TBPN - Markets Surge, Apple's Tariff Strategy, Tracy Alloway, Justin Lopas, Paul Klein, Akshay Krishnaswamy

Episode Date: April 9, 2025

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You're watching TVPN. It is Wednesday, April 9th, 2025. We are live from the Temple of Technology, the Fortress of Finance, the Capital of Capital. And the Fortress of Finance has never been stronger. The market's ripping. We're back, maybe. I, for one, I never doubted for a second. I never doubted for a second. I never said it was so over. But yet we are so back. Always knew we'd be back. I always knew. I always knew. It's a perpetual cycle. It is. It's so over. We're so back. If you haven't been tracking, the breaking news is that the market's way up on the announcement from President Donald Trump that there will be, some of the tariffs will be put on hold, specifically for countries that do not retaliate.

And the main thing here is Walter Bloomberg wasn't wrong. It was just a little bit early. And this is a lesson that founders, investors often learn. being early is often being too early can be equivalent to just being wrong yes but we're going to give blumber we're going to give mr bloomberg a little bit you're joking but like maybe he did know no no no he watched an interview like the monday move was he watched a live interview kind of misinterpreted what the person said and then nobody could verify it the front of the wall street journal says stock surge as trump authorizes a 90-day pause on some tariffs uh meanwhile

He is raising the China tariff to 125%. So I think that that's probably what's being underdiscust in the midst of this crazy 10% jump in the NASDAQ. That is insane. Is that like this is turning into, it originally was like we are renegotiating the global order of tariffs. We're going back to Bretton Woods baby. We're talking about the Nixon shock. We're talking about major geopolitical global world order dollar dollar reserve currency stories. And now I think we are going to be more in the era of like, this is truly just a U.S. China trade war.

And that's where the pressure is going to be. And we have a lot to break down from that. There's a, I mean, Ben Thompson's back, baby. He's off of vacation. And he's been posting every single day, dropping some great analysis. We'll take you through that. We'll go through some open AI news about the device that they're potentially building and some other stuff before we jump over to the timeline on our guests. Let's kick it off with what Ben Thompson had to say about Apple because this Apple is like the company to watch.

Wait, you didn't want to kick it off with this other post that you have there? Why don't we start there, John? Yeah, this is some really important news. This is from Landshark. Landshark writes, not sure if everyone already knows this already, but there is a guy on Instagram who behind the back deadlifts 30 kilograms more than the deadlift world record in his backyard. And I just thought this was important to share because like obviously you knew this obviously I knew this obviously most of the people in the show will know this But if there's people that have been living under a rock and maybe like distant family members People have been traveling for a long time

You know maybe they're doing one of those like deadliest catch things and they just haven't had access to the internet You got to let them know because this is important news and the fact that this is not moving protein futures Yes, this really should move markets It should be market moving this should be right up there with the Trump tariff story Yeah. So there's a man on Instagram who is deadlifting 1,168 pounds, which puts him in the 1,000 pound club just on this one lift alone. Have you ever attempted a behind the back deadlift?

I've never attempted it behind the back deadlift. Now I'm super curious. Yes, I do wonder if this is just innovation and it's easier somehow and no one ever realized. Like no human had ever said. Yeah, it's kind of like the throwing the basketball like underhand granite style. people thought that might be easier, but it's like embarrassing, so no one would do it. And so, but you actually could get a higher shot percentage, but it became like a meme thing. 530 kilograms.

That's so much weight. You have to think throughout history, there were probably just random dudes out there breaking strength records all the time and just never, they just were in their village, just going through their regular workout routine, having a good day, breaking a world record. You look at the bar and it's like so many. plates. It's like 10 plates or something. Yeah. It's crazy. Anyway, very important story. Anyways, well, we just wanted to make sure that you highlighted that to start the show. It's very important. Back to Ben Thompson and what's going on with Apple in China. He starts the quote

from the Wall Street Journal. Beijing lashed back at President Trump's threat of even higher tariffs on China raising the specter of an all-out trade war between the world's two biggest economies. If the U.S. insists on its own way, China will fight to the end. The country's Commerce Minister, ministry said Tuesday, Trump had said he would slap an extra 50% tariff on China if Beijing didn't drop plans to retaliate against extra levies he announced last week. In a sign, Beijing is digging in for a protracted battle. The government threw its weight behind the stock market and devalued the won against the dollar, pulling a reference rate below a key threshold for the first time since the fall

of 2023. In spite of the spiraling tensions, global markets broadly rose Tuesday, paring some loss. after a bruising three-day sell-off. U.S. stock futures pointed higher after market whiplash Monday, ultimately left major indexes largely unchanged, giving investors some hope that Trump administration signaled that it was open to discussing lower tariffs to Japan, Israel, and some other countries.

Japanese stocks jumped after Tokyo named chief tariff negotiator and Treasury Secretary Scott Bassant said the country would be prioritized in trade talks. And so that we are now in the, We're not quite at the Mara Lago Accords, but we are certainly seeing some differential pressure. And the blanket tariffs, they did seem aggressive. And because, of course, like, there are lots of companies that I think have been taking, taking, you know, tariffs with China seriously.

Like the first Chinese tariffs came into effect during the Trump won. And I was thinking about that discussion with Keith Rubei. Keith, there was this question about like, you know, you're obviously aligned with the administration and you're a good enough, you know, conversationalist or you're good enough at arguing this stuff that potentially no matter what happens to any economic indicator, you can say it's good. You can say, oh, like, you know, interest rates went down. It's easier to buy a house. Interest weights went up.

Well, you're earning more money when you give the government money. That's great. Oh, the stock market went down. Yeah, we're just. the stocks are cheaper. It's more encouragement to grind harder. Oh, the stocks go up, we're all richer. If you can just justify anything, it's like, how do we know if it's actually working?

And my takeaway from the Trump won Chinese tariffs and the re-evaluation of the U.S.-China relationship was that the changes that Trump made to the U.S.-China relationship, they stuck around during the Biden admin. And so I would call this, like to coin a phrase, Kugin's Law, I would call this eventually bipartisan. So when Trump does something, there is this natural reaction from the left wing to say, it's bad, even if they don't know or they haven't really dug into it or no one could know. And the same thing happens on the other side, where the Democrats do something and the Republicans, this is the worst thing ever, right? Yeah.

The real test is when the next administration comes in and is from the opposite side, if they're like, you know what, now that we've, you know, seen what happened with the China tariffs, like, we're good with them. And that's exactly what the Biden administration did. and they eventually went further with the chip bans and the Chips Act. And so when I think about like, whatever you think about the first Trump administration, there were probably lots of things that everyone agrees with and some things that people disagree with, the re-evaluation of the China relationship, that did just technically, regardless of what you think about it,

it did technically become eventually bipartisan. And so my question is, is will these tariffs? To give Obama some credit, he was one of the first people to really, start bringing up China as being a problem. Totally. Yeah. So it's not like, you know, Democrats historically just that China is a perfect sort of benevolent actor.

Yeah, yeah, yeah. Yeah, there was this book, 100-year marathon. Marathon by Michael Pillsbury. And he wrote, he kind of wrote the defining book on like China's strategy to become a global hegemon that they're not moving quickly. They're thinking very slowly. they think about warfare not in the purely kinetic terms and there's economic warfare. They're willing to invest in these industries like we've talked about with DJI and robotics for a very long time, lose a lot of money, but eventually be the winner.

And I think this woke a lot of people up in Washington and this eventually became kind of the backbone of China policy on both the left and the right, which is interesting. And I do wonder, you know, with time, a lot of these, like the Nixon shock, for example, like, the partisanship kind of evaporates over the years, and everyone kind of comes to a more like cohesive understanding of history because you have more economic indicators, because you can see, oh, well, like, what did the economy do over the next 10 years? Was that a good idea or not? And of course, there's debate, but in general you can tell. And so it'll be very interesting to see how this evolves. Obviously, things are changing very quickly, but that's why it's fun to do a daily show. And that's why I'm happy that we've positioned this show the way we have.

Anyway, let's dig into Apple's China problem from Ben Thompson's Treetcher. He published this yesterday, Tuesday, April 8th. And he says it's obviously time to talk about Apple. This is not, as I highlighted, the worst case scenario, that would be war in Taiwan, which would not only abruptly end Apple's China supply chain, but also its Taiwanese one and potentially Japan and South Korean ones as well. That is an existential risk. Yeah, I wonder how, you know,

there's this concept of 20, it's 2028, right? The sort of year that our military leadership generally predict. It's 2027 or 2028. I believe it's 2028. I wonder what Apple's internal forecast is for a conflict in Taiwan because they are the single entity with the most riding on that conflict. So Polly Market has it at 16 percent. Will China invade Taiwan in 2025?

I hope that that goes to zero. It would be very bad for everyone. But there's a lot of cutting your nose to spite your face going on in the global economy these days. So anything is possible. But fortunately, you know, that's not at 80%, which is great. A trade war with China is somewhat more manageable, although still very bad. Ben Thompson then goes through a report in the Wall Street Journal line by line. Apple plans to send more iPhones to the U.S.

from India to offset the high cost of China tariffs. People familiar with the matter said, the adjustments are a short-term stopgap while Apple attempts to win an exemption from President Trump's tariffs, which has happened before. And Tim Cook has, even though he has positioned the company, not as like a right-wing company in any way,

he went to the original Trump won tech summit. He sat next to him. That was where the Tim Apple quote came from. And Tim Cook has been good about not, aligning the company, not saying, like, we are ride or die Biden. Like, we're coconut pilled here. He said, you know, we're an American company. We, you know, will work with any administration.

And I think the fact that Tim Cook is willing to do deals. And he did that thing with where they reshored, they quote unquote, like resured the production of the Mac. I don't know if you remember this, but they opened, like, it was a plant in Texas that was like kind of already working for Apple. And then they kind of like reclassified some of the R&D and CAPEX is like, we're really betting on America, but they let Trump come and, like, cut a ribbon in front of this factory that was, like,

kind of already working, but it was like a moment for the Trump administration. I don't remember that. So it was very much like an olive branch. We need to get some of those. For sure. It was American-made Macs. Yeah, for sure. I need an American-made Mac.

And so, yeah, so I think Tim Cook, he's very, like, quiet about politics, but I think he does understand how the game's played. He does understand how to do deals. He is a deals guy. And so is Trump. Should we play the video? Re-talks of the zen and art of supply chains. If we're ready to go, I want to hear from Tim Cook about why he loves supply chain manufacturing,

and then we'll dig into his strategy in China and how Apple is retooling things going forward. Factoring has always interested me because I'm very curious about how things are made. I'd like to go to factories and see how things are put together, how they're created. My degree is in industrial engineering, my undergraduate degree, and it's a industry. Industrial engineering is essentially the study of people and machines and how the two working together can create things that they couldn't create on their own. And I've always viewed the supply chain piece of it to be a bit of a piece of art when it was done correctly. Because it's a symphony of things coming together of thousands of different components and parts coming together to create something. it really is probably the most complicated organism or just a collection of human progress like the phone really distills everything from like the semiconductor is extremely complicated you need the best and smallest and fastest and most energy efficient chips in the phone the screens are the most advanced screens and the smallest the batteries like it really brings together everything and you can see uh that i think the symphony analogy is fun but he's clearly i mean i think he's really is really is being

genuine there even though it is kind of a it's kind of a dry quote because it's talking about supply chain but I think he really does feel that way and and it's his like Tim Cook is the reason that Apple is dominant in China and and the reason that Foxconn exists to the degree it does and the reason that Apple has been able to grow and scale so much he was the guy that that that jobs brought in to fix the supply chain he went over there figured it out and and then scaled the business incredibly. And now he has a potential crisis on his hands, but I'm sure he's been tracking this for a decade now.

