TBPN - Leopold is Back! Big Tech Earnings, Defense Tech Deep Dive | Richard Craib, Trae Stephens, Blake Resnick

Episode Date: July 31, 2026

(00:27) - Leopold is Back! (29:21) - Big Tech Earnings (32:45) - Richard Craib is a mathematician, AI researcher, and founder of Numerai, an AI-driven quantitative hedge fund. Richard Craib discusses the distinction between genuine alpha and returns driven by concentrated risk, arguing that disciplined diversification, mathematical risk management, and sustainable long-term investing matter more than short-term gains or investor hero worship. (01:00:15) - Trae Stephens, co-founder of Anduril and general partner at Founders Fund, discusses volatile venture valuations, responsible fundraising, and the evolving defense-tech ecosystem. He also covers Anduril’s autonomous aircraft and rapid manufacturing expansion, the case for mandatory civil service, and Founders Fund’s investment strategy. (01:34:39) - Blake Resnick, founder and CEO of public-safety drone company BRINC, discusses the company’s $125 million capital raise and tours its drones, recharging pods, R&D facilities, and factory. He explains BRINC’s plans to deploy autonomous emergency-response drones nationwide, its strategic partnership with Motorola Solutions, and opportunities for innovation across the domestic drone supply chain. (01:53:47) - 𝕏 Timeline Reactions TBPN is made possible by:Ramp - https://ramp.comPublic - https://public.comCisco - https://www.cisco.comConsole - https://www.console.comCrowdStrike - https://www.crowdstrike.comFigma - https://www.figma.comMongoDB - https://www.mongodb.comNYSE - https://www.nyse.comRailway - https://railway.comShopify - https://www.shopify.comCodex - http://openAI.com/codexFollow TBPN: https://TBPN.comhttps://x.com/tbpnhttps://open.spotify.com/show/2L6WMqY3GUPCGBD0dX6p00?si=674252d53acf4231https://podcasts.apple.com/us/podcast/tbpn/id1772360235https://www.youtube.com/@TBPNLive

You're watching TVPN. Today's Friday, July 31st, the end of the month, 2026. We are live from the TBPN Ultron, the Temple of Technology, the Fortress of Finance, the Capital of Capital. We have a guest co-host today. Introduce yourself for those who are going on. He's out again. I'm back. Yeah, we got Tyler in the Ultradome, in the hot seat.

Well, let me tell you about ramp.com. Time is money. Save both. Easy use corporate cards, go-pay accounting, and a whole lot more all in one place. You're back. You know who else is back? Leopold Aschenbrenner's back. He says you're going to have to.

drag me out of sulp, out of situational awareness, LP, because he's down but not out, little beat up, but he shared a letter that's making the rounds, thanks to some intrepid reporters on the DBPN team that posted this. He sent an LP letter that clarifies a lot of the questions. Yesterday, I mean, even internally, we were going back and forth on like, okay, he sold a bunch of the portfolio to Ken Griffin, to Citadel. Does this count as a liquidation? Does this count as blowing up? And these are like, Like sort of vague terms? Like what does it mean to blow up?

It seems like there was definitely a drawdown. The fund definitely was underperforming that month. But what does it mean? Is the fund gone forever? Is he going to work at McDonald's as some people were trying to make it seem like it was happening? Obviously that's not going to happen. He's going to have a long career. Lots of people are rooting for him.

I'm certainly rooting for him. But there are some facts in this letter that we should read through. So he writes, this is Leopold, Oshin-Brenner to the LPs of Situations. awareness LP. We let you down this month. We came closer to permanent capital impairment than is acceptable to us. We, while we ultimately found a solution that protected the fund and you as investors, that was the sale of the public equity book to Citadel. There were some other structure going on to get liquidity. He said, we ultimately found a solution that protected the fund and you as investors. Our intention in running the fund is to never find ourselves in

such a position in the first place. Volatility is the price of long-term investment returns. Over the past two years, we have delivered outstanding results. That's 100% true. It was up, what, 1,000% at one point or something like that? Yeah, something like that. I mean, it got up to, what, 45 is the number? Yeah, 45 billion AUM from an original raise. Less than two years ago, I believe, up $250 million, which seemed crazy at the time. People were like, he's a young first-time hedge fund manager. He's got $250 million. That's crazy. Then pretty soon it was like, oh, he's got a couple billion. That's crazy. Then it was like, he's got tens of billions. Then he's got half a centi billion. So he says, over the past two years, we have delivered outstanding results despite occasional sharp pullbacks. Probably not the first time. There's been other pullbacks in the market. And those have probably been amplified, but never gotten to this level of actually distressing the fund in this way. He said, but our fund must always.

be structured such that we can take a loss and fight another day. And that's a recurring theme in this. The writing in this letter is really good. Very clear, very direct, not being dodgy, very up front. I love the way it's written. Almost kind of like there's the PG advice to like write very clearly. Yeah. I think it was very kind of in that line. There's a lot of that in here. Yeah. So he says, I will make it my mission to ensure that we learn the necessary lessons from this experience. Here's where things stand. One, the portfolio experience a significant drawdown over the course of July, which was exacerbated by extreme moves in core positions over the past week.

Many AI names drew down by half or more while our positive long, short spread reversed violently. While we could say much more about how unusual the month was, we hold ourselves to a higher standard, irrespective of market conditions. Two, as these moves proceeded, we started to see increasingly adverse trading in names publicly associated with us. So this is the rumor that Martin Screlli was talking about yesterday, this idea that there's blood in the water. You can kind of sniff out if someone's hurting and that.

Exactly. And then short, sell those positions, sell those names, put some pressure on those downward pressure to actually intentionally hurt that fund. It's a knockout, drag out fight there on Wall Street, clearly. But that's the game you're playing it. That's why you get paid the big box. if you can pull it off. So these dynamics are essentially similar to a bank run.

Crazy to put that word in there. A lot of people would be dodging that, but very, very direct. I love it. Vulnerability, be getting more vulnerability. We worked to keep the portfolio within our risk parameters, but gradually this became more difficult as positions rapidly moved against us and market liquidity dried up. On Wednesday night, Thursday morning,

we took decisive action to protect LP Capital. We traded a portion of our public portfolio in a block transaction to remove all leverage from the fund and prevent further losses. All shorts were closed and reliance on portfolio financing removed. We currently manage a fully paid for public book, long stock and long fully paid for options with no margin liquidity risk. This restored stability and allowed us to preserve our private positions. So this feels like down but not out for sure. And he says, I take full responsibility for these events.

That's just the full paragraph. He just says I take responsibility. No equivocating. It's great. to be clear, this should rightly have been a very painful month in terms of the performance of our fund. When AI stocks draw down dramatically while AI technical business fundamentals are improving, you should expect our fund to be down a lot. We embrace volatility, but it should never jeopardize the fund.

The fund was not shut down. It was not liquidated or transformed into a private-only fund. This was something that a lot of people were speculating on was, is this going to be private-only? Are they only going to have their private book? It's just going to be the anthropic position that's going to be riding. Or is it just going to be liquidated and they're just going to return capital LPs and just say, hey, we're going to start completely fresh, do something completely different. Even like an aqua hire, like the situational awareness becomes like a desk and another fund. None of that's happening.

He's very clear about this. Situational awareness is not shutting down. It's not liquidating. And it's not transforming into a private only fund. He says, we are continuing to operate as a hybrid public private fund. as before. However, we will manage our public book on a fully paid for basis while we draw the lessons from these developments. Most importantly, we took the steps that were necessary to fight another day. I love it. A rally and cry to both the LPs and the employees, I'm sure.

In the coming weeks, I will focus on putting in motion the necessary changes across a portfolio management, risk team, and vigilance applied across the board to ensure a higher level of resilience going forward. AI may continue to intensify market volatility for years to come, and that is something that is so clear outside of the situational awareness, bottleneck trade, long-tail, low, market cap, high volatility stocks. Like, I have never seen the Mag 7 trading like this where across earnings, we're going to get into this with recapping meta, Apple, Amazon, Microsoft. Yeah.

I think the stat was Microsoft had the biggest, like, day ever of any public company. Yeah, the biggest move. Yeah. So you're seeing, you're seeing trillion-dollar companies move by 10%. 9%, 15%. It's insane that anything can happen at that scale. And so clearly there is going to be a lot of volatility. And I think he's right to point out that it is based on the AI trade.

There's so much uncertainty about one little number about how the CAPEX is going to trade back. The investors in these large companies, let alone the small ones, are moving the stocks significantly. And that makes his job all the harder. He says, these were very expensive scars, but I am dedicated to ensuring they will be invaluable lessons for our organization and for myself as we move forward. My core promise to you is that we will not waste the opportunity to learn from these events on the portfolio itself. We are very optimistic about the current investment opportunity set. Of course, I mean, the thesis still holds. The underlying fundamentals are accelerating at the very same time that prices have declined significantly.

Thank you for your patience and your partnership. completely invested alongside you. Virtually all of my capital is in the fund, and I intend to work relentlessly to demonstrate that the events of this month have made me a wiser and stronger investor. He says he's available for calls, but he also says that as an interim update, the current unaudited estimate of net month-to-date performance,

this is for all of July, basically. Negative 67% sounds atrocious until you realize that net year-to-date, they're still up 80%, which is like better than, any investment fund ever. So people are definitely, you know, maybe down but not out. There's going to be a second act here, which I think everyone's very excited for. A lot of people were praying for his downfall. It's very unfortunate to see. I think this was really good letter.

I mean, this is like instills so much faith. Like, yeah, he's completely level-headed. He's not like freaking out. You're calling it another billion dollar PDF. Yeah, that's going to be the second billion dollar PDF. It might be. I mean, Shaltrow agrees. Shalto? Yeah, Shult had a great take here. He had a great position. What did you say? He said, prediction.

Situation awareness will be bigger than Citadel by the end of the decade. Leopold has predicted the last two years better than anyone else. Now that he can combine that with very expensive lessons in risk, he will be unstoppable. He has my full confidence. This is such a wild post. Kane Griffin sitting there being like, you got a ride with your boys. Shalta, like, you're going to take a shot at me like that, bro. Really?

Really? You're going to comfort me like that? because I will die before I am not the biggest hedge fund manager in the world. But no, I mean, I love that Shulte's coming out and supporting. Now, interestingly, this is the battle of the Dwar cash guests because Shalto's been on Dworkesh, obviously, also a roommate, and Leopold's been on. But Augustine LeBron is a little deep cut in the Dwar Cache archive. One of the first Dwar cash guests, Augustine LeBron, is taking the other side of it.

He says, even odds, I'll take the other side. side, it's gentleman's bet. And so they're putting money on the line. How much leverage will they be using? That's the key question. Shaltow says, $1,000 for fun. Anything more is better put in the fund, even on us. And Augustine LeBron says, done. And Shalto says, deal. And Augustine says, it's in my Google calendar. They're going back and forth. Now, John Shue wants to get it on the action. and everyone's doing derivative bets on whether or not Leopold surpasses Citadel by the end of the decade. So check back December 31st, 2029, I guess, would be the end of the decade. Yeah.

That counts, right? Yeah. So when the clock strikes midnight, there'll be a countdown. 10, 9, everyone's going to be new decade. Tech people are just going to wonder which one is bigger. This is the biggest thing of the decade. Hopefully, the situational awareness will be taking over. square for a ball drop to celebrate being bigger than Citadel.

