about graphite every single day.

I used graphite while building my last startup. While he's joining, let's tell you about a. different ad sponsor. Bezell, go to getbezzles.com. Your Bezell concierge is available now to source you any watch on the planet. Seriously, any watch, get a hitter. AGI is delayed. Super intelligence. When it gets here, if it's five years, if it's 10 years,

it's going to want to look on your wrist and know that you mean business. That's right. So go to Bezell. Without further ado, let's bring in Merrill the first time on the show. Merrill, how you doing? Doing well. Thanks for having me, guys. Good to catch up with you.

you. It's been a week. I saw you in New York City, had a lot of fun chatting. Give us the update and give us the actual impact of GPT5, the news that happened yesterday. I want to kind of noodle through that and the impact what it means for your business. So GPT5, obviously, a huge, huge announcement, made a lot of waves. Our team immediately got to work on testing it. And I think we're noticing a few, a few things that are improved about it and a few downsides. that come along with it as well. On the improvements side, I think it's a lot better at deep thinking. It's good at one-shotting apps. It's also the biggest surprise for us is it's meaningfully cheaper on inference than a lot of the previous models. On the downsides, though, I think there's a lot of buzz around it being this massive step function. And for us, what we've seen practically in reviewing code is that it's an incremental improvement,

but it's not this massive step function. It is very much still in the realm of many of the other state-of-the-art models. The other piece there that a lot of folks have commented on is latency. I'm sure the open-AHA team is working on improving this, but one thing that we've noticed in updating our code of view product. Yeah. I want to talk about that's latency versus using just like the previous generation of models that are now being deprecated.

Yeah, the previous generation of open AI models, Anthropic and others. Yeah, I want to talk about mixture of models. We were in the mixture of experts era with GPT4, and then GROC is doing more mixture of different models together. And I'm wondering, like, code review is pretty high stakes. It's pretty high value. It's a very economic, like, I don't know, like the average salary or hourly rate

of someone who's capable of doing code review as a human is really, really high. And so is there a world where I actually want, to run within graphite code review on every single model, and then have you design a rubric or a scoring system that compares Claude to GPT5 to grok to all the different models and kind of lets them war it out and sits at a higher level of abstraction. Obviously, that's more expensive on the inference cost side, but is it cost prohibitive compared to a human reviewer that might be a couple hundred dollars an hour?

Yeah, it's a great question. And I think today it's certainly cost prohibitive to run every single model. What we do, though, and what's worked really well for us is we, much like a human reviewer, we break down the task of code review. And we're looking for different set of things at different times. So we'll look for bugs, security vulnerabilities, efficiency gains that we can make, code-based style guide inconsistencies with the rest of the codebase. We also let customers define every team kind of has their own.

own protocols and their own guidelines around how code should look. And we've let them define custom rules. Many teams are really heavily leveraging this now. And for each of those tasks, you know, those can be their own tasks in the review process. We also then, once we generate a lot of comments, we'll have like simple things that we're looking for, like, you know, little rules that even these can be things that we've learned over time. Like if it's kind of left to their own devices, the models like to say things like, we should update this line of code or something, and developers find that really annoying. So you probably don't need the highest power model to say,

you know, we should, don't add comments that start with we, but over, that is how we've kind of composed the logic and composed the voting system that we use to determine, is this actually a comment that's going to add value, or is it just going to be noisy, like, many, you know, the challenge of many AI products, and especially AI code reviewers out there? Yeah, how do you think about decomposition? We've heard this trend of like the smartest frontier models might be training smaller models.

We've talked to a couple like almost like micro foundation model companies where they're training. You know, it's just a great model for filtering for profanity and it runs and it was trained on like video game graphics cards. And I could imagine in the world of like tool use there becomes a future where there's a bunch of small models that are being kind of orchestrated by the more expensive model. How do you see kind of the surface area of what you're building kind of fork out? Yeah, I think that there's, especially as we think about the scope of code review, it is, it is kind of this first collaborative moment in the developer lifecycle. It's historically we've seen we've seen cogeneration be fragmented, every developer

having their own IDE and terminal setup. Even today we see this with a lot of our customers that are using, you know, Some engineers are using cloud code, some prefer cursor. Everyone's trying the new cursor CLI now. There's so much heterogeneity on the code generation side, but that's always been fragmented, but code review has always been unified. And it has to be because everyone is working together. It is that first collaborative moment in the developer process.