And they've done some of the stuff. And we put up a polymarket around the cost of the next iPhone. Oh, yeah. And seeing basically whether they're going to pass costs on to consumers or eat the cost. Knowing Apple, they'll pass the cost on to consumers. Maybe. But again, we talked about this with the shift to services revenue.

increasingly, and we'll get into this with some of the Ben Thompson analysis, increasingly the amount of money that every year Apple makes more money from services than devices. Like that mix is shifting. And so you could see a world where you're, I mean, already you can subscribe to an iPhone. You can pay something like a couple hundred dollars a month or something and get a new one every six. Yeah, but isn't that more you're effectively financing and releasing it?

Yes, yes, yes. But you could imagine it's like, okay, yeah. if you have an Apple phone plan and you have Apple TV and Apple News and Apple Health and Game Center and you're spending, you know, tons of money on, you know, Roblox credits or something that are paid. Candy Crush. Candy Crush. Yeah. Yeah, you're a candy crush whale. It's like, yeah, we're making $10,000 off of you. We'll just give you a new phone. Whatever. It doesn't matter. I don't know that they're actually there. But it is interesting to think about it. So for all the criticism of Tim Cook writes Ben Thompson, which has been mounting for years,

including from yours truly. He's been thrown some shade. This is truly the opportunity for him to earn every dime from his paycheck in an attempt to preserve the viability of the Chinese supply chain that he built. He will certainly call back to his previous arguments. Massive tariffs on Apple products will do a lot of damage to an American company and give a big advantage to foreign ones, particularly Samsung. That worked during the first Trump term.

the problem is that the other bullet point in Cook's tenure, one can certainly make the argument that Apple more than any other country, any other company, is responsible for China's dominance in manufacturing. If China did not have Apple to ride the learning curve down, China would not be as dominant as they are, particularly when it comes to a high-tech componentry that the U.S. is so far behind it, Apple's response might be that, while that's, well, that's, true, at least the company has been trying to diversify. And so, uh, yeah, they're trying to shift to other markets. They're trying to shift to India, Vietnam. Yep. And, uh, I'm sure out of this will come a US iPhone factory. Yes, but I don't. Most importantly, when, when you hear, oh, the iPhone has shifted from

China to India, that's the last stage, uh, manufacturing process. That's not the componentry. Yeah. So Apple makes many iPhone components in China, but in recent years has assembled more of the devices in India. And it's such a huge scale that they manufacture or they assemble in both. That allows the company to stamp India as the country of origin for those devices because they undergo substantial transformation there from a pile of parts to a functioning smartphone. Since 2017, Apple has worked with partners to assemble iPhones in India, starting with older models and gradually expanding to include the latest ones. The policy both addresses China's risks and avoidable. important tariffs when selling in India, one of the world's fastest growing smartphone markets.

The fact that India does little more than assemble Chinese source components gets at one of the reason for blanket tariffs. Chinese imports to the U.S. have actually fallen over the last several years, but a lot of that is because of similar schemes to do final assembly in countries like Vietnam, Thailand, Mexico, or in this case India. And that's the whole thing with like the what China does so well in places like Shenzhen, where you walk across the street and there's like the world's largest, you know, like button manufacturer. And then there's like an insanely scaled factory for just glass. Camera lenses. Camera lenses. Exactly. And so it's not enough to say, oh, yeah, there's some cheap labor. Like, let's just put it together in India. Like, that's not really solving

the problem, even though you get to, you get to write something different on the box. Yeah, I mean, Apple has two problems. Yeah. They have a China problem and they have a Trump problem. Right. And they're going to need of really solving just the immediate Trump tariff problem is not fix does not fix their kind of collective issues right of this dependency on China that that again it could end up being if they do do some type of like operational warp speed to to move production out of China and including the individual parts production that could end up saving them if there's an eventual Taiwan conflict. So Ben Thompson goes on to say, building on the blanket tariff point, probably the biggest question

right now is if the goal is to fundamentally reshape the global economic order or to simply cut off China, we have more, we have more information here. I think it really, it does seem more targeted at China now. We're seeing that. Trump's pulling back from this idea of reshaping the global economic order, but we will have to see where it all pencils out. If it's the former, then there is arguably less incentive for Apple to change anything because if they go anywhere, they're going to feel the pain everywhere.

And so that probably makes the most sense to keep the supply chain based in China with final assembly elsewhere. If it's the latter, however, then these final assembly shifts to other countries could be viewed as positive. A company of Apple's scale doesn't shift its entire supply chain overnight. It shifts parts that are easier to shift like final assembly. and that forms its own gravity for high value components. Indeed, this is exactly what happened in China.

And so that idea of economic gravity, even if you just say, hey, we're going to do all the components in China and we're going to do final assembly in India, eventually you're going to be like, ah, we ran out of buttons today. We would pay twice as much for a button that was just manufactured across the street. And then the natural market is going to just figure out

that some entrepreneur in India is going to say, wait a minute, if I don't have to pay shipping costs and tariffs and all this other stuff, I should just set up a button manufacturer right here. I would do that for everything eventually, but it takes a long time. I would pay the equivalent of 10 UFC pay-per-views to get Tim Cook to break down why making an iPhone in America makes no sense, long term, right? Like basically saying like, okay, obviously sort of reorienting supply chains is like decade-plus long initiative.

but why wouldn't you be able to make an Apple, top of the line Apple mobile device with, you know, great margins in the year 2040, right? Assuming massive technological advancements and automation. I think the previous answer has been that even though Apple is absolutely massive, they just haven't had the money to, they would effectively have to build. everything vertically integrated, right? So they would need to build every component. They would need to make that company happen because it doesn't exist in America. So they're not to say,

okay, now we are not just assembling iPhones with Foxcon or an Indian contractor. We are building our own Foxcon for assembly. And then we are also building our own camera lens manufacturer. And so how do we staff those? Well, we need to train people. So there's this massive investment there.

The question is, Apple has produced over a trillion dollars in cash over the last decade, right? Could they, how much has China invested in this? Probably more, honestly, if you think about the investments that have gone in from the free market and from all the different economic incentives because it's not just Apple that's pushing China to develop capacity around high and technological componentry, right? It's also Huawei. It's also, you know, every,

show me, like every single company needs something that overlaps a little bit. So these companies that are built on the back of Apple, and Apple's maybe the biggest client, well, even if there's a company that doesn't do anything with Apple, their employees might slide over to an Apple-related supplier one day. So I think that that gets back to that heart of that debate between Obama and jobs about, hey, if we need 30,000, you know, engineers, is that the job of Apple?

Or is that the job of the government? And the government couldn't do it. But could Apple have even done it if they tried? I have to imagine for a trillion dollars you could do that, right? Like, that's so much money per 30,000 per people. But it cuts Apple's market cap. Oh, totally. It'd be extremely expensive.

Who knows? It'd be, yeah. It's basically like saying, like, hey, It's nationalization at that point almost. It's like, hey, you know, this makes no sense to the shareholders. It does not maximize shareholder value. Instead, it is just something that like we think is generally good for America, but they haven't had an incentive for that because their Apple is not responsible to America.

They're responsible to their shareholders. And their shareholders are some Americans, but some international folks. That's the nature of being a global company. while the iPhone got less attention than usual at its launch event by far the greatest amount of time was spent on its camera and for good reason review after review has lauded the iPhone 6 camera as possibly the best iPhone camera ever as it turns out though there are a couple of companies in the world that are capable of producing such a camera and Largan Precision is one of them that's why they provide the camera for the iPhone 6 so this was like one of the first stories of major outsourcing in the in the iPhone supply chain. They have a $9.6 billion market cap barely registers when compared to Apple's $623 billion number

at the time, now it's in the trillions. But when you consider that Largan Precision is a relatively tiny company that's pretty darn impressive. And I can assure you, the founders are living much more comfortably than all but the most senior Apple managers. Moreover, it's not far off from Foxcon

who actually builds the iPhone. Their market cap is only 5x greater than the maker of a single component. And so really owning a single piece of the supply chain and the iPhone supply chain, incredibly lucrative. So seven years later, Largan Precision was under threat, along with a host of other non-Chinese suppliers. With the iPhone 13 model, Chinese outfit, Sunny Optical, is finally broken into Apple's supply chain, marking the first occasion upon which a PRC-based supplier has entered the iPhone's optical parts realm to capture supply of one of the model's three main lenses,

namely the 7P, 7-stack wide-angle lens. Largan Precision is probably a bad example, writes Ben Thompson. They are the best in the world and have bounced back to take more iPhone share while Sunny Optical fell off, although they may be back later this year. What is more pertinent?

By the way, Largan Precision, by the way, is a $240 billion market cap. Now? Company. Wow. I mean, everyone has three cameras. is now. You know?

Like, it's not just everyone has a camera. And I'm sure they make, I'm confident they make a bunch of other components for other cell phone manufacturers and other device manufacturers. Ben Thompson writes, there's one fly in this ointment that is worth noting. A big reason why those Chinese component suppliers got off the ground is because of Apple not just giving them a buyer, but also investing heavily in R&D on their behalf in an attempt to over, to undercut the power of companies like Largan Precision.

That's controversial. Absolute dog. I'll throw some phones on the R&D side. Let's get it going. Anyway, so Apple in the short term, there is news from the Times of India that Apple transported five planes full of iPhones and other products from India to the U.S. in just three days during the final week of March. The urgent shipments, which were made to avoid a new 10% reciprocal.

tariff imposed by President Donald Trump took effect on April 5th. Sources told said that Apple currently has no plans to increase retail prices in India or other markets despite the tariffs. To mitigate the impact, the company rapidly moved inventory from manufacturing centers in India and China to the U.S. And this was something that happened like all over the place. There's reports of car companies just Lamborghini, put every Lamborghini on a boat, get it to America.

We don't want to pay a tariff. I imagine there were even more planes flying from China over the last few days. And I wouldn't be surprised. To be clear, a lot of these companies were predicting the tariffs and had still been trying to get in front of them, right? Just, you know, basically over-over-ordering against what they would normally do. To that end, I would imagine that Apple is going to try to hold the line on pricing in the U.S. for as long as it can. For the iPhone specifically, I wouldn't expect any changes until the next iPhone launch in September. While Apple has changed prices mid-cycle in countries facing significant currency change.

changes. They have studiously tried to avoid that in the U.S. market, which has the added risk of angering President Trump, even as the company will be seeking some sort of exemption. Obviously, if people are complaining out the prices of iPhones, Trump's not going to like that. And so he's been documenting for several years now how Apple has actually been cutting iPhone prices in real terms, in inflation-adjusted terms. And we've seen the two-year-old iPhone went from $499 to $411. And the iPhone Pro Max, the top of the line one went from $1,100 down to $900. And so they have been reducing prices. And again, I think that's driven by the increased value that they get from software.

Yeah. And from people losing their AirPods. I mean, they are monetizing in so many other ways of the Apple ecosystem. My average Apple order is so funny. I walk in and I go, Yeah, I just want five sets of your wired earphones. They bring them out and they're like, you're sure you want these? I'm like, yes.

That's ridiculous. One for every one for the car, bag, desk, you know, et cetera, et cetera. Yeah, I'm getting extremely close to just throwing away every sono's product and going with the Apple speakers because I just know that they will, I don't know if they'll sound better. I don't know if they'll work it better, but they can't work it better, but they can't work what worse than Sonos. Sonos, you may as well just hire live musicians

schedule them to come. They'll be more reliable. I think of the Sonos app as like a meditation app because you click it and it's just blank screen for like five minutes and it just gives you a second to like reset and be like, okay. Clearing my mind. Nothing's coming in because it's just a blank screen

for five minutes before you put on a single song. It's getting worse by the day. It was expecting to get better. I thought they just rolled it back. Anyway, let's go to 10. Tech's complement risk. This is Ben Thompson's big takeaway. He says, whatever a disaster this is for Apple or for tech generally, he wants to go back to what he wrote last fall. Apple could not only manufacture an iPhone in the U.S. because of cost. It also can't do so because of capability.