No, I mean, if it happens, it's going to happen like way before that. It won't be down to the wire. But let's pull up first this ad for Cisco. Critical Infrastructure for the AI era. Unlocked seamless real-time experiences and new value with Cisco. And then let's pull up a live view from the Citadel trading floor because we got some leaked video. This is not. the vibe that

Martin was articulating Ken Griffin's wanting to be framed as like the Savior, the last resort, positive force. This is the guy you want to call. I guess. Dune, so good. Is this from Dune 1 or Dune 2?

I think this is... I want to say Dune 1. Yeah. Beautiful. It's very heavy. So I think one of the big stories of the last, you know, a few days is we've seen all these new Leopold photos. We've never seen these before.

Yes. Brand new rare Leopold's from Wall Street Journal. This might be the biggest story of them all. Yeah, because, I mean, for a while, the only image of Leopold was basically, there was, like, one headshot, and then it was just Stills from Dwar Cajbatch Podcast. Yeah. And now we're just seeing all these new ones. Yeah.

Like, where did these come from? There was one. And then there was a photo that was done, I think, for the Wall Street Journal. But then the New York Times writes up the whole story of the, of the situational awareness, you know, did. deal with Citadel and they just drop a bang or new photo that they just had in the archive that they could have leaked. Let's pull it up.

It's here. It's Leopold looking very pensive behind a glass wall. This one's in the Wall Street Journal today. This one's new too. Everyone's been clamoring for this because the one that goes viral is him in that green suit. This is the one that's AI. That's AI. But this one is not.

This is from the New York Times. They went and shot this and then never published anything. Like the first time Leopold was mentioned in the New York Times was yesterday, and they used this photo. And so you have to wonder if they were like working on a profile. Yeah, they just been sitting on it. But Leopold's been so quiet with his public relation strategy. He's not talking to media doing photo shoots, doing profiles constantly. He certainly could be doing more in Bloomberg at Forbes and Fortune.

Like he could be doing a lot. But he's had a very narrow strategy. And I think it's worked very well for him. But it's funny that somehow all the mainstream media just has secrets. Leopold photo, they've been dropping on the timeline. It's a big day. Let me tell you about MongoDB. Strategic Reserve, indeed.

What's the only thing faster than the AI market? Your business on MongoDB. Don't just build AI. Own the data platform that powers it. John Arnold is chiming in. He says, my philosophy when I used to hire traders was that the optimal number of past blowups was one. He's not saying zero. Yeah.

He says, you've got to learn your lesson. The question is, is how does the FTX future fund? count. I don't think that counts at all. It definitely doesn't count as a full blowoff. He wasn't a fund manager of it, right? It wasn't it like for donations and then FTX was just the one that was funding? Yeah, it was like plant three. He was doing flansprice stuff. That seems

yeah, that seems completely separate. Yeah. Is the wedding photo AI? Or is this real? And is he carrying an American flag? Let's pull up this image. Yeah, this one I've never seen before until yesterday as well. I mean, like if it's the wedding, like the wedding's happening right now, this wouldn't exist. But I am wondering if this like leaked onto the timeline from someone who was there. Also, this photo hit like Wednesday and I think the wedding would be over the weekend. But it's cool that he's

just rocking, carrying an American flag international. Yeah, the real lesson here is never travel internationally because he takes one day off, one weekend off to go to Europe and everything blows up. Of course. This one I was laughing at before the show, Rambo says, comparing Leopold Osh and Brenner to Bill Wang. Wang is the goat, Bill Wang's from Argoose. Wang is the goat of degenerates and Leopold as a sheep compared to him. Did you know that Wang turned 200 million into 36 billion and it was all personal capital? The guy literally led prayer circles in the conference room before trading days started. He had 160 billion dollars of stock exposure on just 36 billion of capital. It's like five or six X levered. His blowup happened in two days and he literally caused the collapse

of one of the most prestigious investment banks. Banks lost a total of $10 billion dollars combined because of his collapse. Leopold, there's nothing compared to Bill. It's so. It gets her numbers up. Yeah. No. Yeah. I mean,

that's the interesting thing here is that like it is this sort of like dramatic, unwined, but at the end of the day, it is just like an over-the-counter transaction with Citadel for a block of trades and block of equity positions. Yeah. And the fund is still around. I mean,

they still seem to be like probably going to be doing very well. Yeah. They'll be, yeah, they'll be okay. They're going to be bigger than Citadel pretty soon. Any day now. Yeah.

And importantly, all of the prime brokers, the big banks, like they were not affected. There was not like a liquidity crisis that a contagion effect did not take root. Roy Driscoll says, there's nothing to learn from the situational awareness situation about the AI trade. Leo was right in 2024. And based on the Amazon results, he's still right today. Hyperskeleic KAPX continues unabated. There's obviously something to learn about risk management, 4X leverage with high beta stocks, mistake in trading stocks. Half the battle is getting the trend right, but the other half is

nailing the portfolio construction. Well, I mean, this is what Martin was saying yesterday, right? Yeah. The underlying completely makes sense, but like you get into these crazy psychology things where it's just like, yeah, who's really, everyone's focused on the leverage. It does also seem like there were like every time the 13 F would drop, it would be like 12 names, which is like not a lot of diversification. So I wonder, like right now the message from the letter is we're not using leverage right now. We're going to be learning the Maybe the lesson is, hey, 2x leverage or three X or something like that or four in certain scenarios with smaller trades, not portfolio wide or something like that.

But it will be interesting to see if there's a difference in if the lesson that's learned when the next 13 drops in a couple quarters, we see, oh, wow, he has like a hundred names or there's, you know, he's using more options or less options or, you know, whatever, however it changes, that will be interesting to see for sure. So Leopold still has Anthropic, Madax and Fluid Stack, tier one private companies. He can probably raise two to three billion more. It's not over for him by any means, says Zephyr and people are going back and forth on this. A lot of people, it is interesting.

I'm seeing, I don't know if it's just my algorithm, but I seem to be tuned to, I'm seeing more people dunk on people dunking on Leopold than actual people dunking on Leopold. It's like mostly just defending him. Like, yeah, he was correct and unfortunate circumstances. And a lot of people being like, it's in poor taste to dance on graves or you shouldn't be so negative. Why is everyone praying on his downfall? I'm not actually seeing that many people praying on his downfall. I have here and there throughout. And earlier in the week, there was like the he's working at McDonald's memes and whatever.

Yeah, yeah. But overall, it feels like that has been. pretty quiet and low. But I do get where those takes are coming from. There's been this vibe of like, it's too good to be true. Yeah, I mean, it's like tall poppy syndrome. You know, he's the AI. Can't keep getting away with it. He's the Wonder Kid. Yeah. Yeah. Yeah. People, uh, people, people hate to see a young, a young, a young, a young hedge fund manager, run it up crazy. Let me tell you about Railway. Railway is the all in one intelligence cloud provider. Use your favorite agent to deploy web app, servers, databases, and more. Well, Railway

automatically takes care of scaling, monitoring, and security. We have Richard Craib from Numeri coming on in 10 minutes. He's been running an AI hedge fund for years now and has been through all sorts of different pullbacks, understands this stuff really well. We open the show with one of his takes and his analysis of how leverage affects the returns and risk profiles of hedge funds yesterday. So very excited to talk to him. He has been a very interesting voice in in the world of tech and finance for years. I've been a fan of his, so very excited to have him on the show.

So Alexei Goosey says, people keep making fun of Leopold on the timeline, but everyone, one, everyone needs to get Marjorgen called once in their life. Is this true? Delian had a similar take, right? He said basically all the goats on Wall Street have had some sort of blow up earlier in the career,

part of the game being a live player on the field. So. But yeah, is that true? I don't think that's actually true. I don't think Warren Buffett ever blew up. I don't even think Ken Griffin ever really blew up. I think he had a really bad year in 2008 during the financial, during the housing crisis, the financial crisis. But early on, I think he got his start sort of post.com and was doing convertible debt trading and never really like the entity has always been Citadel.

There was no precursor to that. But it's a fair take that like clearly people can blow, can build. back up after there's a... Yeah, I mean, there's a lot of comparisons to PT, right? Yeah, Clarim. And then they're saying, oh, this is also kind of loose take, right? You go into VC. Yeah.

Then you can kind of do the long only thing. The real hack would be to just raise the smallest hedge fund ever, $10,000, lever it, blow it up, and be like, wow, I'm post fall. Oh, yeah, he's post fall now. He's post fall now. But if you do it with, like, such a small amount of capital, but you can still be like, oh, man, I'm just full fall now. learned so much. That was really crazy. Those were crazy, crazy times. I lost $500.

Ready for the real fund now? No. Leo still made incredible returns. His fund will do incredibly well in the long term. Lots of people coming out in support. One person that's not in support, Joe Wisenthall is going back and forth with Tracy. This is hilarious. This is funny. So Joe has been live tweeting this. He's been making a bunch of great points. and just illuminating the deeper level of like what's going on with prime brokerages and all these different aspects of what's going on. But so Joe started by sharing the Wall Street Journal article that said that Citadel Buy situational awareness stock portfolio after big losses in AI. And Tracy says, why does he have to get bailed out at all? And this is another question.

Like, is this a liquidation? Is this a blow up? Is this a bailout? It would be, it would have been a very different conversation if this had been like a government bailout. of situational errors. That's not what happened. But Tracy says, why can't we just let the speculators fail? Joe Wisenthal says, who says he's getting bailed out?

He entered into a transaction with a willing counterpart. And Tracy says, isn't that a bailout? Why not just keep managing the fund? Why not beat Kathy Woods and have a bad day and live to tell another tale? Except there were probably too many redemption. So it was spiraling. Joe says he got margin called. And Tracy says, so it is a bailout.

Just let it fail. But maybe he was too big and could see the contagion. Joe says, I don't get what you're saying. Someone gets margin called and they have to pay the broker. And the way they pay back the broker is selling off shares to some other counterparty. How is that a bailout? Like he's just selling and people associate every sale with a bailout now, I guess. But that's not what this is.

This was not the government stepping in. Yeah, yeah. He was not too big to fail. No, not at all. I mean, some people were saying that he could have been too big to fail going in. Yeah. It doesn't seem like that's what happened. It seemed like there were significant losses and then they ran an auction and there were three parties bidding.

and the bids came in above like liquidation level so the fund is not liquidated and it remains and so Joe after fighting back and forth for several posts he says I think we might have a different definition of the term here and I think you do I think you do

very fun anyway let me tell you about Shopify Shopify is the commerce platform that grows with your business lets you sell in seconds online in store on mobile on social on marketplaces and now with AI agents Yes, this was the post you were talking about from Delian. He says Silicon Valley

somehow unaware that basically all of the goats on Wall Street hedge fund land have had some sort of blow up earlier in their career. Part of the game is being a live player on the field. He's obviously talented never met, don't know him, and we'll be back.