And it is, and then it connects to all these other pieces around, you know, CI merging, deployments, like everything that comes downstream of that, the moment you create that PR to get it out to production. And each of those, I think, represents the different tasks to be done to move those along. So you could think about having one model or one agent that's really good at resolving merge conflicts and another that's really good at looking at CI failures and figuring out what the problem was and being able to just fix that in the background without you having to do anything. And we see that, I think the impact of that will mostly be one.

of reducing costs over time and just letting you run a smaller model and not have to use this like superpowered laser on even a little task that something smaller could do it. What is what does market share look like from your view upstream of graphite? Like what are so yesterday we had a bunch of people on that way that had gotten early access to GPT5 and everybody's heavily conflicted because a lot of them are doing code, code general in somewhere or another, it's hard to really suss out, like, okay, what is actually dominating other than just picking up what, you know, people are saying on the timeline as actual users. But what are you guys seeing? Yeah, we're seeing, we're seeing a pretty big shift

in the past, even over the past three months, I think we've seen this shift from primarily orgs using, like using cursor and moving more over to cursor to cloud code, I think has really started to dominate the conversation for at companies of all scales for the past few months. And now we're seeing, just in the past year, so we've heard a lot more interest in the cursor CLI. I think that Claude really proved out that prompt-first modality working really well. And we've seen this sort of shift from the code-first modality of tools like copilot and then cursor and windsurf to now like prompt first with Claude code, cursor CLAI.

And then I think the next big shift is like staying prompt first but moving from local to to like remotely deployed agents. And we're already seeing, you know, we've seen cursor build something there, cognition, co-gen, many others that play in that space. So I don't think that we've seen a massive, I don't think we've really seen a massive shift in the past 24 hours, though. It's still, it's still, I think the good news for everyone is that it's still a pretty close race. And competition is really, I think, necessary in this world. I think if we ended up in a place where there was one model provider that was so much better at cogeneration than another one, then there wouldn't be as much pressure to innovate. They'd have a ton of pricing power. It really wouldn't, and it wouldn't reflect that historical model of cogeneration being kind of up to developer preference.

How is AI changing developer communication around pull requests? Like the canonical example is like you, you know, you write a summary, you write like a headline. But I imagine that it's probably pretty easy. Like one of the things the models are great at is just condensing down information. I'm not a particular fan of them expanding information oftentimes. But if there's a really big poll request, you can kind of show varying levels of summaries. And I find myself doing this even in the consumer realm where I will say, okay, I want a deep research report on something, some, some, the history of a business. but then give me a one-line summary, give me, you know, five bullet points,

then give me, you know, a New York Times article length, a couple hundred words, and then give me the full 30-page PDF. And because I want to be able to consume it like a fifth grader, like a college student, in these successive levels of depth. Is any of that happening in the pull request world in the developer code review world? Absolutely. I think one of the most used AI features and one of the first things that we launched, in the graphite platform was the ability to write the PR description for you.

And that's something his developers kind of famously like hate writing, writing long as a description. Yeah, yeah, just do this for me. But AI is amazing at understanding a change, summarizing it. Now we're actually, I think this is also where we'll see Coder view going is it's moving from this world where you're just scrolling through, you know, scrolling through the and everything is just an alphabetical order, and you have to kind of guide your own way through it to, I think now AI is incredible at understanding the change. We're actually working on a new feature launching pretty soon in Graphite,

where you'll be able to just ask Graphite, hey, what are the important parts of this change? Like, walk me through the key pieces of code that changed here. What should I be looking at? What is high risk? And making it a lot more, I think even an AI code review right now, I think we're still in like the copilot V1 moment of AI code review where we're just adding comments on GitHub. But the future, I think, is much more of a one that's interactive and is guiding you through the code change in real time and helping you to both review it and also to make updates and coordinate the various agents that are working on that change in real time.

That's great. Jordy, anything else? I think we're... Yeah, I'm curious. I mean, the main thing is, I guess, like, going into this year, everyone said this is the year for agents. And I was in, and it felt like yesterday with Greg or Mark, I said this was the year more of deep research. But then they said maybe, maybe also coding agents. Coding agents have been the other thing.

Where, what do you expect out of the coding agent market in the next, like before the end of the year? The question. I think that the biggest thing is that we're just moving through, like, slowly moving, moving around that grid. If you have, like, you know, the way I think about the market is, is you have one axis of where does the code live? On the one hand, historically, it's all lived locally. Now we're seeing a shift to some of this living remotely and having these background agents that you access primarily through prompting. And then on the other axis, you have, like, is the interaction modality code first? is it prompt first? The code first ones being you started with co-pilot, you had cursor, windsurf, now we're seeing the prompt first and the prompt first modalities in Claude code, the cursor of CLI, warp and others. And I think we're starting to see, we've seen that shift from like the local code first to the local prompt first tools now. And now I think what I'm curious to see for the rest of the year is how quickly we then go from local prompt first to remote prompt first, using like cognition, code gen, cursor background agents, those others.