The capability is downstream of an ecosystem that has developed in Asia and a long learning curve that China has traveled and that the U.S. has abandoned. Ultimately, though, the benefit to Apple has been profound. The company has the best supply chain in the world centered in China. That gives it the capability to build computers on an unimaginable scale with maximum quality and for not that much money at all. It is crazy. China doesn't really.

It's fantastic computer. Yeah. Yeah, works great. And it was dirt cheap. They don't get much credit for being the backbone of what people love about Apple. Oh, yeah. It's just fantastic reliable devices. Like, I mean, you.

buy a car and it's like there's a lemon law you know like like you could just get a car where it's like oh the engine doesn't work and that's a thing like I've never even talked to someone who's like oh yeah my Apple like my Mac like the hard drive didn't work when I got it like it just doesn't happen it's always 100% perfect every time it's crazy the benefit has extended to every time Tim Cook he he has cooked he has cooked over several decades whether they make their own hardware or not it is fascinating though so when Buffett really started dumping Apple. Tim Cook.

Like that was like, that one must have hurt for Tim because Tim was starting to realize that he was a little bit cooked and Ben Buffett. Buffett knew too, right? He was just like, you know, he could kind of see the writing on the wall. Trump presidency,

you know, loves tariffs. Apple, you know, Apple not being able to move their supply chain without trillions of dollars of investment. and Tim just sitting there being like, well, I'm going to give Apple intelligence a good shot here. So he concludes to that end, the risk for tech is that tariff specifically in Trump's approach to trade generally do not do more damage to the golden goose than expected. More expensive hardware ultimately constricts the market for software.

Tariffs in violation of agreements like the ITA give the opening for other countries to impose levies on their own and the US tech companies could very well be popular targets. Yeah, I mean, I was thinking about, so there's this whole idea that like if you bring down the cost of hardware, all software needs to run on hardware. Every, every app company, every software company that we know and love, like Uber only exists because everyone, the iPhone got so cheap that everyone got one, right? And you think about, it's very easy to say like, oh, well, like everyone kind of has an iPhone. They don't really need to upgrade. If prices go up by 30%, you just upgrade every, four years instead of three years.

It's not that big of a deal. But what about for the next platforms? We've talked about drones and humanoid robotics, but even VR. Like the current Applevision Pro, great product, super expensive. I think I bought like a max spec one

and it was like almost five grand. Yeah. And you add tariffs on top of that. You're just going to be fighting tooth and nail to drive that down. John Carmack when he was at Meta said that He wanted to get to a hardware device for VR that was 100 grams. So extremely light, like the big screen beyond, the big screen beyond, that's 100 grams,

but it's like $1,000. The Meta Quest has been down in like the 3 to 400 range, but still nowhere near $100. Carmack wants to get 100 grams, $100. Because at that price, at that price, like everyone has one. It's like glasses. It's like glasses. Yeah, the sunglasses. The install base gets so big that developer.

can say, yeah, you know, there are 100 million Americans with these out there, and if I can make a breakthrough app, I'll make a lot of money, whereas that's just not the case. And that does get very, very difficult if you see that there's just no way to manufacture new hardware devices cheaply. So it's a complicated, it's a complicated problem. U.S. tech exports are primarily software and services, which aren't calculated in things like trade deficits. One suspects that that means, it's a complicated, that the Trump administration isn't very concerned about them, although countries looking for retaliation targets surely will be. That though pales in comparison to the cost of blowing up the hardware supply chain,

tech's most essential complement. This isn't the end, it's just an Apple story. This isn't in the end just an Apple story. So yes, this idea that like if all the hardware devices get more expensive because the supply chain blows up, you could actually see like Google suffer and Apple and meta suffer is a very interesting take. Anyway, should we move on to some ads? Everyone wants to hear ads.

Let's talk about public investing for those who take it seriously, multi-asset investing, industry leading yields, trusted by millions. If you're looking to get in on the action, we had Leifond. A lot of people were buying yesterday. They did great, I guess, because the market's way up. I won't give you any financial advice.

Anytime there's news, people buy, good or bad. It is crazy. I mean, look at this. No, but we are the generation. We are the generation that is, we're the buy the dip generation. We are the buy the dip generation, yeah. We're someday all going to be, you know, 90 years old. And our younger members of our family will be like, Grandpa, like, don't buy the dip.

Like, I think you're really built for T-Bills at this point. You're like, I'm buying the dips. No, no, you know how they used to say like, you should have a mix of stock and bonds, and the percentage of bonds should be your age. So if you're 30, you should be 30% bonds, 70% stocks. And then if you're like 80, you should be 80% bonds, 20% stocks. Like our version of that is going to be like, you should be, you know,

if you're 80, you should be 80% like levered long Bitcoin and 20% NFTs. Packy had a good line, a post from earlier. he said like the proper hedge right now is just to buy like just basically go for uh democrats on polymarket the markets aren't even up packy uh polymarket doesn't do uh midterms yet but they will in a year probably do like county level stuff you know county level stuff just people are like I can't take these tariffs like I'll vote for anyone like I'll vote for a Democrat in my city council uh it's hilarious um anyway Ben Thompson is clearly reflecting on this a lot.

This is his third post of the week. He also did this interesting thing where he thought that his Monday post was a little bit too casual. So he made that more of an update. I think he put it behind a paywall. Then he posted a new front page article breaking a bunch of his rules. He says, don't post more than one front page article a week. Well, it's a special week. So he's posting too.

And he starts with... He's fired up. He was on vacation. And it's super important to him. I mean, it affects tech super. super deeply. It affects China, Taiwan, America, all the places that he's involved with. It's fascinating. So he starts by kicking out with Professor Clayton Christensen, who coined the term disruption. A little minor coinage. I love it in a seminal paper called disruptive technologies catching the wave. And of course, the innovator's dilemma, which we've talked about a lot. His most concise summary comes from this and we'll give you a little refresher on disruption. So disruption describes a process whereby a smaller company with fewer resources. is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most

demanding and usually most profitable customers, they exceed the needs of some segments and ignore the needs of others. Entrance that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more suitable functionality frequently at a lower price. Incumbents chasing higher profitability in more demanding segments, tend to not, not to respond vigorously. Entrance then move up market, delivering the performance that incumbents mainstream customers require while preserving the advantages that drove their early success.

When mainstream customers start adopting the entrance offerings and volume, disruption has occurred. So when CNBC starts posting unhinged, you know, sort of highlighting unhinged posts from the timeline, we'll know that it's working. Yep, totally. But we're counterpositioned. They can't do it. Yeah. They're built different.

So it's over for them. Notice what did still happen in the United States, at least back then. Actual chip fabrication. This was the main driver of innovation. It's kind of Silicon Valley 1.0. That was where innovation happened and where margins were captured. So of course, U.S. chip companies kept that for themselves. So when chips started to boom, U.S. companies kept the, the, the, the, the, the, the, the, the, the,

and the fabrication, it was tedious and labor-attensive assembly and testing that was available to poor Asian economies led by authoritarian governments eager to provide some sort of alternative to communism. And so that's why the chip manufacturing went abroad. One important point about new market disruption, which Asian manufacturing was, is that it is downstream of a technological change that fundamentally changes cost structures. In the case of Asian manufacturing market, actually three. Number one, in 1963, Boeing produced the 707, the first jet airliner capable of nonstop service from the United States to Asia. In 1970, the 747 made this routine. In 1964, the first trans-Pacific telephone cable between the United States and Japan was completed over the

next several years would be extended throughout Asia. So you could fly there with nonstop service. So you wouldn't need to stop in Hawaii anymore. So you could get that. there, like, in a day instead of two. You could also call. And then ISO 6868 dropped in 1968. Good timing, I guess, that one. Standardized shipping containers. And that dramatically increased the efficiency with which goods could be shipped over

the ocean in particular. These three factors in combination for the first time enabled a new kind of trade instead of manufacturing products in the United States. And trading them to other countries, multinational corporations could invert themselves, focus on design products in their home markets, then communicate those designs to factories in other countries and ship finished products back to their domestic market. And thanks to the dramatically lower wages in Asia,

supercharged by China's opening in 1978, it was immensely profitable to do just that. So it was just basic economics. And so, yeah, we can go through some more of this. But he goes back to Ivan. Yeah, it is fascinating how there's this narrative in Silicon Valley startups, venture broad, that, you know, we used to do hardware, like, we were this sort of, like, you know, hardware culture.

It's called Silicon Valley for a reason, yet all that silicone was actually scaled from a manufacturing standpoint pretty quickly from Asia. Yeah. I think it's silicon. Silicon. Silicon. Is that what goes in? Wait, are they different?

I actually don't know. Anyway. Silicon. I think there are, I think there must be. related, but just slightly different pronunciations or something? Yeah. I don't know. Wouldn't be the first time I botched a pronunciation. Me too, especially a person's name. I'm terrible at that. Anyway, let's move on to iPhone stuff again. Ben Thompson writes, there is one other very important takeaway from disruption. Companies that go up market find it impossible to go back down. And I think

this applies to countries too. Start with the theory. Christensen had a chapter in the innovator's dilemma entitled, What Goes Up Can't Go Down. Three factors. The promise of upmarket margins, the simultaneous upmarket movement of many of a company's customers, and the difficulty of cutting costs to move down market profitably. Together, create powerful barriers to downward mobility. In the internal debates about resource allocation for new product development, therefore, proposals to pursue disruptive technologies generally lose out to proposals to move up market. In fact, cultivating a systemic approach to weeding out new product development initiatives that would likely lower profits is one of the most important achievements of any well-managed

company. You've got to keep your profits high. Now, consider this in the context of the United States. Every single job in this country, even at the obsolete federal minimum wage of 7.25 an hour makes much more money than an iPhone factory line worker. And critically, we basically have full unemployment. That is what full unemployment. No, we have full employment. And we do, we do. Even post-COVID, we bounce back very quickly to like three or four percent unemployment. By the way, Ben shares now seems obvious silicon.

Silicon is a synthetic polymer. It's different. Made from silicone. Silicon. Silicon. God. Let us know how you pronounce it. We're working.

It's kind of a... Anyways, yeah. but silicon is just silicon element symbol SI. All right, we got it now. And so he points to White House Press Secretary Carolyn Leave it, making a what he calls ridiculous statement in response to a question from Maggie Haberman of the New York Times about the types of jobs Trump hopes to create in the U.S.

with these tariffs, Levitt said. The president wants to increase manufacturing jobs here in the United States of America, but he's also looking at advanced technologies. he's looking at AI and emerging fields that are growing around the world that the United States needs to be a leader in as well. There's an array of diverse jobs, more traditional manufacturing jobs and also jobs in advanced technologies. The president is looking at all of those. He wants them to come back home. Haberman followed up with a question about iPhone manufacturing specifically

asking whether Trump thinks that this is the kind of technology that could move to the U.S. Levitt responded. Trump believes we have the labor, we have the workforce, we have the resources to do it. As you know, Apple has. has invested $500 billion. Here in the United States, we covered that. And it was kind of like money that they were maybe already spending, but still like a move in the right direction, I guess.

So if Apple didn't think the United States could do it, they probably wouldn't have put up that big of a chunk of change. So could Apple pay more to get more US workers? I suppose so, says Ben Thompson, leading aside the question of skills and whatnot. But there is also the question of desirability. The iPhone assembly work that is not automated, is highly drudgerous, sitting in a factory for hours a day,

delicately assembling the same components over and over again. And again, it's like, I hear all this, but when I think about what's happening in humanoid robotics, AI. And not even humanoid, it's just, just one robotic arm or just a six axis. Like, I mean, you look at what Hadrian's done with. I mean, they've raised, Chris has raised a lot of money, but it's not that much money. And he's been able to build, you know, he has a couple of robotic arms. and you know, a couple of CNCs and stuff.