In the comments there's some counter examples, Pulter Jones. A lot of the I mean, a lot of these people are like wildly different strategies. They're not really like, I don't know. Like, there's a whole class of like mutual fund managers that were

like by design, never using leverage, never hedging anything, never going short. Like, and if you never, if you never engage in a trade that can blow up on you by definition, you can go way down and just not sell. And if you

have good relationships and there's not redemptions, like if the redemptions are locked up. I mean, this is like VC funds have never, like there's not really any VC funds that have like blown up all of a sudden because it's like, okay, you invested a billion dollars over a decade and you returned 700 million of that. That's terrible. You lost money over a decade and you completely whiffed on the benchmark and it's a bad

result, but there's not like a blowup. It's just like a miss. And so you're sort of set up for a different thing. Anyway, let me tell you about Figma agents meet the canvas. Your AI agents can now create and modify your Figma files with design. system context. I want to keep going on this. Let's see. Yeah, the fund is still up 80% year to date. That is a crazy, crazy stat. This might surprise some, but I continue to evaluate Leopold Ashenbrenner as a live player. So Samoburnia, absence of setbacks isn't a technical criteria for who is or isn't

a live player. And I mean, it is funny. Like, I really, I can't think of many examples I've seen of people like actually hating on. Basically everyone's defending him. I think the algorithm might just be tuned to like positivity. I got a golden retriever algorithm or something. This happens all the time where I will see the backlash to the backlash. Yeah. I don't actually see the first backlash because I just see people dunking on like whatever's going on.

It's so unacceptable. No, I'm sure it's there. And there's also like you can sort of feel it in the in the replies and the anans and the snarkier people a little bit. It's out there. This is an interesting scoop from Berber Jin over at the Wall Street Journal related to this. Situational Awareness tried to sell a $3.5 billion stake in Anthropic to a group of investors led by Green Oaks and Sequoia. Obviously, there's a lot of demand for the stock. The party's reached a deal late Wednesday.

But then situational awareness pulled out Thursday morning. They turned it down. They turned it down. They turned it down. They were not for like $3.5 billion, something like that. Something like that. And they turned it down just to grind for the public equity book. They sold that to Citadel.

That obviously cleared a lot of the risk out. And they said, hey, let's keep this position. We're extremely excited about this. We're bullish. And so, I don't know. I think, will this be the subject of a book? Will this be the subject of an actual movie? Is it drama enough?

Have we gotten the FTX movie yet? Because that's very much dramatic. And I don't think that ever happened. Yeah. I haven't seen it. And then there was Infinity Machine, not Infinity Machine. There was a Going Infinite. Is that the one?

That was the Michael Lewis book. Michael Lewis book, but that was written like before the blow-up, and so it was like sort of, it didn't really tell the story like day by day. But like an in-the-room fly-on-the-wall minute-by-minute account of this would be interesting, but it's not that dramatic because it doesn't end with an explosion. It ends with like, okay, we're back in the fight, which is cool. I mean, it's maybe more positive outcome. And so Augustine LeBron has taken a victory lap because he tweeted a, a. SHA 256 hash December 29th of

2024 saying Leopold Daschenbrenner has terrible instincts and he will fail spectacularly. This is of course the Dwar cash on Dworkash guest battle that's playing out. And so this is an interesting thing that you can post a cryptic, a literal

cryptic... Yeah, I've seen a bunch of people do this. Yeah. They post some prediction. Shouldn't you just post every possible prediction then and then just delete the ones that don't come true and then be like... I think some people accuse other, you know, anons. You just post you know, one trade and the opposite of it, and then you delete it next day, if everyone's wrong. Yeah. Then you look back and you're, wow.

This is another way to get started in the hedge fund game. You start two hedge funds, true North Capital, true South Capital. One goes extremely levered short the market. The other one goes extremely levered long the market. Yeah. And then after a year, one has exploded. The other one has ripped. And then you wind down the one that didn't work and you're like, I called it.

Yeah. I'm goaded. I'm goaded. Yeah. Exactly. I don't think that's what Augustine did. I think this is his real take. And maybe he is the example of someone who has been like not so secretly rooting against Leopold

or just skeptical. And he continues to be skeptical because he's betting Shaltow $1,000 that Leopold will not be bigger than Citadel. What if Citadel just, you know, pivots and just becomes something way smaller. Like it could just spin out, fracture. He could divest something, break up the company. Like, Schulte could win on a technicality here. Yeah, yeah. You know? No, I'm riding with Schulte here. You're running with Schulte? Okay. Well, let's go through a quick, we have like one minute until Richard's joins. So let's just go through some time. Like, we'll take you through some bit mag seven earnings later. But the interesting recap is that there's absolutely turmoil in the

in the big tech markets based on earnings. Big Tech's AI spending is continuing to produce blockbuster financial results, even as investors have become increasingly selective about which companies are willing to reward. Over the past two weeks, Microsoft, Apple, Amazon, Meta, Alphabet, all reported quarterly earnings that largely exceeded Wall Street expectations. It's very boring when you pull the, did they beat on top line? Did they beat on bottom line? It's like everyone beats and then the stock goes down 10% or up 10% based on

CAPEX forecasts and also just messaging around AI diffusion and AI uptake. So Microsoft led the group with shares surging after reporting fiscal fourth quarter revenue of $90 billion, up 18% year over year, and ahead of the 87.4 billion that analysts were expecting. That was the consensus estimate. EPS came in at 474 versus expectations of 421. So they beat top line, beat bottom line, Azure revenue accelerated 43% over. year over year. Yeah.

So they gained $450 billion in one day, 16%. $450 billion in one day. That's for... Big it's one day market cap gained for any U.S. company. Look at that, the God God. That's really, really impressive. It's up 25% over the month. Very impressive.

Apple also beat expectations reporting 109.4 billion in quarterly revenue, earnings per share of 202. Stock briefly pushed the company market cap above the, $5 trillion mark, but it has been absolutely tanking today down, what, 10% today or something like that? Let's see. Down 9.47%. Last, we'll go through two more. Amazon has also impressed investors with revenue climbing 20% to 200 billion, 200.6, AWS growing 37% to 42.4 billion, sending shares sharply higher in after-hours trading. Here's Amazon. We can pull that up as well. The market is up 13.76%.

And the day is looking pretty good, too, up 15% today. The market's reaction wasn't usually un-unversally positive. Meta posted stronger than expected revenue of $60.8 billion, up 28% year-over-year. But earnings per share fell $6.18, fell short of the $7.22 analysts had expected. Investors focused on the company's $31.1 billion in quarterly capital.

Apex, along with $3.6 billion in one-time legal and severance costs, sending the stock sharply lower. Let's see what META is doing down just a bit. Alphabet, meanwhile, reported revenue of $118 billion, while earnings per share of $9.11. Comfortably beating expectations while Google Cloud revenue served 82% year over year to nearly 24.8 billion. Even so, investors remained focused on the escalating cost of AI infrastructure, as hyperscalators continue pouring hundreds of billions of dollars into new compute capacity. And here's, uh, here's Google. So, uh, we can dig into this more. There's a whole bunch of deeper questions about what is the actual efficacy of meta spending on AI. How much are they spending on tokens? How much are they spending on head count? All these things

matter. But we'll dig into it another time because we have Richard Craig from Numeri here with us in the TV pinel show. Richard, how are you doing? Hey. Thank you. Thank you so much for taking the time. I'm so glad that you had a chance to hop on the show on such short notice, very excited to talk to you. But could you kick us off with a little bit of background for anyone who's unfamiliar with your career, your business, and why it's relevant to talk to you today? Yeah, so I am a hedge fund manager. I started my hedge fund numerai in San Francisco in December 2015. Before that, I studied mathematics. and I was very, very interested in AI from a very early age.

And in 2012, some of the key breakthroughs happened with self-driving cars and things like that. You could really see that this would be a really good thing to kind of bet on in the future. But Numerar, you know, we're a quant hedge fund. So we trade stocks using AI. We don't simply invest in AI companies. Although pretty much every company is in some way entangled with AI. So, you know, it has a lot to do with us. And in terms of like the fund structure, how similar or different is it to what we're talking about with situational awareness, where there's like a few LPs, maybe some institutions invested?

How broad is the LP base? How concentrated are the bets? How big is the investment committee? How are investment decisions made? So, yeah, I mean, we're trying to make Alpha, which is kind of a technical term. Like, we can't take any market risk. We can't take any factor risk. We can't go off on anything we think is, you know, something's going to be big.

Okay, we can't invest in that except for through our strategy, which is a low volatility strategy. The fund has been growing a lot. Assets are up 100% a year for two years now. Congratulations. Well, remember, that's a lot of that's AUM growth. And but, you know, the point of the company is to make this kind of thing called Alpha, which I feel like is a term that gets abused a lot. And we're trying to make sure that our investors can make a better portfolio by holding a piece of us.

Yes. So help me understand Alpha in the context of situational awareness. because I've heard a lot of people throw around, it's just levered beta, it's beta. But when I think about situational awareness and the ideas and the thesis that was contained in that PDF that was released almost two years ago, that felt contrarian.

It felt like alpha in the sense that you can understand the future in a way that other people can't. Is that not alpha? Yeah, it is. It kind of isn't in a naive sense. It is. And it's obviously the situational awareness, you know, blog posts that came out was sort of super visionary and fun. I mean, I read the whole thing. We had a mutual friend. I think we were at Joey's wedding together. Yeah. And Vienna. And Joey, I said, oh, Joey, can you please introduce me to Leopold? This is so cool.

So, you know, there's a, there's a, there's a, there's a place for that type of, um, that type of fund where you're going to take a big, a big bet, uh, with a lot of risk. And, um, those types of funds can obviously produce extraordinary returns. But the trouble is, um, the driver of the return is the risk. Mm-hmm. Um, more than the, more than the alpha. Okay. So the alpha is there, but the driver of the return is, is the risk. And so when people, retreat to a more classic example of alpha, what are we talking about? What is the purest source of alpha? Yeah. So, I mean, here's the naive way to have alpha, right? If you, if you have, if you beat the market, you have alpha. Okay. So natural. Why, what's so hard about that? If my portfolio is up 20%, but the market's up 9%, I have alpha. Yeah. But that's actually still kind of missing the point in actually a very deep way. And so the problem is there's not just one factor.

You have to look at do you beat the market? You have to look at do you beat all the factors that there are in the market. So there's a factor called momentum. There's a factor called technology. There's a factor called U.S. technology. There's a factor called momentum times data. Yeah. All of these things as a term of art in quantitative finance, you call that risk premium.

They might, they're risks, and they might have a premium, but they, but they're actually not the types of things you would call alpha. And so a fund like Numeri, we're trying to hedge to things, so many things, thousands of different risks so that if someone ever looks at our portfolio and wants to say, do you have an offer or are you making money just from risk, they can't argue that. It's very hard to say that. So we, that's our, that's, that's the goal. And that's the goal of all hedge funds, a Citadel or a millennium. They're trying to make this kind of alpha. How much should I, if I'm trying to understand if I'm, if I'm looking at a fund's returns over a number of years, how much should I be able to identify alpha purely by, uncorrelated results with the broader market.

Like, is, if the market goes down 10%, and the fund goes up, 20%, then the market goes up and the fund goes down. Is that, is that giving me, like, a sense of alpha that at least this fund is searching for that? Or is that just uncorrelated returns and they're just throwing, throwing, yeah.

If you're uncorrelated from all the factors, you have alpha. Okay. I think there's a sort of sleight of hand that discretionary, investors, hedge fund managers tend to call, which is they say, well, look, we believe in the US, we believe in AI, we want to take that factor risk, because that's part of our return, and to which a sophisticated investor would say, we can take that risk ourselves without paying

fees. There is nothing stopping any LP of situational awareness from buying anthropologists from buying anthropic shares themselves. Right. There's nothing stopping them from going long microchshed. Micron or something. It's really like almost childish to think that they, a sophisticated investor, wouldn't be able to pull those trades themselves.