And I do, I think our bed and what we're seeing is that that is very much the future. It requires, it likely requires another step function improvement in the models for that to be, you know, for that to truly be the primary modality of software development. But I think that's, that will be the shift that we'll start to see for the rest of the years, you know, that migration from, you know, from local to remote prompt first modes. Thanks a lot of sense. Well, thank you for joining. Thank you so much. Have a great Friday. Have a great weekend. We will talk to you.

I'm sure it'll be a busy weekend for the whole graphite team. For sure. Making sure that GPD5 is rolling out. Fantastic. We'll talk to you soon. Have a good one. Cheers. Thanks for me, guys. Later. We have to talk about the actual biggest news in artificial intelligence. We miss this. Everyone's been focused on GPT5.

The biggest news in artificial intelligence is that the billionaire AI co-founder Lucy Guo pays nearly $30 million for an LA spec house. Lucy Guo found co-founded scale now runs passes got a discount on a Hollywood Hills home. Tech entrepreneur Lucy Guo 30 has been called the world's youngest self-made woman billionaire. Now she's putting some of her earnings into real estate. She paid $29.5 million for a newly constructed mansion in LA's Hollywood Hills. According to people familiar with the transaction, the price is a significant discount. They originally were pricing this house at $43 million.

It's a 13,500 square foot house with five bedrooms on 1.2 acres. And this is, I mean, everything about this house looks great. The photos are fantastic. The one mistake, Lucy Guo couldn't be reached for comment. Why are you no commenting this article? You got to tell your whole story. All I can say is you can sign up at passes.com. Exactly.

There was a great, there was a great opportunity to upsell to, do all sorts of stuff. But there was a, I, I, uh, this, uh, this house has everything, a sunken, a sunken fire pit, a pool, jacuzzi. It has everything. It looks fantastic. Um, LA's high end real estate market has been hobbled over the past year by the LA fires outward migration and lower, to lower taxes and broader economic uncertainty.

Most of the recent high end sales have closed at significant discounts. So there's really no reason to buy a 30, there's no reason not to buy a 30 million dollar. Friend of mine. in Malibu says that the, there's a barbell in the market right now where things are hot under, under like five, like single family homes, and then really hot on the high end in like 50 plus range. Well, speaking of 50 plus ex-Google CEO, Eric Schmidt, has purchased LA's spelling manner for a $110 million. Finally.

Finally. This is a very, this is a very fun article amidst a challenge. luxury market the property sold for less than its 2019 sales price he got a steal this was built the spelling manner if you're not familiar with this this is an iconic legendary house if we can pull up the image look at this thing it is insanely large multiple wings it has an entire like a B-21 Raider from above it's amazing it's amazing it has an entire famously has an entire room for just wrapping presents because when you're right when you're at this level yeah when

you're at this tier you don't just like you You got to be wrapping. You need a whole room for wrapping presents because you will be wrapping lots of presents because you'll be giving out lots of presents. It's a 56,500 square foot property, 14 bedrooms on five acres. And this is in Los Angeles. This was built by Aaron Spelling, who was a TV producer in the 90s. Very, very famous. The French Chateau style property is slightly larger than the White House.

It has a bowling alley, a wine cellar, and a beauty salon with massage and tanning rooms. So if you need to get a tan on, you go to the tanning room. What about the movie theater, though, John? I don't know what the movie theater status is. What's the over under on that? Well, the property will remain a single family home. The Schmitz, philanthropists who have homes around the world, purchased it, primarily to host meetings and events for L.A. non-profits and cultural institutions.

They're not even living in it full-time. It was sold for a discount. It was listed for $137 million. $1.5 after several years on the market and multiple price cuts. I mean, it's such a big, iconic house. the buyer pool is probably pretty small. It was last sold in 2019 for about 120 million when the seller was British heiress. Petra Ecclestone.

Echlestone famously hired a team of roughly 500 workers to complete a massive renovation of the property. And now, just six years later, the Schmits are planning a significant remodel of the house to simplify the floor plan. So this thing is just getting more complex. And they're putting in a present wrapping room. They're tearing out a present wrapping room. Everyone is remodeling this property. And they're no longer going by spelling manner. You know, the guy who belt it, he put his name on it.

They're pulling it off and they're calling it 9. 594, 594, a restaurant, a reference to its address on Mapleton Drive. Very nice. Well, I have a post to cap off the week. It is in the timeline from Lulu, Missouri. So we've been, I guess, Brees mentioning over the last few weeks that it feels like we've maybe reached a local top on startup launch videos. A lot of them are starting to look the same. They're sort of the default now.