Onshoreing, reshoring is not a jobs program. Yes. I think there will be jobs created, but we're not going back to this idea that, you know, 50% of Americans will be assembling iPhones. It's like America will do the iPhone assembly, but at a more efficient rate. It's a huge challenge. But I just, people say it's impossible because we're not down the learning curve and it's so hard. But when I think about like, in the same way that,

China took R&D's, you know, materials from Apple willingly and sometimes unwillingly. A lot of that strategy should be able to be ported back. Like Apple probably knows at a very, very high level of detail how Foxconn assembles an iPhone, right? Yeah. They can tour the floor. They probably have badges. They can walk around. They can just see the stuff.

They probably have plans. They probably have all this stuff. So if they really wanted to build a, Foxcon clone. Foxcon also knows how to make an iPhone. Yeah, yeah, yeah, true, true. And they do for other companies. It's quite a standout.

Yes, yes, yes. But, but like just this idea of like, of like, Foxcon is an amazing light south factor. So many interesting, amazing things that are really hard to copy. But at the end of the day, it is just a building with a bunch of machines and people inside. And if you get the right machines and you tell them right to do and you have the right code, like you should be able to copy it.

And then there's a question of, you know, at what point. does the labor ratio to automation ratio flip where it is competitive at all in the United States and is a 45% or 100% tariff or a 200% tariff or 400% tariff enough to offset that? Yeah. It doesn't seem impossible to me. It doesn't seem impossible that America could wind up developing automated manufacturing capacity that could assemble an iPhone with robotic arms and three axes, you know, different pick and place things.

The question is really, really hard, but it seems possible. I don't know. Clearly, it's one of those things. Clearly, Apple doesn't want to do it. Yeah. Clearly, it's not in the immediate and direct benefit of the shareholders to do it. Yep. At the same time, the China supply chain is this massive, massive, massive risk to the business. Yep. That will also impact their market cap over time if they just don't actually address it and don't try to.

And the question just becomes like, how, you know, how hard can they lean on India, right? How hard can they lean on Vietnam if they spend hundreds of billions or trillions of dollars to sort of rebuild these supply chains elsewhere? Is there a world where in 2040 suddenly we have, you know, problems with another country? Yeah. And this is the question of like that center of gravity. And this is what's so interesting is that right now if, let's read from Ben Thompson again

and then I'll give some extra context. At the same time, it is important to. to note that this drudgerous final assembly work, the stuff that can't be done for $7 an hour, it's a $3 an hour job or something like that, is a center of gravity for the components that actually need to be assembled. And these parts are all of significantly higher value and far more likely to be produced through automation. And so there's a question of like, if Apple goes to India, you might get the component manufacturers

popping up in India. And then we haven't resured that stuff, even though that. That's higher value and more automatable. And so there's this weird scenario where I don't know exactly what you could do to stimulate this, but maybe iPhone assembly in the United States is what you need to do to get to kickstart all of this. And so any economic policy that you can put in place that gets the iPhone assembled, even if it really is, yeah, we're paying people $20 an hour and like college kids are doing it. And it's just the best option.

It is grueling, but we know that we're going to automate that. And you don't go into the career of iPhone assembly knowing I'm going to be doing this for my entire life. You go in knowing I'm here to do this really hard work under American human rights rules. And so it won't be as brutal, but it'll be rough. I'll do that for a couple years and then I'll move up and become a manager of robots. Or I'll become an engineer or I'll become someone who works in componentry and it's higher value. That's not that crazy of a trade. It's not great, but it is possible.

I always have this riff about maybe what we need to do to reshorre manufacturing is make Happy Meal toys here. Like everyone's talking about, oh, we need aerospace and defense parts made in America. And it's like, yeah, those are really, really key. We got to make our drones and we need our Anderl stuff here. But maybe part of the reason why DJI exists in China is because the happy Meal exists in China. To be clear, that's a big issue with the China. tariffs is just how how much of the supply chain for the toys that are incredible young American children depend on for joy and happiness.

Yeah, we were talking about this, the American toy manufacturer. Yeah, I got a pitch just the other day for one. Really? Yeah, people are starting to think about it. I thought it was cool. The advanced toy manufacturing company of America. I mean, you've used these toys. Some of them are like so rough.

No, I hate it. It's so sloppy. And you're just like, this thing is going to last three months and it's going to be in the They don't, they don't last three months. Yeah. A lot of these things last 24 hours, 12 hours. Yeah. And it's not even like, I have like a toy a day.

Yeah. And I'm not even that panicking about like, oh, we're going to run out of landfill. It's more just like the aesthetics of it. They're just like like the emotion of like, like I was reading a book last night. And the inscription was like to John, like to me. Yeah. Because like we passed that down. Yeah.

It's a 25 year old book or something, a 35 year old book. Yeah. Something like that. My son plays with my Legos. that I had when I was a kid. Exactly. My dad had... Yeah, and it's like, what are the new toys that you're going to pass down?

Certainly not some sloppy injection molded, like, robot that's going to, you know, completely explode in three months or 24 hours, as you put it. And so, let's close out with a little bit of Ben Thompson's takeaway. He is defining a better plan. A key distinguishing feature of a better plan is not that it doesn't seek to own supply. but rather control it in a way that U.S. does not today. So the question is, do we actually need to own the supply chain or do we just need to have really confident control over it? And so he says first, blanket tariffs are a mistake.

I understand the motivation. A big reason why Chinese imports to the U.S. have actually shrunk over the last few years is because a lot of final assembly is being moved to countries like Vietnam, Thailand, Mexico. Blanket tariffs stop this from happening, at least in theory. And so that's a reasonable argument, but it could be risky. The problem, he argues, is that those final assembly jobs are the least desirable jobs in the value chain, at least for the American worker, assuming the Trump administration doesn't want

to import millions of workers. That seems kind of counter to the foundation of his candidacy. The United States still needs to find an alternative, trustworthy country for final assembly. This can be accomplished through selective tariffs, which is exactly what happened in the first Trump administration, and today it seems like that's maybe where we're going with these selective tariffs. Secondly, using trade flows to measure the health of an economic relationship with these countries, really any country, really, but particularly final assembly countries, is legitimately stupid.

And this is what you were talking about with like Switzerland, right? Yeah. It's like, well, Switzerland's another example. Really make a great sense. Yeah. But it's like, yes, we buy a lot of Swiss watches. Yes. But yes, they also buy a lot of digital services.

Yes, of course. Our movies and our Netflix's. is your point. Yeah. Makes a ton of sense. And those are, we're not getting factored, factored into the calculus.

And so simply looking at trade flows, where an imported iPhone is calculated as a trade deficit of several hundred dollars, completely obscures this reality. Go back to the iPhone. The value add on, the value add of final assembly is in the single digit dollar range. It's all the components that are expensive, the glass and the chip and stuff.

You put it together. That's a couple bucks. The value add of Apple software, marketing, distribution. is in the hundreds of dollars, and that's where they extract their actual profits from. And so, moreover, the criteria for Final Assembly country is that they have low wages, which by definition can't pay for an equivalent amount of U.S. goods to said iPhone. And so they're making the iPhone.

We're bringing it over here. It feels like we have a trade deficit of hundreds of dollars. But really, we only got $5 a value per iPhone out of this country. And of course, because we're paying them a dollar an hour, they're not going to be able to buy, you know, $200 worth of Netflix a month. It would be interesting for Apple to, do effectively a request for startups. And I know they highlight a lot of their top vendors and say,

hey, these are the companies that we're spending the most money with that do various things. But you have to imagine if Apple put out the challenge to bright, young, or mature technologists and said, hey, we need to make this button. The cost needs to be half a penny. And you need to be able to hit, you know. Well, that's interesting.

kind of like an Apple-driven warp speed where it's like if you can produce this we will buy it and then VCs can underwrite it and everything. That's kind of interesting. I like that. Yeah, that's really cool. I bet you, the problem with that is that if they open source their supply chain economics, that opens them up to

a bunch of different attacks from other countries and stuff, or companies. Let's continue with Ben Thompson. At the same time, the overall value of final assembly does exceed its economic value for the reasons noted above final assembly is gravity for those higher value components, and it's those components that are the biggest national security problem. This is where component tariffs might actually be a useful tool. The U.S. could use a scalpel

instead of a sledgehammer to incentivize buying components from trusted allies or from the U.S. itself or to build new capacity and trusted locations. So yeah, if the U.S. could sell the higher value components, that makes sense. Like, it's much easier to imagine, oh yeah, we have a, we have amazing, like even Intel reshoring, chip manufacturing, TSM is going to Arizona, right? Like, you can imagine that, oh yeah, iPhone lenses for the really crazy seven-layer pancake, wide-angle lens, like, yeah, there's some amazing company in like San Jose that's doing that, right? Yeah, and people don't realize. So when you look at the Apple supply chain problem and you say, okay, Apple might have to

invest or somebody would have to invest trillions of dollars to bring it to America, that looks insane, right? Because it's basically like saying, take all. all of Apple's profits for the last, you know, 10 years and don't distribute that out to shareholders who do buybacks or anything like that and just invest it in this sort of new ground-up supply chain. But then you look at how much money Foxcon makes a year and their revenue, which is in the hundreds of billions just on mobile devices, right? And so there is probably an economic equation where some combination of Apple,

Apple, you know, its own sort of off-balance sheet investment and other private capital that could, could over time, we could make it in America. Yeah. It's just not as easy as Trump asking nicely or slapping tariffs around

and expecting things to happen immediately. What a chaotic week. What an interesting week. I'm excited for our guests. We're going to be asking more folks about their tariff takes, how they're processing all the market turmoil. We have Tracy Allaway from Bloomberg, Oddlots coming on the show, which would be great. But you know what isn't tariffed?

Time. And what is time? Money. And how would you say both? I'd go to ramp.com, John. Why? Easy to use corporate cards, bill payments, accounting, and a whole lot more. I couldn't set it better myself.

Go to ramp.com. Sign up for ramp. Go to ramp. It really is. Now, there's never been a more important time to save time and money. Yeah. It's always been important, but now more than ever. Yeah, I mean, when these market shocks happen, like, you know, all the VCs get on their podium and say, hey, you know, here's my memo. There's economic turmoil. You need to, you know, buckle down. We don't know what's going to happen in the funding rounds and the funding markets. But never a bad time to save money and never

a bad time to understand what's going on in your business. So that's why you should sign up for ramp, get clarity into what's happening in your business on the expense side. And we have Paul from browser base coming in the studio, breaking down computer use the next generation of large language models and artificial intelligence. Very excited to talk to him. And he's here. He's here. He's ready. Welcome to the studio. How you doing? The basement. Hey guys. The base. What's up? What's up? Looking good. Came prepared in the, uh, looking sharp. You know, uh, do you wear that every day? You know, you got to dress up to impress. Yeah.

Dude, I love this, is this a green screen background, whatever? This is a lot. This is a live. No, kidding.

People are working. People are grinding. I like it. I love the whiteboard. I love the whiteboard action in the back. It's fantastic. Somebody's actively whiteboarding something. Some integrals.

Yeah. It's math. Yeah. Why, why do you got a human doing that? Can't you just wire up one of these computer use tools to do it for you? That's,

that's all in the cloud. It's all in the cloud. This is in real life. Yeah, yeah. You need the analog stuff every once a while. Hundreds of engineers running in the cloud right now. Fantastic. Yeah, those are just paid actors.

Yeah, paid actors. Anyway, can you introduce yourself, the company, kind of what you do for everyone? Yeah. Hey, everybody. I'm Paul, founder of Browser Base. We power web browsing capabilities for AI agents and AI apps. So we're kind of building like a web browser for AI. Basically, we think the future of software is software going to have to go out and do work on

your behalf. But a lot of the work that we do is in a web browser on a website. So we want AI to do work on our behalf. We're going to have to have a AI use a web browser and we provide that web browser. Now, we mostly sell the developers, people who are building these cutting edge AI features and applications, and they integrate our AI web browser into their applications to give them superpowers. What that might be is like going out to a thousand websites and finding the right screw for your procurement team, or maybe it's going out and booking demos to help figure out what your customers are doing or, you know,

trying to automate all the Td's work that people have to do every single day. We do that with BrowserBase. I want to talk about MCP APIs and kind of the future of how agents and LLMs will interface with the internet. There was a meme for a while that was just like the front end is the API, just get good at web scraping because the API might change, but the front end is going to stick around for much longer. And so if you can be really dynamic there. And I always wondered about, you know, our API is just kind of going to go away as as LLMs get better and agents get better at computer use. What's your take on where, how we will see companies make their content or their websites available to LLMs going forward? Yeah, we really believe that computers are going to be just as good at people at browsing the web.