And so to take a personal example, here's a fun thing. I bought, it's a good day to say this, I bought some Amazon options. I bought some call options on Amazon. I'm a hedge fund manager. I don't really trade very much, but I just think it's a cool company and it's going to benefit from AI and one of my friends said it would be a good thing to buy.

That's it, okay? Now, my call options are up whatever, 300% today, whatever it is. Does that mean I'm on a generational run? Does that mean I'm a genius investor? No, it just means a gamble I took paid off. And it paid off actually probably appropriately for the risk I took. So in the hedge fund industry, you know, the banality of that is extreme.

No one is, no one to numerize talking about how I bought Amazon options and made money. It's just like, boring. Okay. So even the timeline, like the length that Leopold was, you know, it was like a year and a half. He was on this like generational one, as people say, is there no difference between that and just a single day? The way does a generational run stop. Yeah. How do you define?

Is it 11 months and 30 days? I think it takes a generation, actually. Oh. I think that's how you mentioned the investment performance of someone over a very long time. You're right there. So that's why it's kind of a funny term. Okay. So, wait, but what do you think about the idea that certain managers, they might, it might be possible in theory to, like, copy them, but they are getting paid to do something that you might emotionally not have the resilience to do.

I'm thinking of this Jeremy Giffon post. He says, people really miss that buy and hold means the ability to buy and hold, not that you should buy and hold. and he quotes this screenshot from the Financial Times. It says, since 2010, Warren Buffett sold his entire holdings in 63 positions with an average hold time of four years and three months. Combs and Wechler, two other managers, exited 48 stocks holding for just two years and 10 months. And so even though we all know buy and hold, you know, buy low, sell high, psychologically it's hard to do. So that's maybe what some hedge fund managers are getting compensated for. Sure, I might have read situational awareness, agreed with Leopold, but do I have what it takes to actually go and buy on margin and do all this crazy stuff and like, and not paper hands?

I love that discussion. I think there's a sort of feeling that he was the one with the courage to take all this risk or something. But even that falls flat on a hedge fund manager, I'm afraid. because it's like you know it's like someone someone goes all in with pocket sevens and he doubles

money if you learned anything about his courage or his skill really he's it's a bit like it's a bit foolish really so it's basically like the I also used to actually think this

I was a young hedge fund manager I feel like I'm maybe aging out now but I was the 28-year-old hedge fund. And I did also have this perception that surely these big hedge funds are just so risk-averse

that it's almost like for psychological reasons they refuse to take enough risk. And I've come to learn that they're taking nearly the exact amount of risk that you should take because these things are mathematical.

It's a right amount of risk to take if you have a certain sharp ratio. And those numbers are smaller than you think. If you want to run money for a very long time. Yeah. Right? So, you know, Leopold was up 400% in age 1 of 26.

Well, Warren Buffett was up 5 million percent by basically being sensible for a very long time. Sure. So do you want to do the 400 and then lose everything, or do you want to do the 5 million that it takes 30 million? years. So I think that's kind of like the orientation you have to think about. So it's not that some people are unwilling to take risk. It's that they are already taking that risk. It's just a small part of their portfolio. So there's no doubt that in the markets, numerize AI models that are trading thousands of stocks at all times that we intersected with situational awareness. And we bought some of their positions and sold some of their positions.

Sure. And maybe had similar alpha, if you constrain our portfolio, to just look at that segment of the market. But we didn't do it at the wrong size, you could say. Yeah. Yeah. You actually ran the numbers on, or you had Claude run the numbers, on how likely a catastrophic drawdown would be based on a certain,

leverage ratio. What does that math say is the optimal amount of leverage, the optimal amount of risk? Is it all based on the timeline? If you think, okay, well, I want to be the next Warren Buffett. He's been investing for 60 years. I need to work backwards from that number. And then is that different than if I say, look, I actually believe the singularity is going to happen in 2030. And so I only need to survive another four years and then I'm done because it's whatever the singularity is. Yeah. Well, that's in some ways almost the problem. You really have to have a long horizon for investing.

You know, the market is not pricing that the world ends in 2030. Yeah. In fact, the market's pricing, I mean, just not, like on every level. If the world was going to end, you know, the volatility of the stock market would be as high as situational awareness is fund. So it's like, you know, we basically, we have to have this orientation of long term. And if you don't have that orientation, kind of all bets are off. I mean, if you're if you're gambling and you're playing poker and it's late at night and you only have 30 minutes left to play. before you have to catch a flight.

Okay, let's up the risk. Yeah. Yeah, I mean, there is an element. I'm not saying that this is what's happening there, but there is an element where you're like, if I believe that the world is ending in four years, I want to spend the next four years on a yacht. And so I need to get as much liquidity as possible in the short term.

Sort of like the, you know, you have, you have, what was that mean? You have like six months to escape the home and underclass. Yeah. Sort of like the hedge fund. version of that, I suppose. But you clearly don't, you know, believe in that. What are your beliefs about the future technology, the financial markets broadly? Like, how are you feeling? Is that even something that you interrogate or are you preoccupied with other sources of alpha that are less like macro and long-term trend-based? Well, any, yeah, any long-term, any long,

orientation. So if you're longed the stock market, the problem is all of our investors are already long the stock market. You don't have to tell them, you know, it's a good idea to buy stocks. And so, you know, if I was running a fund and maybe this personal trade of buying Amazon, if I had sold that to invest, then they'd be like, well, bro, we already had Amazon and we already sized the risk appropriately. So all you did was at risk and not any reward. Really, it's that kind of tension that forces all these issues. But, you know, I also want to say, I mean, I think one of the first things I said in my post is, I think there's a place for these kinds of funds.

Okay. So I've invested in funds like this. So there's a fund. It was basically the crypto version of this was a fund called Polychain. Yeah. And I was a big LP in that. in fact the first LP in the biggest I think the biggest one for a while but I guess I never got that enthusiastic that if someone had made

a thousand percent of the past two years or whatever it was that this would be some permanent property of that manager do you see what I mean like if there's no amount of looking back on a track record of a manager that's just buying risk will basically be able to to overcome the reality of investing, which is that it's always going to be hard to make money. So let me defend the situation more, not just that these funds are cool because I invested in one, but I think they're cool because many investors want a high return on the risk that they're

taking because they rarely have their portfolio entangled in all these investments. So they have bonds and stocks and all this stuff. And this marginal 500 million that they're going to give to a small fund, they want that fund to kind of kick ass with that money. And so that's where I would say, I don't think it's right to say Leopold did something wrong in a certain sense. It was very likely to go badly, but I don't think it's intellectually wrong for any LP to have invested in that. In fact, maybe I would have invested in it or something if I could have understood it a bit more and so on. But obviously there were a lot of red flags and the fact that the volatility was obviously much higher than 100%.

You can't make 400% in six months without having that kind of volatility. Then you're basically saying we're literally doing a coin flip here. And I just hope that all the investors knew that. And by the way, if you're a huge investor, you put $500 million in and you lost it all, on the very day you lost it all, you might still be up on your portfolio. Sure. Because your other stuff went up. And so that's how investors should be managed it on their whole portfolio. So I don't want to say anything bad about anyone who invested in that fund.

I'm sure there's some of the best wealthiest investors out there. So I'm sure they're finding. And, I mean, from the letter that he sent today or yesterday, it seems like the Citadel deal put a lot of new cash on the balance sheet, cleared a lot of things out, and that there might not be permanent capital impairment, as he put it in the letter. So he is living to fight another day. What do you make of this idea that the optimal number of blowups for a hedge fund manager is, one. Not zero, not five,

but do you agree? We had one losing year so far with Nuri, right? So we are not not, you know, if you're in the business of being an investment manager,

you're almost putting yourself on the hook to be like, yeah, one time we lost money. In fact, about 50% of days we'll lose money, right? So you really don't want to be, you know,

negative about that. Yeah, sorry, continue. No, so I think that's one very important piece. I would say, the key thing that I think matters is not just leverage, which I think people are saying, oh, you use leverage, you lost money. We use leverage. I'll bet you we use way more leverage than situational awareness. It's not levered long.

We're not levered long. Oh. We're not levered factors. So we're levered. If you were to plot our performance on a graph, you would see, and you would say, show me the unlevered performance. It would basically look like the X axis. You wouldn't even notice it. Sure.

It's so much kind of risk constraint that it requires. leverage to get to appropriate vol. So with more leverage than situational awareness, we have one tenth of the volatility, and risk is volatility squared. If they have 150 squared units of risk and we have 10% squared, it is a whole different ballgame.

So I'm mostly critical about the high volatility. I think that was the mistake, not the leverage. Interesting. Where do you think the fund goes from here? It feels like he's set up for a second act. The fund is not liquidated, not private only, not converted. How do you think this evolves?

Like what is the lesson to learn? I think, first of all, I don't think that we should have a culture of thinking people are intelligent anymore because AI is smarter than all of us. So if one of the reasons is you think there's like a super genius investor out there that's clearly got something like a kind of same type of reason you might have invested in SBF he's clearly on you know you're doing so well that don't do that don't do that hero worship thing just pick up take out your pocket calculator and calculate the risk of ruin.

Sure. Okay. And then you'll probably avoid a lot of these types of mistakes. But I think, you know, I really believe in AI. And I'm a singularitarian. I mean, I'm seriously a believer. I'm not moderate about it. But because of that, guess what?

AI is in the stock market. we you know AI is in Citadel AI is in numerai so if you know if someone comes up and says oh my my thesis is we're going to buy AI stocks because AI going to be big

okay the stocks are in the market the market is an artificial intelligence so don't take it lightly man like yeah what is the process psychologically for dealing with a career where 50% of your days are going to be bad days.

There's a lot of people in most careers, I feel like, can show up and have a day that's successful. Like they move the needle forward. They didn't make backward progress. And yet with the job of a fund manager in your role, half the time you're going to wrap up your day and you're going to be worse off than the day before, right? I think, well, you see my terminated hand in the back, right? Yeah.

I think you need to lean on math and AI. You need to basically say, you know, if the volatility, if you know what volatility means and you know what your volatility is, can there be anything to shake you if you can just rest on that mathematics. I mean, so when our fund had a down year, we lost a bit more over the whole year, a bit more than one standard deviation of volatility. But guess what? That happens to practically any investment. You're guaranteed to lose one standard deviation, one unit. You guarantee to lose your volatility. So the question is, were we running 100% volatility when that happened?

no, we were running a survivable amount, so we didn't lose everything. But yeah, so I think there's some, there's really a lot of comfort to be had in math and AI and just kind of trusting that, you know, things will work out. You know, all you need to do to be Warren Buffett is just get 9% alpha per year. and add that to the S&P, right? So if you have a hedge fund that's making 9% alpha per year, and they can repeat that, they're going to make 5 million percent return.

That's great. And all the people taking too much risk are going to lose it all over and over and over again. And so, you know, that's how you have to think about it. Last question, and we'll let you go. Retail froth. there's an interesting arc here, and I want to know if you think it's real or the shape of it, but it feels like when the situational awareness PDF drops, no one's thinking about bottleneck stocks or memory. The smart money gets in.