It's very hard to stand out. People, I think, are certainly delays over them a little bit. But Lulu has potentially a new meta. So let's pull this up. She says, who's going to be the first startup to do this format as a launch video? And it's the sorority. And I would go out and bet that it's clearly. Of course.

I bet they're already working on it. They're probably working on it. There's not a format they admit that they don't like. The challenge is some startup might. This is so much choreography. I guess the people in the back are just kind of dancing up and down. They're not really doing choreography. Yeah.

So the challenge is if you're launching your startup, Monday. Yep. You could be spending all weekend doing this, getting it ready, and then Roy Lee and the team will launch it like Sunday in the middle of the day. So good luck out there if you're trying to launch. Speaking of Cluelly, obviously they still have to do so much on the product side to really nail it, get retention, all this other stuff.

But in terms of just the cheating as a keyword, I think that there's something that's going to be very, very sticky there. Julius Steinberg who's been on the show is posting a picture of a billboard says, hi, my name is Roy. I got kicked out of school for cheating by my cheating tool, cluelay.com. And I just feel like it's such a simple encapsulation of the value prop, just in one word that grabs your attention. I was thinking it's kind of like Red Bull gives you wings.

It's not, Red Bull doesn't actually give you wings. It's just. Speak for yourself, John. Yeah, yeah, yeah. You've grown wings. You've grown literal wings, you know. But it sticks in your mind. it grabs you and I feel like the even though the Cluley stunts are kind of getting like less

and less shocking because it's like oh okay we we kind of come to expect that clearly is going to do a sorority dancing video for example but just just the the cheating as a as a keyword if they can own that in in the broad consciousness I think it's going to continue to pay dividends and grab people's attention and just be something that they can run with for a long time because like even though the Cluelly stuff went super viral, everyone in tech talked about it, everyone in Tech was arguing about it for a long time. There's still hundreds of millions of Americans that have never heard of Cluley or maybe they saw it once and forgot about it.

And I think that that is going to be like a keyword marketing campaign that just like keeps, keeps sticking in people's mind. And it will, you'll find out that it goes viral. Yeah, they have to figure out how to go mainstream. But like it's such a distillation. It's such a compression of a meme of an idea of like, oh, I would like to like cheat on that, you know, report that I've been working on at work. And actually, my boss doesn't care if I cheat. They don't care if I use that.

They care about the result. And so, but it grabs your attention. And so like, I could see it, I could see it running in a Super Bowl ad and actually driving conversions and downloads. Now the product has to be really great. It has to be better than chat. GPT. That's an extremely tall order. They're going up against Gemini.

which will help you cheat, quote unquote. I'm using cheat in the just AI assistant language, not actually literally cheat. And they're going up against free models and cutting edge models and all sorts of different things. And we'll see how sticky that new, their UI implementation is where it screen scrapes and records your calls.

But in general, I think just as a marketing technique, like I don't think we've seen the end of cheating as a buzzword that clearly will be reaping the benefit of. Totally. Cheat code. Anything else in the timeline? Tyler is the timeline in turmoil? Is the timeline quiet?

Quiet at the western front. There's one thing. So some small updates for GBT5 from Sam Allman. He says they're doubling rate limits for plus users. Can you do the Sam Altman voice? What is this? They're doubling. We're doubling rate limits.

We're going to let plus users continue to use 40. There we go. That's how I imagine. Yeah, they're bringing 40 back. Interesting. Wow. And the auto switcher was broken yesterday. Oh, interesting.

So he says, it will seem smarter today. Yeah. The result, it was out of commission for a chunk of the day. And it will seem. It's kind of hilarious that they had like, you know, a pretty big launch. There's like two bugs, like one with the chart, clearly got misrendered for the live stream was fine on the blog post.

And everyone's like, chart crimes. This is the, and then the model switch is broken. And people are like, this is, it doesn't work at all. But I'm thinking, I think we're back. I think we're back. I think we're back. We heard it. We've heard it.

You heard it here first. We are back. accelerate your timelines. You now have two days to escape the permanent underclass. So have a great weekend, everyone. Get to work. Two full days. I will be, you know, I think most people at summer you should escape the permanent underclass this weekend by hitting the pool, hit the beach, have some fun out there. Get a ramp floaty. Get a ramp floaty and spend a weekend on it. Enjoy. Have a great weekend, everyone. We will see you Monday. Leave us five stars on Apple Podcasts and Spotify. Thank you for watching.

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