And for a very long time, there's still going to be humans using the web doing the same task they do every single day. So why do we have to rebuild the internet for AI when AI can use the web the same way people do? So there's certainly going to still be APIs and MCP servers, especially for high volume stuff. You know, if you're booked on a flight, you probably should do that through the Delta MCP server, not through a website, because that's just not the efficient way to do it. But when we talk to companies that are not the cutting edge companies like our customers like perplexity, but more cutting edge companies that are old school, have been around for a long time, there's a lot of websites that aren't going to have MCP servers. The Nigerian immigration form won't have an MCP server for a long time. And AI needs to automate that just as much as to automate kind of the more high volume tasks. So we view the browser as kind of really the most primitive MCP server that can work on every single website without having to have, you know, first party integrations.

Can you talk about how you thought about the opportunity early on? Because I imagine you, you know, you've made a tremendous amount of progress, raised a bunch of money, working with some of the most, you know, important. companies in the space. But early on, I imagine some people would have said, hey, like browser automation software has existed before, like, we don't think the market's that big. And clearly you didn't agree with them. And I'd love to hear you kind of speak to, you know, why you understood the opportunity is so much bigger than people might have originally thought. Well, yeah, there's a lot there. I mean, frankly, I just love this browser automation stuff. If it wasn't, as popular as it is, I still would be doing it because I just love the stack.

I love the problem. It's really interesting to me. It touches on the programming I did when I was the developer starting out, which was, how can I automate something and help my life and make things easier for me? And that often was interacting with websites on my behalf. So there's a bit of luck there because I just love the space. Now, I'll reference one of our angel investors, Jeff Lawson, the founder of Twilio. When he was starting Twilio, people were saying, well, SMS is going to go away.

Like, why would you build a company around SMS? And his point was that it's a very long bridge. I think it's the same thing here with browser automation is that, sure, when we have Neurrilink and all of our brains are talking to each other, software is going to be a lot different. But I think we have a really long time until software, especially software on the web goes away. And taking that perspective where browser base is going to build for that short, medium-term future and really build great technology to help agents run and do tasks on the web, that felt

like an opportunity that was a bit contrarian. And, you know, when you're contrarian, you find alpha. and that's what we've done at browser base. And as you can see today, the public markets are reacting. You know, after our Q1 results, triple Q up 10%. I don't know what happened. I think they may have gotten wind of what's happening at browser base and have really corrected accordingly.

I love it. I love it. Can you talk about, you said you sell to developers, obviously, perplexity. It sounds like as a client and a very large company. Do you have kind of self-serve offering where someone can just kind of start import this in one line and start to get hack? And kind of how do you see the market developing from like prosumer, you know, just some no code developer is going to be using a browser base like product or you're going to be under the hood,

maybe to someone who's, you know, building a business on top of browser base. Yeah. For us, you know, you can get started self-serve. You can sign up as a free plan. You can upgrade accordingly. And then, you know, as you get to a certain volume, we want to give you pricing. That's right for your use case. So there is more of a contact sales option longer term.

But what we think about most is our business model. We're a consumption-based business model, which means that we only win if you build something that's successful. So our incentives are very much aligned with helping our customers actually build applications that use browsers a lot, that are used by lots of customers. And a lot of my job as founder and CEO is going out and helping our customers really think about how can they use AI in the best way to help impact their users. Because you can kind of map one-to-one the browser hours are using on browser base to the time that they're saving for people. and we get really excited seeing that number chart up every single month because that means there's

hundreds of thousands of hours that are being saved by people instead using browser base. How do you, was deep research the studio Ghibli moment for agents or is there one on the horizon in your view? It feels like, you know, we've talked about this on the show over the last year. There's been a lot of, you know, we were at YC Demo Day. There was a lot of like AI agent infrastructure companies. I don't remember getting pitched that many individual AI agents, but it does feel like as the underlying tech gets better and people figure out how to actually build quality agents,

that that will flip at some point. But I'm curious, like, you know, do you think that agents are even priced into the market yet? I imagine you're seeing a lot of stuff like, you know, in, you know, using browser base that like hasn't, isn't really in the public domain yet. Yeah, it's interesting because, I really like to think about the vastness of our customers.

Like, sure, we have cutting edge companies, but we also have a 55-year-old dairy trucking company in the middle of America. And they hadn't hired a single engineer in all 55 years, but then they hired one. And their first thing they got was browser-based to automate, hey, how do we know what the gas prices are along this route?

Previously, like an ops person calculating all the gas prices, and they're like, oh, maybe we can hire an engineer to make this easier with AI. So it's certainly, AI has escaped Silicon Valley. And every company in the world is thinking about how to use it. And thankfully, browser-based, since it's pretty easy to get integrated and get started with, we have a framework called Stagehand, which makes it easy to tell AI how to control a browser. Stage-end team behind me. Those guys, it's much easier on-ramp to use AI. So we really try and think

about, like, you don't have to know what the cutting-edge models are. You have to keep up with the research. If you're using browser-based, we try and bring it all to you. In terms of it being priced in, I think there's a lot of people who maybe moved a little too early to AI agents. I think the Klarna study, this story is a really good use case here where They went all in on AI agents. They threw away all the software. And then I think they had to walk that back a little bit. So it's still early days for agents.

And a lot of that's limited by great infrastructure. And we think that if we can build good infrastructure that works best with the models, it can really help ease adoption. How do you, everybody's been really worried about AI agents and their sort of potential to be used in nefarious ways. So like, you know, releasing agents across the web that are just like, you know, effectively spamming people. Is that, like, were you at all?

I'm sure you can see if somebody's using browser base in a nefarious way. You can kind of identify it quickly and eliminate access. But I feel like people have been just worried about this idea of AI spam, but it hasn't seemingly had, it isn't so prevalent yet that we're in like a crisis. Yeah. The only place that I've seen is LinkedIn, and we just disable LinkedIn on browser base. It's just not a business that we work with. And we think the LinkedIn, you know, everyone at my LinkedIn inbox is crazy. It's just something we don't want to contribute to.

For us, we really, we really want to think about, like, how can Browsbase be an arbiter of good bots long term? I think there's this cat and mouse game and anti-bot blocks, all bots, but there are good bots and bad bots. And we're in this really great position where we can actually be advocates for our customers that can talk about how so-and-so customer has 20,000 employees on Workday, and the Workday APIs aren't really cutting it for them. And this is why they're using BrowserBase to automate it and build.

that relationship. That's why in our last round, we brought on Octaventures as an investor, the founders of clerk, the founders of Stitch, the founders of WorkOS. These are people who are really thinking about authentication. And my view is that the antipot problem is probably solved at the authentication layer. Antibot is just proof of personhood, right? So if a agent can log in on your behalf, that's going to be really good to match their actions to the person that they're saying they're acting on behalf of and hopefully match the rate limits there accordingly. Can you talk a little bit about the Lama evals for Lama 4 I saw that I believe someone from your team posted that they had done some kind of I don't know I don't even know how you described it like private evals stuff that

you guys just look at directly and how do you build that stack up what are you actually testing for and then what are your vibes around Lama 4 yeah so what we did over the weekend of course whenever something comes out we want to move quick and try it out we're all engineers here I'm an engineer and I love to try and play with new models and with stage hands You can kind of imagine it like a BurrSEL, AISDK, just for building what's called a web agent or an agent that browse the web. So we can slot in any sort of model into that. And we have a standard eval set that we run stage and against. Common tasks on the web that we've kind of built up to evaluate different performance like websites with drop downs, website with date pickers, you know, the many different types of elements you see on the web.

We want to see how our automation framework can stack up against that. We spent a bunch of money this weekend evaluating every single model that we could get our hands on against that. Eval framework and we actually found that Gemini was one of the best performing models. I think it was Gemini 2O Flash and Lama 4 a little bit more disappointing. Now, Lama 4, we used it with an inference provider and we know the different inference providers can have different performance based on these different open source models. So I think it's still too early to call on Lama 4, but we're definitely excited about the stuff that Gemini is cooking up and they seem to have really figured out some of this interesting stuff

with long context models. Yeah, and also Lama 4, they haven't released the behemoth model like their biggest and best. So maybe that changes the conversation when that happens. And there was also a discussion about they might have used a different one on L.M. Arena is getting a little spicy on the timeline. What's your, what's your Paul Doom? What's your P-Doo? Pea-Doo.

And specifically, I'm curious how you reacted to AI 2027 because I just want to go out and say, like, if any of AI 2027 becomes true, I hope that you'll turn into a defense tech company. really quickly and you know help unleash an army of good browser base agents to protect fighting on our behalf yeah but i but i fight the good fight yeah exactly in terms of p doom by paul doom right now very low it still feels like there's a lot of you know capabilities they need to improve infrastructure needs to be built and everyone seems really willing to work together which is positive i think i see a lot of partnerships having in the ecosystem for us browser base will be a partnerships company.

We need to work with the cloud players of the world, but also the Open AIs, the labs. When computers came out, we were able to launch alongside Open AI and kind of get early access to that model and give them feedback. So it certainly seems like everyone is being collaborative to solve these problems.

I mean, we'll see what tariffs do to model prices. I don't know if that comes down one of these days, right? But in terms of what's going to happen in the future, it's still too early to really tell, but I'm feeling pretty confident. What? I was going to say, what are use cases that you want to see more of?

Maybe you see it happening on browser base today. Like the example of a dairy company, like trying to more strategically route their, basically like manage their logistics to drive down costs is cool and sort of random. But I'm curious if there's other areas where you think there should be more people building these sort of browser use type experiences.

Yeah. For us, we really look to like all these. these use cases that probably don't need to be standalone products on their own, but really help individual businesses. We get really excited about companies that are kind of building things in house. One insight that I've had is that as code creation has become easier, more and more companies are kind of opting to kind of semi-builded in house where they're pulling some primitives off the shelf,

like some infrastructure like browser base or maybe super base for the database, but then still building their own agent internally. And it's kind of interesting. It's like if you have all the primitives available, can you just stitch those together using cursor and actually build something? that's more bespoke to you. What we found from some customers is when they buy black box solutions,

they aren't able to really tune it to their specific use case. And agents still need a lot of tuning for each individual use case. On the wider side of use cases I want to see, I really love seeing stuff around like every CEO should be looking at what do they have an operations team doing? Is it going to an insurance website and doing a credential check on a provider

or insurance verification? Is it doing some interesting procurement task? Is it doing some manual research? And how can they automate that? There's a lot more tools out there than they were before, and it's easier to integrate than ever. Can you talk a little bit about the actual tech decisions you've made? I could imagine one version of computer use on the tech tree is like, take a screenshot, use a diffusion model to understand this.