Everyone in Silicon Valley was already thinking about that. Yeah, yeah, yeah, yeah, but that's like maybe the smart money, and then it gets bigger and bigger. And then pretty soon it's like retail meme stock. And it feels like one of the knock-on effects of it. that is just more volatility, like the last little leg up can be more tumultuous. Is that the way to think about that? Is it important to think about the meme stockification of a particular asset class as a factor and then how to deal with it?

Yeah, I, you know, our fund was operating with high leverage during 2021's like meme stock rally. Sure. And it is a phenomenon. And Cliff Asniss, a famous Quants, EQR, talks about how the internet sort of making the market less efficient because there's so many people who almost get the same message at the same time with the same media and then have the same trading account systems like on Robin Hood or whatever that can instantly express that. but I think I don't think that is something to lose sleepover

I mean it's very easy to handle that type of thing the what happened to Leopold wasn't something extraordinary it was banal it was you had higher

volatility and you had a standard deviation drawn down it's going to make for a bad movie then well it'll be a great movie, I'm sure. The movie wouldn't have any math in it, but it

probably has all. It should. It should. It should. Well, thank you so much for taking the time to come chat with us. Have a great rest of your week, great weekend, and hope to talk to you soon. Thanks so much. We'll talk to you soon. Goodbye. Let me tell you about CrowdStrike. Crowdstrike

CrowdStrike and stops, breaches your business is AI. Their business is securing it. Head over to CrowdStrike. We have Tray Stevens, the co-founder of Anderl general partner at Founders Fund. Trey, how you doing? Hello, guys.

Welcome back to the show. I don't know if you've met Tyler before. Jordy's out today. George's out six. We have a guest co-host, but great to see you. How you doing? I'm good.

Can't complain. How is the market turmoil affecting you in the venture world? You mean the public market turmoil? I mean, first time in my career that I've seen trillion dollar stocks, mag seven companies moving by 10% in a single day. That seems crazy. You have the

situational awareness thing going on. Like the public markets seem insane. And sometimes, you know, gyrations in the public markets reverberate into private markets. Sometimes they don't. Sometimes you're insulated as someone who can hold longer, who doesn't have to deal with that. But I'm just wondering if any of that chaos is bubbling up to what you're seeing in your seat? Well, I think there's certainly, like, different places where that intersects. You know, one of the things that Brian Singerman, who's one of the former partners here at Founders Fund, he used to tell us, venture capital is a micro game, not a macro game.

What matters is have you invested in the generational companies in every kind of era? And, you know, I think Founders Fund has performed incredibly well in that regard. We have large positions in some of the most important companies of the last 20 years. But obviously there's questions around things like, you know, SpaceX has gone public. There's been kind of a reset back to like basically the IPO price. The lockups haven't even released yet. So there's like all these questions about where that's going to stand as that kind of lockup happens over the next really two years almost.

So I don't know, I guess is the answer. I'm not a finance person at heart in any way, so I understand very little about the public markets. But one thing that I hope happens is that as there's a reset on the public market side, I'm hoping that there will be somewhat of a reset on the private side as well because the market, it makes absolutely no sense in venture capital right now. Okay. Is there a steel man here where the capex intensivity that we saw work out in hard tech companies like SpaceX, like Anderl. You know, this is a company that's doing something very important. It's going to take a little bit more capital to actually build something really hard. It's not just a couple lines of code and then an elegant, you know, website that just prints money.

You're going to have to invest some real money to make SpaceX work, to make Anderl work. and that's coming for AI companies now. They have big training budgets. They have very expensive talent. Isn't there a reason why valuation should be higher because the rewards that people are going after are so much more, not just capital intensive, but potentially bigger? Well, I mean, certainly if the outcomes are these like multi-trillion dollar businesses, then, yeah, you know, you can kind of blend that risk over many rounds at higher prices. But that's the question is like, is that necessarily the case? Are we going to have $10 trillion IPOs over the next five years,

or is it going to look more like a reversion to the mean? Where we have companies like Anthropic, companies like OpenAI, companies like SpaceX, but then a lot of companies that are really successful, really interesting companies that are, you know, Uber-scaled or Airbnb scaled or even, you know, in meta-first went public. You know, those would be tremendous venture capital success stories, but not if you're pricing a seed round at a billion dollars. Yeah.

Well, how do you advise founders who might have the option to raise that billion dollar seed round? Because you're in this sort of conflict of interest territory where if I come to you and I say, hey, I got an idea. I think I'm going to raise a billion dollar seed round. You could be, you know, saying, I don't know, this doesn't seem like it's going to be $10 trillion anytime soon. Maybe you shouldn't do that. But then I come to you and I just say, hey, you're just the VC.

You want a good deal. Yeah. I mean, there's two kind of schools of thought. The first school of thought is to say, you should do that. You should raise as much money as you can at the highest price possible, build up a war chest, and survive until you can justify that price. And that might actually be the right answer for some companies. I don't want to say that that's like always a bad idea.

That might be a right idea. Obviously, the worst thing you could do is raise a very small amount of money at a very high price because that's where you're going to get yourself into trouble. But then the other side of this is like, can you build a financing? strategy that allows you to grow responsibly over time and that you will see continuous momentum with every fundraise. And you're never going to have your back against the wall. That's been the approach from the very beginning with Anderil.

This is what we've tried to do. And I don't think we have any regrets about doing that. We could have raised it a higher price at every round. But it's been nice to be able to go back to our employees and our investors on an annual basis and say, look, we just did a 2X markup. Look, we just did a 2x markup. Look, we just did a 2x markup. So it feels more sustainable and keeps us tethered to our company performance more than this belief that it's going to pay out at some point.

I'm sure you guys watch the HBO show Silicon Valley, but there's the hilarious scene where the what's his name, Rich or whatever. No, the Trace Calmus guy. Oh, yeah. Yeah, I suppose. Yeah, where he has that famous line where he says, no, whatever you do, don't get revenue. Once you have revenue, you're going to be judged on the basis of your revenue. Yeah. Is a billion-dollar seat round?

Is too much capital? Like, is it increasingly intoxicating? Is the level of intoxication with overfunding at the early stage? Is that problematic? Are there some founders that can work it out and not develop a culture that overspends early? Because your point was like, if there are a bunch of money shows up, you need to actually have it as a war chest. if you just have it flowing out easily, you're just going to run out of it and then you're in a corner. But I'm wondering, like, is there a path to actually setting your company up for war chest mode as opposed to just, oh, we're just spending freely and we're just going to burn through this?

I'm sure there is a path. You just don't see that discipline exhibited often. And you can see this in every bubble that's happened over the last 20 years is that, you know, everyone believes that. that they can have a billion in the bank and be responsible with it. And very few people can actually pull that off. So I think there is something, there's something wise about kind of metering that out and having a plan rather than just kind of yoloing into the abyss. But, you know, it's so hard because like I said, in some cases, it might actually be the

right decision to raise as much as you can at the highest price possible. In Defense Tech specifically, it feels like this was a category that was a category that was, was extremely hard to get revenue because you had to work with the government. The government is just a little bit slower than selling to your friend in B2B SaaS or something like that. And the traditional path that I remember talking to you about was SBIR and then at some point there's the Valley of Death and you try and get to the program of record. But following the new programs in the Department of War, it feels like there's more of a menu. There's more ways for hard tech companies, defense tech companies, to work with the government just to get to revenue. Can you explain a little bit more of what you're seeing in terms of early, mid-stage,

different ways for defense technology companies to actually grow their business, prove what they're doing? And has it actually changed over the last decade that I'm feeling like there's a change? Yeah, it really has. I mean, I was at Palantir very early. And, you know, that early era of the, you know, 2005 to 2015 range where Palantir and SpaceX were really the only players that were doing this.

I mean, it was a wild wild west. Like, both companies had to sue the government for contracts to go through on the basis of this thing called Title X, USC 2377, which is like a commercial preference authority. So there was really no path. It was like, you know, if you got to the point

where you had a product that was worthy of going into production or going into scale, with the government, they would do everything they could to block you and go back with the primes. That's shifted. You know, that's not the case anymore. There are much better pathways. You know, in the early Palantir days, we worked with Incutel, which is a CIA's venture capital firm on these work programs. And that's the same way that we got started at Androl, actually. And, you know, right around that same time, Raj Shah and Chris Kirschoff were standing up the Defense

Innovation Unit and making that like a relevant contracting pathway, you know, all of the like softworks, AFWRx, Army Futures Command, they all like started developing pathways for companies to get, to get funded. Now there's StratFi funding, which can come through under the SBIR umbrella that allows you to get, you know, tens of millions of dollars and matching funds from the government as you're scaling. There's bridging funding to go from pilot to prototyped production. It's much better understood. But the problem is, is that a lot of these are still at the end of the day funded out of the research and development budgets rather than production budgets. So, you know, the U.S. government has a history of kind of this let-all-flowers-bloom

strategy where they are always happy to give out low single-digit millions of dollars to hundreds or thousands of different companies. But there's a big difference between having, you know, 10 to 20 million dollars of research and development funding and having billions of dollars of production funding under like major weapons acquisition programs, program offices, things like that. And that muscle is still, it's still needing to be developed. It's early days. When you say the let all flowers bloom strategy, I'm thinking back to when we talked about, like, this idea of the Anderol for X's Anderol, there's a lot that Anderol can solve. At the same time, you've partnered with companies like Dirac.

You've partnered with other new startups in the hard tech, defense tech space broadly. And I'm wondering if there's maybe more. opportunity now, now that we're, you know, maybe a decade into the defense tech boom, maybe five years, a couple, you know, we're deep into this. There's a path. You've charted it. Is there more opportunity for new entrepreneurs to pursue deeper in the supply chain opportunities, see an anderl as a customer maybe instead of a, instead of the government as a customer? Absolutely. I think not only instead of, but also in addition to. Sure. I think a lot of these companies that are working down the supply chain, they have relevant government customers. They have old legacy customers like the primes that are still needing to correct some of these problems or become more efficient, as well as the big successful tech companies like the SpaceX's, the Teslas, the Andrels, things like that. So I think that the opportunity is definitely there. It's just a matter of like, you know, having a novel idea and being really passionate about driving that single. thing forward. And I fear that when you look at the defense tech industrial's kind of ecosystem right now, it's a lot of hype. It's a lot of like, you know, people that want to be part of a moment. And the reality is that's not how tech investing or tech startup creation has ever worked.

You know, once the thing is a category, it's kind of too late. If you were a space tech investor and you didn't invest in SpaceX, you probably lost money. If you were a crypto infrastructure investor and you didn't invest in Coinbase, you probably lost money. I think that we're like nearing kind of overhype of volume in defense tech that is going to make it very difficult to separate signal from noise. I assume you're referring to on the venture side specifically. I'm interested in an idea of, like, is there an opportunity for an entrepreneur who says, look, I'm not building a next trillion dollar company. I don't want money from founders fund. It's not a fit, but I need some private equity dollars to go buy an old factory and I'm going to make drone motors, small drone

motors in America pretty cheaply and efficiently. And I'm going to sell them to a bunch of people. And it's going to be, you know, a 50 million dollar revenue business after a decade. And it's going to continue chugging along at 10% growth. And the EBITDA is going to be reasonable. We're going to pay back the debt. And we're never going to IPO it, but it's going to at the same time provide a career and jobs, but also a financial return. for the right person, but we're not going after the, you know, oh, hype and venture funding and the big raises and all of that. Well, I think the intersection of both of our points is that, yes, I think there's a ton of

room to do that. And secondly, all of those companies that are doing the things that you're mentioning are trying to raise oodles of venture capital dollars. So if someone actually wanted to build this business in like a more like normal financial structure, yeah, I think it makes a lot of sense. But, you know, there's 20 of the companies that you just mentioned. They've all raised tens of millions of venture dollars, and I'm not really sure what the end game is. Yeah.

I guess we'll find out. We'll find out. Take me through some of the recent ander all announcements. I want to know about the Thunder autonomous attack aircraft. How did that come together? What is the program? What is the scale up? What's the manufacturing look like for that?

Yeah, so Thunder is an autonomous attack helicopter. that we just announced at Farmboro in the United Kingdom last week, you know, the proliferation of drones has turned the near-surface fight into like a robotic kill zone. And so crude helicopters or crews, they're tremendously at risk. And so basically the same way that we approach Fury, the collaborative combat aircraft that we can talk about as well, we just rolled our first unit off the line to the Air Force earlier this week.

But the same kind of concept with collaboration with, manned crews is what we're talking about here except with helicopters instead of with fire planes. So that process is, you know, fully in flight. We have, we've been working on this project for years now. We've completed test flights with a full-scale surrogate. And we're planning for Thunder's first flight for next year in 2027. What is like the shape of the autonomy? Is it like you have one person kind of overseeing a bunch of these different crafts or like, how do you guys think about that. Yeah, you can kind of think about the helicopter pilot, whether it's, you know, an Apache

or whatever, they're like Inder in Inders game. And they have this, you know, fleet of autonomous vehicles that they can kind of command and control from the cockpit of their own aircraft. And, you know, there's this really cool anime video that's the third in a series that just came out when we did the launch last week. And it kind of explains the concept of operations for this, which is, You don't want to be putting the Apache and the human beings in the helicopter in harm's way when you're engaging with all of these autonomous assets that are creating risk out forward. So you want these to be able to go out and take shots, give you a better sensor view of things, or even become attributable and take the shot for you so that you're not the one that's eating that missile they are.

We talked years ago about the idea of building intradable systems, not building intradable systems, not building. building capital assets, these huge aircraft carriers, these exquisite systems. But if I'm charting the size of what you're building year over year, we go from the anvil, we go from a very small drone, something bigger and bigger. If I chart it out, it looks like, you know, C-130 is coming up any day now. Am I off? Is there a limit to this? Or is there a world where, you know, everything up and down the stack is on the table?

Well, at some point, it becomes non-attritable, right? The danger of an aircraft carrier is that there are 5,000 service members on a 20-plus billion-dollar vehicle that can be destroyed by a single missile. That's a bad trade. We don't want to be doing that. But to the extent that there are assets that are physically larger but will be better suited to robots, yeah, I think that's very much in play. You know, the DOW has been talking for a long time about autonomous tank or aircraft for aerial refueling. that's the sort of thing that if you could actually get an autonomous system to do that really well, logistically it becomes easier.

It reduces risk in theory if you can get it to work really well. And it also is kind of like a prime target for risk reduction. So I think there are larger assets where it does make sense. But the tradeoff is really in human lives and total cost. Because at some point, in either of those calculations, these things are no longer considered to be attributable. Yeah. Talk about Fury at the Ohio production line, Arsenal one. How did that project, like what 18 months from start to finish, I think is roughly the number, but was that the original plan? Were there setbacks? Was there a risk of not hitting that? Like, what did it take to actually nail that? Because that feels incredibly quick. Yeah, it was incredibly fast. We kind of did the ribbon cutting for, the land that we were building on in January, I think it was, yeah, January of last year of 2025.

And then factory is up and running in May of 26. We rolled our first fighter plane off the line on Monday of this week with the governor. And so, you know, things were very, very rapid. We could talk about this for a long time. There are a lot of advantages that we had going in. We had an existing building, an 800,000 square foot building. It was just a shell, just concrete shell, but we weren't starting totally greenfield. We had utility support to the site.

Jobs, Ohio, which is the Economic Development Agency for the state of Ohio, was partnered very closely with us on making sure that we had the resources that we needed to get that facility up and running. But of course, there is like a tremendous operations effort that had to go into building, like designing the facility, building out all of the office space, setting up the factory line. And that's still a work in progress. not totally done with building one, but we've already stood up the shell of building two next door. So that would be in flight as well. You know, internally at Andrel, the person that eats all of the garbage around this is Matt Graham, RCOO, my co-founder. So I would hesitate to pretend that I know what I'm talking about. But Grimm is the man that made this really difficult project happen alongside his team on the manufacturing side, on the operation side,

They really put off a heroic effort. So are there, is there, I don't know if you can actually share this, but are there long lead times for specific machines that you, that you sort of needed to think about sourcing and even signing contracts with like years in advance? And then you were like, okay, we have the site so we can go drop this one expensive machine in the facility and get going faster. Because when we hear, when we talk about like semiconductor supply chains, like everything stretched out 24. for 36 months, and it feels like if you were to sign, get the building, and then start ordering things and actually building the production line, you'd be behind schedule on day one. Yeah, I mean, if we're comparing it to the semiconductor supply chain, nothing like an ASML UV machine, anything like that, to be clear.

But yeah, of course, there's all sorts of things you have to figure out on the supply chain, not only the tooling, but also the materials that go into construction of the products that we're building. So, you know, natural resources are very challenging. Rare earths are very challenging. And we're working closely with the Department of War to ensure that we have off-take agreements to get those natural resources that we need to build the things that are important for them. They've been a great active partner with us in that. And in addition to that, I would say that labor becomes a big bottleneck. You can't, you know, say 18 months ago, yeah, when we're ready to open the factory, when everything is built,

we're going to start hiring people. No, we started hiring people. the day we announced that we were doing this, and we had them work out of our headquarters in Orange County. The entire team of people that are building Furies at Arsenal 1 in Columbus, Ohio today, we're doing the exact same thing a few months ago in Orange County where our headquarters is located. So you have to really get ahead of every aspect of this, and it's a very complicated task. But again, we're really happy to see that we have things up and running and rolling off the line today. Speaking of jobs, what is your pitch for mandatory civil service engaging, solving the jobs crisis that may or may not be coming? Walk me through your latest thinking on the role of civil service in the modern American society.

Well, you know, I've actually had this thought for a long time for probably close to 20 years now. I've been kind of beating this idea around. you know, it's not like a super contrarian idea, actually. Like there are a bunch of countries across the world that have some version of mandatory civil service. In fact, we have aspects of this inside of our own society. If you think about things like jury duty or being subpoenaed for court or there are instances throughout the last even 50 years where people were called into service to do things like road construction and maintenance. So I understand there are all sorts of questions. that you would have about the 13th Amendment. I am not in a position to adjudicate those

complicated constitutional issues, but I think that there's something really important about ensuring a sense of civil duty into our next generation. And I don't think that needs to be into military service. I think it could just as easily be like going and working as a clerk at a county, you know, courthouse. There's all sorts of things that we can do to pull people in and have this feeling of shared progress that we all owe a responsibility towards. And I think if you were to go to Singapore or to Israel and ask them, like, is this a societal good or has this been a disaster? Is it forced labor? Is it involuntary servitude? I think they would all say, no, this is actually pretty great. You know, it was a difficult thing that I did, and I'm glad that

I did. I learned a lot. I met a lot of people that are still part of my life today. And I think that it would be wise for Americans to take a hard look at ourselves and say, is what we're doing right now working? Like, are we happy with the pathways that have been created for our own kids? Are we happy with the political tribalism that's resulted from a lack of civic duty? I would say, no, I'm not particularly happy with this. Is my particular recommendation the right answer? I don't know, but I think we should try things.

Yeah, no, I love it. I have a hot take I want you to react to. I believe that the TSA is underrated. I think people complain about the TSA constantly. Say it slows me down. I'm just trying to get to my airplane. But when I look at the record of the TSA, it seems pretty much flawless. It seems like they've done a great job securing our airways.

And when I actually experience it and think about the people there, I have positive interactions, I haven't actually been offended by anyone or anything. It feels like a great, yes, maybe it's a jobs program, but it feels like a great job. It feels like people, they're going and they're working in a clean, air-conditioned building. They're interacting with other Americans, meeting other people. I think that TSA might need a reevaluation after being the butt of every comedian's joke for two decades. I mean, there are aspects that I would probably agree with you. I still do think it's sort of a jobs program, but again, that's maybe not the worst thing. Mandatory service in the TSA.

Yeah. Well, yeah. How does it fit in with like mandatory civil service? Yeah. I mean, it could definitely be into something like that. I mean, the reality is like it's actually gotten pretty efficient. It has. Like, I don't know if any of you, this is CBP, not TSA, but I'll use it as a similar kind of counter.

I don't know if any of you have gone through a global entry at one of the large international airports, but you just literally walk through now. It's amazing. It's unbelievable. Like, you know, I think that we have the ability to lead the world in the way that we, you know, process travel safety, that we handle, you know, visas that we handle immigration. And I think the Department of Homeland Security has actually done a pretty remarkable job, despite all the criticism that they've been levied. Yeah. I think that there's two steps to the argument, to the discussion around any sort of mandatory civil service is first, you know, yes or no. and I think you made a good case for yes in some capacity. But the second stage is, okay, what will these civil servants be doing?

We'll have a new labor force and how will we democratically decide to deploy these folks? Will they be repairing potholes or building parks or building data centers? Building data centers potentially. That would be great. That would be politically spicy. It might make people like a lot more. They're like, hey, I got a hard day's work. I feel good.

I feel like I accomplished something. The building's there. I don't know. But anyway, another random take. Oppenheimer or The Odyssey? Which one did you like more? I liked the first two-thirds of the Oppenheimer better than I liked the entirety of The Odyssey. Okay.

But I liked the Odyssey more than the last third of Oppenheimer. Oh, interesting. Okay. That's good. What can you tell us about the few? They're both at the bottom, though, of the Christopher Nolan canon. alongside Tenet, I would say. Oh, you were going to put Tenet at the bottom.

I like Tenet. I think it's so fun to watch. Tenet is inarguably the worst Christopher Nolan movie of all the time. What's the best one? Dark Knight? Interstellar. I've got to go with Interstellar. What did you not like about The Odyssey?

I didn't. I'll be very clear. I didn't say that I didn't like it. I just said it wasn't as good as any of his other movies other than Tenet. Okay. If it was any other director, I would have came out of the movie theater and been like, That was great. I'm glad that I watched that. But it was Chris for Nolan, so my expectations were much higher.

Totally. It was the same thing. I was like, that's obviously the best picture. I can't think of any other movies that are going to be better than that this year. At the same time, I don't know if I'm going to rewatch that this year. I don't know that I would rewatch it. I don't think, like I watch Interstellar every year. I don't know that I would watch The Odyssey, you know, again ever. Yeah. We'll see.

Yeah. Also, there is just, it's a type of film. It's like a moment. It's a whole experience. You've got to see it in IMAX. It's three hours. it's a, you know, it's very much a slog, whereas, you know, you can throw on the dark night and it's just like a, it's like a party almost. It's like a very entertaining. It's a popcorn. It's a popcorn. This is not a, this is a whole like journey that you're going on. That's the point and that's the experience. Anyway, what can you tell us about the future of Founders Fund? SpaceX. We were talking to an LP in Fund 2 yesterday. I think you said it's like potentially the best fund in human history. Are you resting on your laurels? Are you going to be incubating new things? Bring it on new partners. You, you signed some new talent. Tell us what's going to happen with Founders Fund over the next couple of years.