We're seeing this with images in chat GPT. It's getting very good at recognizing text. It can recognize people within images. You could imagine taking a screenshot and just asking the vision model, where is the call to action? define that in pixel terms so I can click that button. At the same time, you can imagine just passing the entire view source, like the entire DOM to an LLM and just saying, hey, write some J-Kerey that clicks on the call to action

and make an educated guess based on that. You could imagine hybrid approach. What has been most successful? What are the paths that you are not looking at these days? Yeah, for our framework, which really kind of abstracts all of this, we use everything. And I think that's the important thing is it's not one. size fits off, it's just screenshots or just DOM or hybrid, you really need to kind of think about

what's the context size of the website. It's a very long, complex website with a lot of HTML. You probably want to go a vision approach. If it's craigslist.org, Dom is probably sufficient. So I think every single website has different configurations that work well for it. And with our products, we really try and help developers make those right choices or not have to even think about that and just give us all the models they have access to. We can, you know, route between that model based on the type of website that's important and help them build a reliable web automation. For us internally, we do really love the DOM-based approach or the HTML-based approach, just because it's frankly more cacheable, such that instead of having to send a

screenshot to an LLM every single time, if the website doesn't change, you could probably reuse the same button you used last time to perform a workflow. So that DOM-based approach seems to be like the more perform and cacheable longer term. It's also a little bit cheaper. But we'll see as computers models keep getting better, maybe there's going to be some model-level caching on screenshots where they can say this screenshot we've seen before, this is the prompt we've seen before we can say this is the same button. So as computers models get a little bit better, it might be on more equal footing with the DOM-based approach in terms of cost, but it's going to be up to the labs to really do some innovation there. What's the team's take on vibe

coding right now? Is it not a fit when you're needing to build reliable products that customers depend on for business processes or are you guys making it work internally? Yeah. So, I mean, the team doesn't vibe code very much on critical infrastructure, you know, that goes under a lot of review. But it's made shipping integrations with browser base and stagehand easier than ever. And we've been able to integrate with lane chain or llama index or crew AI and those kind of come out a lot faster. So this interconnected world that you're seeing with every tool integrating with every other tool, that's a lot easier. Vibes wise, you know, something happened one day where the whole team switched from cursor to windsurf overnight. I'm the only cursor user left. Maybe that

means I'm slow to adopt. But it seems like people are moving between these IDs pretty damn fast. and the next tool that comes out, maybe could, it's like the great flippinging, you know, between cursor to WimSurf. It just kind of happened at browser base. Yeah, it feels like there's this Cambrian explosion in like AI tooling. And there's a lot of businesses that have built pretty solid businesses. We've seen like the crazy charts and the revenue ramp. And in the past like cloud era, a lot of the companies actually went public, you know,

like Twilio and MongoDB, you know, are very point solution companies, in my opinion. but they both built fantastic businesses eventually. But you could imagine a future where there's more competition and you're building into adjacencies or there's mergers or acquisitions and you kind of get some sort of like new age roll up of all the different AWS style tools in this infrastructure. Like how do you see the market evolving? Because at the same time, I imagine the hypers are thinking about

could browser base be an option in AWS with the other, 25,000 tools that they have up there. But, but yeah, I mean, obviously, you're very partnerships driven right now. How does that evolve over the next couple of years? Yeah, you know, we are seeing hyperscale interest for sure. Amazon just launched Nova and the Nova SDK took a lot of inspiration from what we've done is stagehand, right? And we really appreciate that that's the DX that we're all settling on.

It's the right way to do things. Now, the model performance is a little bit subpar. And I think trying to build a model while also building a great framework is just a really impossible mission. For browser base, we think about how do we build best in class infrastructure and are able to go super deep on a single vertical in a way that a hyperscaler might not be able to do. If you've used Amazon RDS versus maybe a more focused database provider like Planet Scale or Superbase, I think you'll find that the product just, it's not as exciting for developers

to use. I think Stripe is a good example of a company that's gone very focused on something like payment infrastructure, but then layered on this product platform on top of that. When we look at the expansion opportunities for BrowserBase, I think it's a lot of interesting stuff. You know, think of every Chrome extension you have. You have your password manager, you have your payment information saved in there. of your browser history, which is like memory for an agent. So we can think about more areas within the browser to offer as agent primitives longer term. But we're really focused on just building

best and classic infrastructure that developers love, building a framework that really works well for everyone, and just continue to move up the stack and find things that we can do to help developers build browser automations easier than ever before. Can you talk a little bit about some of the optimization vectors that the various foundation model companies are kind of sprinting towards. We saw this with the Lama 4. They were claiming, hey, we got a 10 million token context window. I think it was 10 times bigger than what Google was touting a year ago or even a couple months ago. There's obviously the length of time a reasoning model can stay consistent. And that's like doubling every couple months now. There's different things about just maybe it's not

the highest IQ model, but it doesn't make stuff up because it's got a rag integration or something. and it's actually pulling real facts instead of just hallucinating constantly. And you can imagine that if I'm just thinking about like, what does a computer user need? Well, I don't want them to lie, but I also don't necessarily need like a chess grandmaster. So maybe I'm not optimizing for IQ. But where are you most optimistic about where the foundation model companies will go and what kind of problems or vectors or the shape of that progress looks like?

What does the shape of the progress need to look like for you? to really succeed. Yeah, for us, I really like this paradigm of splitting up reasoning models to other types of models. I think trying to make a generalistic model that's great at everything, it's going to be really, really hard. And you can fine-tune different types of models and different types of tasks, if it's code gen or reasoning or even UI automation, like a computer use model.

So more models means more choice for our customers. In the end, you know, our customers are trying to choose the best model for their task. And that varies because the internet is so big. You know, there's billions of websites and billions of choices. on what you can use or should or shouldn't use. For us, like, we do see the reasoning models being closer to the agent loop, whereas more like a 4-0 or a Gemini 2O Flash being more close to the tool calling makes a lot of sense. You want the expensive model making the decisions and the cheaper, faster model,

maybe making the individual tool calls. That's been a great paradigm split. And more of our customers than ever are actually using models from different providers. So it does seem like more choice means more innovation and more ways to kind of mix and match the best of every sort of e-val. Very interesting. I want to get your take on the latest from Microsoft today. They just, this just leaked out or something that Microsoft said it would no longer move forward with its plans to build data centers in Licking County.

The company had planned to invest a billion dollars initially towards three data center campuses in New Albany, Heath, and Hebron. Microsoft plans to ensure the land at two of the three sites will be available to be used for farming. And Nick on, on X, says, yep, it's a, over. So how are you feeling? I mean, obviously there's a lot of turmoil in the markets around tariffs, but I feel like the whole narrative of like maybe we're getting over our skis on CAPEX and hyper-scaling. Is all this just noise to you because you're just focused on product experience and you don't really need a 10x improvement in the foundation model performance

that might come from a bigger data center buildout? Or are you still like inference bound? And you're like, yeah, it would actually be great if they move forward with that. What's your take? Yeah, from what I've seen, the labs are still innovating. And I don't know if Microsoft is a lab that I really think is going to be an innovator as much, you know. So I don't think Open AI or Anthropic are holding back on investment. Now, does that mean they're signing massive data center contracts right now? I think people are kind of waiting to see what happens in the macro sense. For us, I'm very downstream of that, right?

And then, of course, we're, you know, a private company, venture backed. Things that happen in public markets tend to trickle down to private companies. So being aware of it, but, you know, with browser base, you know, with the traction momentum so far. We've had no shortage of inbound and it feels like there's a lot of room to run for us, so not really concerned. My last question, and you've covered some of it before, but can you talk about just general capability overhang?

There's this like, you know, with all the evals and the sort of pressure for the labs to constantly be number one or at least be, you know, at the top, it feels like that's almost like a distraction at times from just like delivering all the capability that is now possible. But I'm curious what your take is on that. Yeah, maybe answering this in another way and we can go deeper, but for BrowserBase to exist, there needs to be healthy competition at the model layer. And we see that models are more fungible than ever. People are switching between models all the time. And people don't want to switch your infrastructure. They want to have a piece of infrastructure that works. They can kind of integrate with a little more deeper. And if that means

plugging in different models, that's just going to help them long term. I think there's a lot of innovation that needs to happen at the model level, some stuff like multimodal tool calling being supported by all multiple providers and not just anthropic. This is like a lack of capability, but it seems like every time someone innovates, it does trickle down to the other labs. So it doesn't seem like there's going to be a shortage of choice from customers. And there's still a lot of innovation happening, especially in long context. We think that long context is going to do a lot for DOM-based web agents. And there's still a lack of true performance there. But we think with time, all this stuff does just get better, cheaper, faster, and it's inevitable.

I want to ask you about this other story that kind of broke recently that Open AI is considering acquiring a hardware device manufacturer that was started by Sam Altman and Johnny Ive, the ex-Apple designer. Potential designed includes a phone without a screen and an AI-enabled household devices. And I'm curious to know your take about generally we saw the first wave of this with like the Rabbit R1, the friend, the human, and some of those didn't go so well, some of them are plugging along, but I could imagine that maybe the Studio Ghibli moment or the Turing test moment is when, yeah, I don't need a screen because I trust that I'm not just using this pin or this device without a screen as a knowledge engine, but it's actually able to go use a web browser on the back end and just talk to me in conversational. I know that's a little like sci-fi and maybe like, I don't know, maybe it's

like three months out, who knows? But I want to know your take on kind of devices and how you could see browser-based plugging into all that ecosystem. Yeah, you know, for us, like consumer web automation isn't really a focus just because that I think that is one on the device level. And I think that Google, the Apple, I mean, Apple intelligence, not really something I use every single day. And oh, I hope it gets better, right? But you can imagine the amount of data they have access to, the integrations with your existing life. They're really well positioned to offer more consumer web automation. You can tell Siri, hey, go book that restaurant.

and it's going to have a lot more capabilities to do that, maybe even on your device, right? But for our customers, customers who are kind of building, like I said, these more traditional RPA or maybe they're using BPO or maybe they're a company that's building something more verticalized to go sell to someone who uses RPA or BPO. Those people are still going to need infrastructure the way that they, because they're building applications and that's who we focus on. I wish opening AI the best with that and I hope it works. I want more cool devices.

I wanted to grab it to work and humane to work. and I don't have a friend, Avi, hook me up. I'd love to get one, you know. I want all these things to work because I want this cool sci-fi future. So I try and stay super optimistic about that and hope it into existence. Yeah, it doesn't feel like it's super in Apple's DNA. Like if they, even if they just had an Apple intelligence query, oh, like, summarize the news for me, you know that they're going to do a bunch of partnerships and then they're going to pull that in from an API

and it's going to be as deterministic as possible. I feel like Apple does not have probabilistic computing in their DNA. And I'm sure you have to deal with a lot of a lot more rough edges. Are you seeing, the thing that we're seeing with like agents, and we heard about a little bit of this with like the dust up with like AISDRs is just that the like a hallucination rate of 1% is unacceptable. How are you thinking about like keeping a human in the loop? And just kind of like even how do you message to a client the reliability of your

model. Obviously, you have benchmarks for all the LLMs that you're using, but what kind of claims are you making? Because I think we all understand that like, hey, this stuff's new. It's moving fast. It's improving. Like, you got to go, you know, fast and just, you know, test this model and not put it in like a life critical situation yet. And you can still get a lot of value out of it. But how are you pitching browser base to folks? Yeah, you short term, you are going to need some human supervision at some point, right? And the way that we allow this with browser base is we have this thing called the live view where you can actually embed an eye frame that shows the browser working. And with the browser working, a human can take over if the agent gets stuck.

And you can imagine maybe the future that's like very immediate is not a browser doing all your work for you, but maybe more of like a Devon experience where the browser is doing 90% of the work for you and maybe you have to come and do the last 10% once in a while. And when we talk about with our customers, like how do we build a human into the loop into the designs that you currently have in your application to make it just super easy to have that escape hatch into the human operator if something isn't working. Yeah, yeah, that makes no sense. Well, thanks so much for stopping by. This is awesome, Paul. This is great. Thanks, guys. Congrats to the whole team. We'd love to have you back on next time there's news.

Yeah, this would be great. Appreciate it, guys. We'll talk to soon. Bye. Next up, we have Tracy Allaway coming in to the studio. But first, let me tell you about Bezell. Shop over 24,500 luxury watches, fully authenticated in-house by Bezell's team of experts. The market's up, baby. Take, what do they call it? Take some gains. or whatever, realize some gains, right? And convert it into a watch. If you bought yesterday, you're doing pretty well right now. Yeah, if you bought the dip and you and you're up, you know, treat yourself.

You've been working hard. You've been working hard. You deserve it. Yeah. Go to Bezzle. Download the app as well. And we have Tracy in the studio, I believe. Not yet.

She's coming in just a minute. She's been covering the chaos in the markets very closely. Odd Lots has been on absolute tear. They had Ryan Peterson on. They've had a bunch of people dig into reactions to the tariffs. She also just put up everything about the basis trade, which I want to dig into with her. She writes, it's worth taking a detour to explain just what the basis trade is and why it became so popular. To do that, we need to go back even further into the dark days of 2020, all the way back to the aftermath of the 2008 financial crisis.

Scarred by the near collapse of the financial system, policymakers moved to makes bank safer. And here she is. She's in the studio. Welcome to the show, Tracy. Thank you so much for having me. It's been a wild week. It's hard to imagine. It's just been seven days since Liberation Day. Yeah, it's crazy. And I was messaging you about this. I really appreciate you coming on in the midst of the chaos because I think it makes for a better conversation. But also, when the markets are crazy, is your job crazier? Are you doing more episodes, more research, more blog posting? I mean, I'm reading. Or in some ways, the job. easier because there's just so much attention. Yeah, yeah, you don't have to come up with a wild story. Hey, let me take you on this really obscure deep dive that you've never heard about. What's it been like on the workfront?

Yeah, we definitely don't have to scramble for content at the moment. It's been a fire hose of content. We've been rushing out episodes. The great thing about odd lots is, you know, as you mentioned, we span this wide range of finance, markets, and economic subjects. We did a lot of supply chain and trade episodes back in the 2020 pandemic when there were all these disruptions. Now we can just tap our previous guests, you know, all the logistics experts, the truck

drivers, shipping companies, small and big companies, and ask them like, what's going on and what impact is this actually going to have on your business? Yeah. I want to start by asking you to explain the basis trade to me, but like I'm a VC. So similar to explaining, you know, maybe like a child. Like I'm five years old. But to a VC that, you know, considers themselves a macro expert, but maybe isn't. Yeah.

What will this look like in the form of a X thread in three months or a memo that's hastily written to every entrepreneur in the portfolio in two weeks from now? Bring it down for this. Oh, man. It's going to be hard putting it in language for a VC. What I would say most simply, basically, the basis trade is arbitraging the difference between a cash treasury and a, futures contract on that treasury. And historically, this has been a really safe trade. The spread

or the difference between them has been pretty range bound, very, very tiny. Because it's been tiny, investors like hedge funds and active funds, what they do is they go out in the market in something called the repo market, the overnight funding markets, wholesale markets, whatever you want to call it. And they borrow from banks, from broker dealers. And this, leverage allows them to amplify the returns they're getting from this arbitrage between the cash and the futures. Now, the problem, and we've seen this a couple times now, is when the entire financial system starts derisking all at once, suddenly investors can't really roll over these trades. They can't necessarily sell the cash treasury bond in order to close out the trade. Because

the broker dealers, they do not have the space on their balance sheets to actually absorb those extra bonds. That's the big difference we saw it in the pandemic, and we're seeing it now in 2025. The thing to remember is really, you know, the financial system isn't built to handle like a 10% decline in the S&P 500 and a simultaneous surge in bond yields. It just isn't. There are supposed to be hedges that banks can tap to manage their risk, their capital. Instead, they're derisking all at once, and that has consequences. So who's hurting the most? I've been joking that this is a bull market for short sellers. It's a golden age in the VIX. But with regard specifically to the basis trade, is this putting more pressure on banks, hedge funds? Will this actually affect

the VCs that we were joking about? Or can they just kind of ride it out? because they have LP agreements that date out like 12 years. Yeah, definitely a good question. Who's hurting most? I mean, obviously hedge funds that had the basis trade on. Active fund managers, by the way, are really big players in all of this. And we've heard anecdotally in the markets that they've been selling quite a lot, too. Banks probably are not having a fun time at the moment.

But on the topic of VCs, I mean, I think we have to step back a little bit from the basis trade and talk about just those surging bond yields in general. So, you know, bonds are supposed to be boring. They're not supposed to be moving around that much. They're not supposed to be talked about as much as they are in general news over the past couple of days. And the reason is bonds are the benchmark borrowing cost against which all other loans are basically judged and measured, you know, refinancing for mortgages,

refinancing for corporates and companies. And this is where it comes in for VCs, right? Over the past few years, VCs have been showered in money. I know there have been breaks in that trend, but in general, showered with money. Cost of financing has been going up. That would seem to be an issue, at least for a lot of VCs. And then the one other thing I would add here is uncertainty in the market doesn't look like it's going to go away. So yes, we had the pause on tariffs just announced today.

We still don't know what's going to happen with China and the U.S. Trump has basically destabilized every form of capital out there. Stocks, bonds, domestic, international. It's not clear whether or not he's going to be able to put the tariff threat toothpaste back in the tube now. So I think that uncertainty is going to stick around. And what that means is less capital. willing and available potentially to actually fund a lot of risky activities like BC, like tech. I have this narrative and I want you to tell me if it's cope or not.

Somebody was, I was talking to a friend and they were saying like, this feels as bad as the COVID drawdown or the SVB crisis and the interest rate hike that caused a lot of turmoil in markets. And I was saying like, yes, the magnitude of the move is significant in the economic indicators are significant, but this is fundamentally different, potentially, because that toothpaste can kind of go back in the tube because it's within the president's, like, remit to just say, hey, everything is going back to exactly the day before Liberation Day. That was a weird, you know, fever dream. We're back to what it was before, and markets might respond to that, whereas during, in 2020,

no one could ever say, oh, actually, like, COVID cases are non-existent now. It was not within the purview of the president. Is that a ridiculous narrative or is there something there? I mean, I think some investors would probably say in certain ways it's scarier right now. And I think you need to remember, you know, the experience of Monday. So we have one person, the president, who's effectively controlling this entire narrative, this entire story. As you mentioned, at any one time, he could have issued a statement announcing a story. softening in the position or maybe just saying something other than be cool to markets,

something comforting and realistic for them. He chose not to do that. And in fact, whenever there seemed to be a positive headline on the horizon, whenever people seem to be talking about, like, maybe things are going to start to calm down, the administration really seemed to rush out to bat those away. And the big example was we saw that mistaken headline on Monday about. a potential pause and the White House was out, you know. The other Bloomberg.

Yeah. That's right. From Mr. Bloomberg. They were out within minutes to slap that down. And this is the difference, right? In previous crises, 2008 being a really good example of this, we knew that policymakers were basically all pulling in the same direction. They were trying to rescue the financial system.

And as part of that, they were probably wanted. asset prices to go up. I don't think that's been certain at all over the past seven days. Yeah. Three. Yeah, what, how do you rate the admin spin on the announcement today? Like, you know, you had said earlier that they just, they blinked, right? A lot of people, you know, Trump supporters historically have just said like, oh, it's 70 chess. like this was the plan all along, right? And so your position generally was like, no, he blinked, you know, the tenure was like ripping in the wrong direction and like they basically needed to do something.

Is that, is that correct? I think that's right. The thing to remember here is, okay, the great thing about 4D chess, 14D chess, whatever. We're so past 3D chess, which I think is the original metaphor. It's like those Gillette razors, right? We just keep adding blades. I saw someone posted a picture of one-dimensional chess. It's just one line.

I thought that was pretty funny. Right. Okay. So when you have this 14-dimensional chess or whatever, you have a great tool to basically spin whatever happens the way you want it. And, you know, I think it's very clear that Trump supporters are seeing this in a different way and Trump critics are seeing it in a different way. I would say the one thing to look at,

is the administration's own scorecard. They've been pretty explicit that part of what they wanted to do on the U.S. economy was to bring rates down, bring bond yields down. They want to make it cheaper for people to get mortgages. They want to make it easier for companies to refinance their debt. They want that booming market in the U.S. a booming economy, all that manufacturing to be built, which necessitates quite a lot of capital and that has to be secured and financed as well. And instead we saw bond yields ripping, right? Like touching 4.5% this morning. So I think by that measure, by the administration's own scorecard, this has been a miss. Are there any other levers that the administration could potentially pull to bring down bond yields? What do you think is at the top of their tool chest right now?

Yeah, I mean, the 90-day pause alone is having a pretty big effect. And this has been the story of certainly today, probably the past three days, is the whiplash in markets. So, you know, stocks plunge, stocks rise. I think the last time I looked at the S&P 500, it was up like 8 or 9%. You have to keep your eye on it at all times on this day because it moves around so much. Same thing for bond yield. So after the announcement, We saw the 10-year, I think it went down to like 4.36%, something like that. That's a pretty big drop. And then just to give you an idea of what the mood has been like on Wall Street and how whiplashy, everything has been, Goldman Sachs actually put out a note this morning saying that their baseline forecast for the U.S. economy was now a recession because of tariffs. About an hour later, we had the tariff pause announcement. and they had to send out another note saying that they were rescinding their forecast and no U.S.

recession was on the table. What percentage of True Socials users do you think are finance bros, like trying not to miss the next trade? Like I have to imagine there has to be some edge in being, you know, in the first 100 people to see one of these posts. That was a great time to buy. Is there, is there, do you think there's high frequency truthing where, you know, people are trying to get near the, basically get near. I'm sure the feet's going in somewhere. But yeah, how do you,

what's your, I mean, I don't, I don't even know. I was going to, I was going to ask like, we don't even need to go there. It's going to get too political. What do you, what do you got, John? I mean, I guess I want to know, I was kicking around this idea with Jordi earlier on the show that there are a lot of ways to evaluate these new policies and new, regimes and there's been a lot of discussion of like this isn't just a slight change in trade policy this is like a complete flipping of the board a complete reevaluation and it seems like the most cautiously optimistic folks are like maybe this is short-term pain for long-term gain but there's been a little bit of squirminess amongst supporters to say oh well I was joking

earlier that you know well you know the 10 year is yielding more so it's the best it's a better time than ever to give your money to America and you'll earn more money on that money. And so maybe that's good for that type of person. And you can kind of spin any of these economic indicators in a positive sense if you try hard enough. But the measure that I use is one that I go back to the Trump won presidency and I look at the original tariffs on China and those were not rolled back by the Biden administration. And so it's what I'm calling like eventually by bipartisan. And so I'm wondering if it's like, I don't know if I can really withhold judgment for, I don't know, it might be eight years or four years or how long it's going to take. But if this policy,

if we look back on it and we say, okay, yes, like it stuck around. It eventually became bipartisan. Is that a win? Or do we need to just look at it through an economic lens in the short, medium, and long term? I mean, that's a really good question. I don't know if you watched the, the Trump press conference that was just on a few minutes ago. but he was talking about how Biden left the U.S. economy in a terrible position and wasn't able to strike good deals with China. That, I mean, I would say the Biden administration kept a lot of the restrictions on strategic exports to China over the past four years. And in some ways, actually went harder on China technology as well. So I just don't know how a bipartisan deal would actually be interpreted.

and viewed by not just politicians, but the general public. It's really hard to tell. Everyone seems to be on their own little plane of reality at the moment, so who knows? Who are you tracking? I mean, you mentioned that you went through the logistics and the shipping folks

and the ones that are most impacted. Like they have iPhones on planes right now. That's the most immediate impact. What do you think the second and third order industries that are most important to track in order to understand the impact of the tariffs they evolve. Yeah, I mean, oil is a really big one. And in fact, we had a really interesting survey from the Dallas Fed. I think it was last week or two weeks. I can't remember because

so much is happening. But they're basically in charge of the oil patch, right? They're down in Texas monitoring what's going on with energy businesses. And they put out this survey where they basically go to a bunch of oil companies, you know, drillers, suppliers, and they ask them, hey, what's going on? How do you feel about things at the moment? And the replies are all anecdotal, but, you know, the respondents, they talk about how they feel and they put like little numbers on it. They grade the vibes, as you might put it. But they also get to write written comments. And again, they're anonymous. But if you look at what was in the survey one or two weeks ago, those written comments were dire. I mean, people were talking about how the threat of tariffs, and again, this was before the tariffs were actually unveiled, how bad the threat of tariffs actually was for their business.