Yeah, the worst thing about Fund too at Founders Fund is that I was not at Founders Fund. So I do not benefit from that fund. But yeah, it might actually be the greatest fund in Metro Capital History. That's a lot of booing. But yeah, the fund is doing really well. We have a main venture fund and a growth fund. we have awesome names and both of those were still very bullish about the

again the micro level the companies that we're investing in even if we are a little bit more bearish on the macro we just added Ryan Byrmeister to the team as a partner she and I worked together

when we were in our early 20s at Palantir and then she went off to Meta and then to Open AI and we just got her to join us over here so really excited about what the future holds we have a great team we're all viking really well. Everyone wants to know, is Mafia an official part of the Founders Fund recruitment process now?

It is definitely not. And the joke that I made on X about this is that Ryan got crushed in Game 1 of Mafia. If it was actually a recruiting tool, that was not a great interview. At the same time, I feel like she entertained. She seemed like someone you would want to meet with and do business with the picture. Sure. She's very good. She's actually incredibly talented at mafia. She just had a bad, an unlucky run. It could be, you could go into a game of mafia and display that you're going to backstab a founder that you're working with, and that might be disqualifying maybe. I don't know. That's true. That's true. Although, isn't that the whole point of mafia is to backstab other people?

Yeah. Yeah. So I kind of want the backstabber on my side, so I work with them. Exactly. What about RIA? Are you happy that Founders Fund has stayed in the private markets? Or do you wish you could be just playing Micron a little bit right now with a little bit of leverage? No, no. I'm so happy that we've stayed true to our origins. We are a venture fund. We invest in early stage companies and support founders throughout their entire journey.

And I think there's all sorts of cool stuff that's happening. That Andreessen's doing, that Thrive is doing, that General Catalyst is doing, that Sequoia is doing with their evergreen funds. These are all very cool concepts. It's just not us. You mentioned Brow, any plan to buy a sports team. Ooh, okay, baby. Let's go. Hopefully, hopefully soon.

Well, thank you so much for coming on the show. Wait, okay, last question. What is that sword behind you? This is Anderil. That's Anderrol. Oh, oh, yeah. That's the sword for Lord of the Rings. Sure, yeah.

On the real. Yeah. Beautiful. Is there a criteria for getting one? Is this like five years of the company and you get a sword? Is there any, are there any Anderol like totems or artifacts that come? You can just go online and buy one of those guys. You don't have to work in andrel.

Are there any totems? Well, I mean, we do have an internal, like, exclusives gear store. And I should point out that I'm also wearing one of our external available swag. So this is at gear.androl.com. You can pick up this sweatshirt and a bunch of other, a bunch of other cool gear, including our partnership with NASCAR. So there's all sorts of Anderol NASCAR gear up as well right now. There's an Anderol Hawaiian shirt, you know, harkening back to Palmer's love of Hawaiian shirts.

Yeah. So there are things. Jeff Miller's been cooking. Jeff Miller is cooking. No doubt about it. bunch of good stuff. Well, thank you so much for taking the time to come chat with us. Sorry, we kept you a couple minutes late. Have a great weekend, and we'll talk to you soon. It's all good. Cheers. Have a good one. Let me tell you about Codex. Codex is a powerful workspace for getting

work done with AI agents, whether you're writing code, analyzing data, creating content, or automating business workflows. Codex helps you move projects forward from start to finish. And when you're finished, head over to the New York Stock Exchange, because if you want to change the world, you've got to raise capital at the New York Stock Exchange. Up next. We have Blake Besnik from Brink Drones. He's going to be in the show in the TBPN Ultramum in just a minute. Where do you stand, Tyler, on Oppenheimer versus Odyssey? I'm going Oppenheimer as well.

You're going Oppenheimer? Yeah. Yeah, I rewatched Oppenheimer within a couple days and of seeing it the first time. And I think it's the movie that I will come back to more frequently. But also, I think I like the story more because it's more recent history and it's easier to draw on, I suppose. Sure. I don't know. I don't know.

Let us know in the chat. Derek Thompson had a funny post here. He said, I went back and read some criticisms of big tech in the 2010s, and it's amazing how many of them bemoan big tech's cash hoarding as a major failure of late stage capitalism. This is the PT point, right? Yeah. Yeah. He literally, Peter Thiel stood on stage at a Forbes debate, I think, with Eric Schmidt from Google and said, you have $100 billion on your balance sheet and you don't do anything with it. You're out of ideas.

You're chopped, basically. And now the hyperscalers are deploying the cash and no one's happy. What's going on? You can't have it both ways. So you said just a few years ago, popular criticism of software giants, indeed, of American capitalism was that big companies hoarded their cash piles and refused to reinvest their profits in new ideas. But that era is over.

Today, those same companies have depleted practically all of their cash flow to thicken the irony. Capitalism's critics seem to hate this new era of unprecedented. Precended corporate investment even more than they hated the era of corporate cash hoarding. So fascinating. It's a, you know, between a rock and a hard place, I suppose, for American big tech companies. Well, let me tell you about public.com investing for those that take it seriously. They've got stocks, options, bonds, crypto, treasuries, and more with great customer service.

You can find a company that's burning down all their cash flow. If that's what you're interested in, just be safe out there. Up next, we have Blake Resnick from Brank. on the show. Welcome to the show, Blake. How are you doing? Really good. Thank you for having me. Thank you. I'm going to hand it over to you because it looks like you got a tour for us. Take us through it. What's new in your world? What can you show us? Yeah, 100%. So Brink just raised a new $125 million of capital and that is all being directed

to putting these of every police and entire station roof in America. Amazing. What are we looking at here? Break it down for us. Yep. So these are drone recharging pods. And you're currently watching one of our dedicated 911 response drones launch. So yeah, that's really the focus of the company. See if we can get that camera swung around here. And yeah, right now we are on top of our factory and headquarters. So we have three stories.

Right now we're on our third, which is mostly. We're mostly dedicated towards engineering office space. Our engineering team is pretty cool. It's very multidisciplinary. We employ mechanical engineers, electrical engineers, embedded software folks, autonomy, aerospace, and more. So many of those individuals are working in this volume of our facility. Now we are transiting down to our second story,

which is mostly an R&D space. You'll see a lot of that in just a second here. This is one of our R&D areas. And to my right is our current product portfolio. So our smallest drone over here is where we started. This is Leamer 2 and it is designed to get eyes and ears in dangerous places. Today, about 20% of the squad teams in the country are actively utilizing this aircraft to reduce the probability of officer-involved shootings and keep everyone safe

in the most dangerous police response missions. Across from that, put this guy back, we have responder, and this is the aircraft that you just watched lunch. It was really the world's first purpose-made 9-1 response drone. So already hundreds of police and fire departments around the country are using these things to respond to the majority of the 911 calls that occur in their jurisdictions. And our largest drone on this platform is Guardian. And this is really designed to replace police helicopters. Guardian can fly for over an hour. It has greater than a 60 mile an hour top speed.

Integrated Starlink, that is this panel on the top of the airframe, giving it unlimited range anywhere in the world. I'm falling in from Seattle. If I wanted to take Guardian off and fly it into the Pacific Ocean, that is something that I would be able to do without losing connectivity, which is pretty incredible. We also have an amazing town. payload on this drone. These two things are HD thermal imagers. The best thermal imagers on drones

in production right now are 640 resolution. So that is a huge step up. And we have two thermal imagers that are built into Guardian with different field of view optics, meaning you can zoom in and out of your thermal picture with Guardian without losing any quality. We also have a pretty amazing HD vision system, two 4K imagers, with 640 times total zoom. So even from thousands of feet away, end users can zoom in and read license plate details, all sorts of stuff like that. Behind that, we have a mini LRAD, which is an incredibly loud speaker system. You can kind of see it buried in the back of the drone there. That can emit 130 DBSPL, which is actually louder than a police car siren. So if we had Guardian playing a siren tone and a police car right next to it doing the

same, Guardian would actually be the louder vehicle. And then the recharging station for this, you can see on a monitor back here has a robotic system that is capable of physically swapping batteries. So with Guardian 9-1 dispatch doesn't actually have to wait for the drone to recharge between flights. The second it touches down, our robotics will actually physically swap batteries, replace the batteries in the airframe with a fully charged set, and then it can launch immediately. And we use that same robotic system to load different payloads into the bottom of the drone as necessary.

So if 911 got a call about someone having a heart attack, God forbid, they could load in a defigulator, go accomplish that delivery, come back. And then if the next call is about someone drowning in a lake, they could load in a personal flotation device. So very proud of that. I'll show you just two more things. And then we'd love to chat. Downstairs to my left is where we are actually integrating airframes. So believe it or not, this is one of the larger drone factories in America. and then to my left currently is where we are building our recharging pots.

Wow. So, yeah, that's Brink HQ and a lot of the stuff that we currently have in production. Yeah. Yeah, wow, that is amazing. What progress since last time you came to the studio and brought, I believe, the smallest of the drones and flew it around for us? That was a lot of fun. Yeah, yeah. What is the scale of each program right now?

I mean, you mentioned that SWAT teams are using the smallest of the drones in something like 20% of penetration, but it feels like that final largest drone is still sort of coming out of the R&D phase at this point. Is that correct? Yeah, that's totally a fair characterization. Got it. There are about 20,000 police departments in America. Yeah. 30,000 fire departments, 80,000 police and fire stations. Yeah.

And we think in the future, the vast majority of those buildings are going to have a 911 response. in a recharging pod on their roof. Yeah. Today, though, that number is probably four or five hundred. And that spread across all the manufacturers that are interested in this segment, you know, us, Skydeo, DJI, etc. So yeah, I would say like 1% of the buildings that eventually are going to have this capability currently do. And a big focus for Brink over the course of the next couple of years is going to be increasing that number from, you know, 1% to 10, 30, 40, 50, and

And on this. I remember talking to someone who was operating drones and single rotor drones, actually, in the Middle East, in a military context. And he was saying that at a certain scale, they would actually use gasoline-powered drones because the energy density was higher and it just made sense in that context. And I'm wondering about, like, there are a bunch of good reasons to give someone a rechargeable battery if they're going to be filming themselves rock climbing or something. But this is an industrial company.

This is an enterprise-level solution. Is there a gasoline-powered use case that would make sense? Or are we now at a point with a technology where an electric power train makes sense across every possible opportunity or threat? I mean, you are spot-on. about the power density of gasoline. It is far in excess of lithium ion batteries. However, our drones respond to emergencies in known locations around the United States and the rest of the world. And that means automated recharging and battery swapping infrastructure is actually a pretty

good solution to this problem. With Guardian, you get an hour of flight time and then every hour, you're only down at a recharging station for maybe 90 seconds as that recharging station accomplishes an automated battery swap. That gives you over 97% kind of clickability of the airframe. You can fly Guardian for greater than 23 and a half hours a day. So our customers generally are pretty satisfied with that. And I think the way that will continue to push flight times up progressively moving forward is necessarily with a gasoline-powered drone, but instead with larger form factor drones that have,

you know, intrinsically superior propeller efficiency and maybe also V-TOL fixed-wing aircraft that can stay in the sky, you know, for six to eight hours. Yeah. Without, you know, requiring a battery swapping operation or recharge. Yeah, not to leak the roadmap, but it just feels like you're just going to get bigger and bigger and bigger until it's, you know, the size of a band airplane. but probably with still autonomous. Yeah.

You know, there's a segment, there's a segment of our customer base that has enormous jurisdiction. Sure. Like sheriff's offices in Florida, for example. I mean, they can have thousands of square miles of jurisdiction. So for them, a V-TOL fix thing that can stay in the sky for eight hours is actually a pretty phenomenal fit. Yeah. What does the go-to-market look like for this company? Are you selling to every, every sheriff's department or police department,

Are there conferences where you can meet them all? Are there any that are like collectively buying products together as a group because they might get a better price, but they might also have better service level agreements or some sort of, you know, integration where it's like, oh, well, like the town over is using the same system. So let's go grab a battery from them. There's some value to that. But what does the actual sales process look like? We're seeing all of that. Okay. You know, it's early days, though.

Yeah. The vast majority of our go to market is focused on building direct relationships with police chiefs, fire chiefs, mayors, and city council members. And as discussed, there are a lot of these organizations in the U.S., which, you know, necessitates us to have a pretty large sales team to build all the relationships that are necessary. So we've broken the United States into dozens of different sales territories. each one of those territories is staff with an account executive that holds a quota. Then they can pull from various other sales support organizations that we built, like dedicated

demo teams and, you know, sales engineering teams and other things. Can you get me up to speed on Motorola Solutions? They raised, you raised $125 million round led by Motorola Solutions. Most people in the consumer world might think of the Motorola Razor V3, the cell phones. Do they have a lineage in public sense? safety or development of emergency response equipment. Is there more synergy there or is this purely just like it's a good deal and they did the deal? No.

So the vast majority of Motorola's business is selling body worn radios and public safety software to police and fire department. It's like the overwhelming majority of their business. They are actually the largest company in our industry. Motorola is number two, or excuse me, number one. Axon is number two. Flock is probably number three in terms of scale. So they have three existing commercial relationships with literally every single one of our potential customers in the free world.

Like that is their market position. So we ever have to go and meet like a net new PD or RFD, we can just ask them for the introduction. And then when that organization decides they do want to adopt our technology, we can usually also folded in through a pre-existing contract that Motorola has. So they're an incredible partner. And I would say the relationship is very strategic on the go-to-market side, but it's also very strategic on the product side. We've developed a feature, for example, where if a police officer or a firefighter pushes the emergency button on one of their radios, that can automatically

trigger one of our drones to launch and fly to their exact location. Sure. Motorola has a huge percentage of the 911 call taking software market. So we can grab the coordinates of 911 calls from there and then use those to trigger drone flights. They have an ALPR business. They have a very large computerated dispatch business. In fact, most of the very large police departments around the country utilize Motorola CAD. So, yeah, their synergies left and right with them.

They've been great partners. Why Combinator has their request for. startups. I want your request for startups. If someone in the audience is thinking about building a company deep in the drone supply chain, deep in the battery supply chain, deep in any industrial supply chain, what is a, what is a category or product or subcomponent where you would love to meet an entrepreneur who's thinking about building a new company based in America to solve that particular problem? I mean, camera payloads come to mind immediately.

There are very few American-made gimbalized camera payloads that have high-resolution thermal, you know, good zoom optics, three-axis stabilization, and that don't cost and, you know, an obscene amount on a per unit basis. So, yeah, that would absolutely be one. They're nice, like, self-contained components that, you know, a lot of drone manufacturers don't want to make for various reasons. Even Andrel is actually a consumer of a lot of these parts. Like they're not doing their own their own payloads in that category. Yeah. So yeah, that would be of interest. I would say, you know, very high energy density batteries. Of course, always are

of interest to drone manufacturers, brushless outrunner motors, mesh networking radio, PCBs. You're like the whole supply chain. Just do anything in there. No, it makes sense. It feels like, It feels like a decade ago, you would have been, you probably were called crazy when you started the company, but you would have been called crazy for trying to just build a hardware company because hardware was hard. You had to be a billionaire to start a defense tech company, et cetera, et cetera. And now, you know, there's enough motion and there's enough energy that you can, you know, build this company, hire, raise, get to market, sell it effectively.

And now the next challenge is deeper in the supply chain, which is exciting. There's a lot of opportunity there. Tyler, do you have any question? Yeah, I was wondering, like, what's kind of the shape of autonomy in response to terms? Like, how important is this, is this like getting autonomy much better? Is that like a big bottleneck to selling more of these? Or how do you think about that? Yeah, no, that's a great question.

I mean, the way our technology works in general is someone will call 911 in a jurisdiction. We will grab the GPS coordinate of that call from computer-rated dispatch or 911 call-taking software from some other source. Our software will then find the nearest 911 response drone in a recharging pod that has sufficient battery state of charge to actually respond to the emergency. Then it will plot out a path from that location to the emergency, taking into account manned air traffic, no fly zones, altitude limitations, and so forth. The doors on one of our recharging pods will open up, drone will launch, it'll fall.

it'll follow that pre-programmed flight path out. But if it encounters anything that it doesn't expect, it also has an on-board obstacle avoidance system, so it'll be able to deal with those unforeseen events. Then when the drone arrives, it can engage in a number of pre-programmed on-arrival behaviors. Like, it can orbit a structure fire and just keep on circling around, you know,

with its camera gimbal pointed in the right place. Or it can be programmed to stop at a specific, GPS point, but then move its gimbal to point at an area that might be of interest. And a number of other things. Or at that point, the drone could then be manually controlled in order to interact with the scene. Our drones have on board red and blue lights and sirens. So an end user might decide to turn those on, depending on the circumstances of the call. They can deliver at disgust, life-saving emergency medical payloads. So an operator might decide to engage in an action like that, or they could just follow a person or a vehicle.

That could be done manually, but we also have automated tracking features that can be utilized in those instances. So an end user could like click on a person or click on a vehicle and the drone would just sort of, you know, follow for that end user. Do you have benchmarks? Yeah, in terms of the impact that we make on communities? No, technical benchmarks. Every AI company is like trying to get their LLM to solve math problems and there's a very clear battery of progress.

And I'm wondering if you have like, you know, is there a standard benchmark for like drone agility or like something that's measurable? But a little, the thing with the benchmarks is that they're not, they're not purely quantitative in the sense of like, you know, how like response time is in milliseconds like, for a computer system, that's very quantifiable. It's often like you need to solve this puzzle. And so what I'm wondering is when we will enter, or maybe we already have, the era of there's like a standardized drone agility course and you can unleash a drone on it and say, oh, yeah, it did it in this time or it was 90% effective at this or no one else can do this. I'm wondering if there's any of that going on in just the drone community broadly.

That does exist actually. NIST has put together something very similar to what you just described. Okay, cool. So, yes, that absolutely happens. I would say, though, mostly customers are focused on specs right now. Yeah, yeah, I'm sure. So they're flying about, you know, exactly. Flight time, top speed, HD camera resolution, thermal resolution, recharge time,

what integrations exist, all of that. Sure, sure, sure. We got to get the police department's bench, bench-pilled so that they're just like, How did you do on Humanity's last drone competition? Anyway, that'd be funny. We do big offs, you know? Yeah, sure. There are a lot of instances where brink drones will go up against Skydeo drones.

Sure, sure, sure. Charlotte Mecklenburg in particular ran a pretty extensive evaluation of different companies' aircraft. And we ended up winning that. So, yeah, no, this is definitely on people's minds. Yeah. Well, thank you so much for breaking it down. Thanks so much for the tour. This is fantastic.

Have a great weekend. We'll talk to you soon. Cheers. Goodbye. I can't wait. Truly. Let me tell you about console. Console builds AI agents that automate 70% of ITHR and finance support,

giving employees instant resolution to access requests and password rate resets. Take us through what's going on with OpenAI pushing the model frontier access across efficiency. What happened? They drop the cost of Luna. Yeah. So there's Luna, Terra, Sol. This is the cheapest model. Massively reduced costs.

You can see on the kind of, you know, Prudo curve, this is like actually much cheaper than a lot of like open source models because you, because we've been talking about this recently. It's like there's cost per per task, not just like can it do it and how much do it. Like it depends a lot how token efficient the model is. Yeah, because there you could measure it on on cost per token, but if a certain model takes 10 times the amount of tokens, it's only half the cost, you wind up spending more. Yeah. Why is the Pareto Frontier in this graph flipped? I feel like the Pareto Frontier used to be this direct.

Am I hallucinating that? It's always been this way. You always want to be on the left side. I thought you wanted to be on the right side or something like that. Well, it depends on where you are on the Purdue front. I suppose. I guess. I think I see what you're saying.

I suppose. Anyway, we also, I don't think we touched on this, but Arc AGIV3, the leading labs have been going back and forth. Opus 5 put up a very, very impressive number. Then Open AI fired back with 5.6 soul used to solve open problems in mathematics. So why was it struggling with Arc AGIV3, which you at one point were in the top 10, right? Yeah, I was globally ranked Arc AGIV3. I don't think it's still up, but, yeah, I was.

Ranked Arc AGIV3 player. That's up there. You were like, you were pro-am. Yeah, yeah, I would say. You didn't go pro. You turned it down. You had the opportunity to be at Arcang. They were going to give me like 10 more tasks, five more tasks, something like that.

Something like that. Yeah. But apparently Open AI was able to investigate the low score of 5.6 soul on ArcGiv3, and the harness was not letting it remember what it had learned. We found that enabling two API settings tripled our scores with 6x fewer output tokens. So very interesting to watch these. This is fascinating. I mean, we've seen this a lot over the past, like, I don't know, a year and a half almost where the harness, like, really matters a lot.

And if you have the wrong harness or it's like limiting the model in some way, I mean, it can have like, massive effects on the downstream task. Yeah, people were not expecting this. It was definitely like the model, the God model will be just one model, and you'll just ask it to predict the next token. It'll just do it perfectly. There's a lot more that goes into the integration here. I still think Arc AGIV3, I mean, fantastic benchmark, love the team.

Obviously, Mike's been on the show multiple times. But it's also just a great way to actually illustrate AI progress to someone that maybe just doesn't want to build software or hasn't built software before. and doesn't really, can't really feel that visceral. I can't say viscerally. I don't know. Especially, you know, the famous time horizon task doubling at six months. Like, that's basically, like, we can't actually measure the high end now.

It's like too hard. We don't have enough task to like measure it efficiently. Yeah. And a lot of people are just like, what's a task that takes me 12 hours? Like, what is that? I don't even know. Yeah, it is a bit hard to think of that off the top of your head. Like, what does that mean?

Like, like, building a whole. report or something or like a lot of people work in like various ways like yeah 12 hours of meetings is that one task I don't know yeah but uh if you show someone the arc aGI V1 puzzle and it's very easy and V2 is very very very easy and then you and you walk them through the story of how AI has progressed on this and how hidden the answers are you can you can you can uh pretty easily help someone feel the AGI which is very very very fun uh anyway that's our show folks We will see you at 11 a.m. Pacific on Monday. Have a great weekend. Have the best weekend ever. Be like a golden retriever going after the tennis ball. And also leave us five stars on Apple Podcasts and Spotify. Sign out for our newsletter at TVPN.com.

And we'll see you on Monday. See you. Bye. Rolling flashbang.