And I remember there was one quote in there. It was a supplier for energy companies saying that he had gotten a call from a customer in Canada asking them if they could move production to Canada because they were worried about the tariffs. that is the opposite of the, you know, presumably intended effect of all of this. Yeah, I saw actually Mr. Beast, of all people, commenting on the tariffs. He said, ironically, because of all the new tariffs, it is now way cheaper to make our chocolate bars that we sell globally, not in America, because other countries don't have a 20% tariff on our cogs, which I never thought I'd see Mr. Beast. No. He used the word cogs, but he's in the business now.

You know things are wild when Mr. Beast is making coherent, you know, tariff commentary. Yeah, no, and it makes sense. Like, he does shell globally. He has a massive global audience and he makes everything in America now and then he sells it all over the world. But it makes sense that he would take some other stuff offshore. Where do you look for signal, right? You obviously have your Bloomberg terminal. I feel like Joe shares more screenshots of that than you do probably.

But where do you look for signal in a world where everybody is conflicted in a different way, right? Some people are, you know, some of the loudest people of the last week are fund managers who have big positions on the line. And everybody's got some conflicts, but I'm curious how you try to sort of like see through all the noise. Both Joe and I are glued to the Bloomberg terminals and Twitter X interfaces at all times. One of the things I've kind of enjoyed doing over the past week is just basically looking at what the hosts of the all-in podcast. are saying online and then assuming that the exact opposite is going to happen. So, you know, we had David Sacks, for instance, talk about like, oh, the crash is over. Then we saw stocks plunge again.

We saw Schmoth. He was very much in favor of the tariffs. He was kind of cheering them on. And he was also criticizing stock investors who were, you know, complaining about their losses. I think he had a David Lachapel quote basically saying to, you know, shut up about those losses. And then at the same time, he starts talking about how he's buying credit risk, credit risk insurance through CDS. So effectively betting against corporate America, at the same time, he's talking about, like, how good these tariffs are going to be.

Yeah. How do you think about reading into the insider commentary that's happening? There's, there is that take that it's like, oh, like, they're wrong and you do the opposite. But at the same time, like proximity to power is a valuable source of information, that you have to imagine that there's real information that's being disseminated, even if it's just like, oh, this is the vibe and I'm passing that along. How do you balance those two things? Yeah, I think you're absolutely right. Like VCs are very good at interpreting the vibes.

And in fact, I remember we had Jason Calacanis on the show a few years ago. And one of the important things we learned from him is that the emphasis on the vibe shift. So, you know, back in 2020, a lot of technology companies made money hand over fist, but a lot of them didn't, right? And the criticism was if you cannot make money in this extraordinary time period when rates are really low and people are scrambling for all these different tech services because they're stuck at home, then there's a real problem with the business model. that was like that was one of the narratives but the point jason made was that some of this made sense because investors at that time they were not demanding that companies actually make money right

they were very satisfied if companies were just spending to grow their market share so i think that's really interesting and you know something to watch like what are investors actually going to start asking for here um sorry No, I had a, I'm curious, so we spent the beginning of this show talking about Apple specifically in the position that, you know, Apple basically has like a China problem and that like, you know, if your supply chain is dependent on China and China invades Taiwan at some point, like you're probably not going to get, certainly not get as many iPhones or components out of there. But then they also have a Trump problem and that they're just sort of like probably also internally refreshing truth social, you know, wondering what what Trump's going to do to their. business next. But Bill Akman had a post. This was right around when we started the call. He said, time is not China's friend. Every U.S. company that sources products in China is in the process of finding alternative suppliers. Supply chains are time consuming can be expensive and challenging to move,

but once they're moved, they are sticky TikTok. I look at this and I'm like, if we have a three-month pause on tariffs and, you know, the Chinese tariffs are still happening, like, sure, you know, it's hard for me to see, you know, for these big multinational firms like Apple or Nike, it's not like, yes, they're starting to make moves, but I'm not sure that, of course, time isn't their friend, but I don't know. I'm not sure I'd sort of broadly agree with this take yet. I'm curious how, how you think Apple should just be like responding to this. in general because it feels like it's going to be this sort of like dark cloud, you know, over the sort of share price for basically potentially a decade, right?

The sort of big China problem. Yeah. So a couple things on the China problem. So number one, the 90-day pause on tariffs on pretty much every country except China. Yep. opens up a pretty big window for companies to actually start arbitraging, you know, manufacturing costs between China. and the rest of the world.

We saw that in the first round of Trump tariffs back in 2018. A lot of Chinese production just moved across the border to Vietnam or it moved to Mexico. And effectively, you know, these were Chinese goods that were just being shipped somewhere else before they were shipped into America in order to avoid the tariffs. That's a real possibility now, especially if Trump sticks with those higher rates on tariffs, the ones he threatened earlier today. And then the other thing I would say on China, you know, the thing to remember is China is in a really interesting place right now. And obviously so is the U.S.

The Chinese economy has been slowing. And as part of an effort to reverse that, policymakers are really trying to revamp the whole structure of the system and increase consumption domestically. They want people within China to be buying more goods. At the same time, the U.S. seems to not want people to buy a lot of goods, or at least not foreign goods. And we're all about manufacturing. The roles have reversed, right? The U.S. wants to be a manufacturing powerhouse and China wants to be a consumption powerhouse. It's very weird in many ways.

But the big question is going to be, like, how successful is China in transforming its economy? because if it manages to do that, it never really has before, but if it manages to do that this time, that could be a pretty decent buffer for some of the economic impact. The grass is always greener on the other side, I guess. I want to talk about the penguins. You know, I saw that there are tariffs on the penguin island. Everyone was laughing at it.

But it seems like, you know, entrepreneurs are so enterprising that if I needed to do final assembly on something, some penguin inhabited island to avoid a 200% tariff on my Chinese good. Like, there's an economic equation where I would actually do that. Was it that crazy? Or do you think there's some theory to the penguin island getting tariffed? You're going to ask the penguins to put together your iPhones? I mean, probably, like, bring in people and set up a basic assembly.

I mean, it has a high cost because you've got to get there and get back. But at a certain point, it maybe makes sense. I don't know. Is it completely crazy? I mean, look, I think moving production around is definitely a possibility. Are we going to move it to tiny islands? Somehow I doubt it. And this kind of like, this opens up the question about why the U.S. is doing this in the first place. So, for instance, one of the tariffs that Trump unveiled last week was, I think it was like a 30% reciprocal tariff on the island of Nauru.

Like this is a tiny island. It primarily exports like pig meat and sausages to the U.S., like a million dollars of pig meat a year. So what exactly do we want to get from? And, you know, a place like Nauru, I don't think they're going to be buying Ford cars when they have like basically 12 miles worth of road. Yeah.

I want to talk about TikTok a little bit. It's been odd to me that the progress on any. Any news around TikTok has been so slow, and yet the tariffs have been so fast and aggressive. Is there some underlying thesis there? Is TikTok one of the chips in a larger discussion? Or do you think it's just like, it's just low priority relative to everything else? And I really don't know. It's very hard for me to tell what the administration is prioritizing at the moment.

And I got to say, you know, on the same day we saw Trump make this huge. announcement, Howard Lutnik said it was one of the most important truth social posts ever written. The same time he announced the 90-day pause, he also signed an executive order to increase water pressure in showers. Oh, yeah. Like, this actually happened. You know, he signed the order. There are stories out there where he's saying, no longer will American showers be weak with low water pressure. I mean, I don't know. With everything going on in trade and I might not take the time to fight against low water pressure, but, you know, the president is idiosyncratic in that way. He loves a good headline. He loves starting a new cycle. I think if it doesn't happen in a single day, it's a failure.

He's like trying to distract the panachans by giving them, you know, more water pressure. That's his strategy, maybe. Yeah, yeah. I mean, so, I mean, you've obviously been following this very closely. We'll let you go in like two minutes. but just general predictions for where this goes or how people should be thinking about this more holistically. Because if this is what it's going to be like for the next four years, it's going to be full employment for us, but a lot of chaos for everyone else that's maybe listening. Where do you think this goes? And what are your big takeaways from the last week?

Yeah, content for us, but bad news for a lot of other people for sure. I mean, I think it goes back to that uncertainty element. So the first thing you learn in financial markets is investors hate uncertainty. What we've seen over the past week has been in many ways unprecedented. Like a single man, the president, controlling this entire narrative around trade. We've seen fake headlines that have had a really big impact on markets. The reason they're able to have such a big impact on markets is because investors are hanging on every single word. from the president. And so if they think the president has said, oh, there's a 90-day pause,

they react to it, right? That is really weird where we have this like single source of information that the market is focused on. And that's not going away. Like the threat of the tariff, as I mentioned, like the threat, the tariff threat toothpaste, not going back in the tube. And I think even if we see countries really rush to strike some trade deals, which they might actually do, the threat of tariffs is going to be hanging around in the background for the next four years. People are going to be wondering about what exactly America is trying to do here. It seems very clear that Trump thinks, you know, America's special status in the financial system, the dollar's status as a reserve currency is a burden, rather than. than exorbitant privilege. A lot of people would say America benefits from this. Trump doesn't seem to see it that way. I doubt he's going to change that particular worldview over the next four

years. But, you know, maybe he starts listening to some advisors and he tones things down a bit. But I really think the uncertainty is here to stay. For sure. Well, let's hope we get some certainty. prediction more uncertainty I think that's it we can lean on that we can lean on that at least that is certain yeah well thanks so much for joining us this is a really fun conversation thank you it was fun

hopping on have a great good luck with everything we'll be following along we'll talk to you later bye and next up we have base power coming into the studio we got Justin from base power announcing a massive round get the size gone ready I had no idea how big this round was he told me he was announcing like a studio

and I assume, oh, Series B, 20 million, 30 million. It's 200 million. It's 200 million. He's going to break it down for us explaining what they're going to do. Let's read through their announcement while we wait for Justin to join. He says, we're excited to announce that base power has raised $200 million in Series B funding, co-led by Addition and Dreson, Lightspeed Valor, with support from Thrive Capital, Altimiter, Trust Ventures, and Terrain Capital.

additions, Lee Fixel joins the board alongside Antonio Groszis of Valor Equity Partners. What a stacked board and we'll have to ask Justin about it. He's here in the studio. Welcome to the show. Justin, how you doing? Congratulations. What's going on? Absolutely phenomenal Series B announcement.

How are you doing today? Can you hear us? He's locked in. He's locked in. He's building. He's putting the 200 million to work already. How you doing? Nothing.

I'll keep reading. Power demand is soaring and the grid must evolve to meet the challenge. We're accelerating an energy abundant future through distributed battery storage and investing in American manufacturing capabilities needed to make it real. Another company that's focused on American manufacturing, we've talked to a few of them, all major beneficiaries of the tariff chaos to some degree, although I'm sure that there's deeper supply chain stuff that we'll get into and try and understand where all that goes. in under a year since launching base has become the fastest growing,

one of the fastest growing battery storage developers in the U.S. More importantly, we've assembled a talent-dense team of engineers and operators all focused on modernizing the grid to make more power, more reliable, and affordable. And let's hear from Justin, I believe he's in the studio. How are you doing, Justin? Good. Good. Thanks for having me. Really appreciate it, guys.

Yeah. No, it's great to have you on. Big day for you and the whole team. Congratulations. We've been following your journey for a while now. and seems like the momentum is just building. Yeah. Can you give us like a brief introduction on the company?

I actually don't know the prehistory. I'd love to know kind of how you started the company, how you got to this moment. Seems like a quick ramp to a $200 million fundraise. Some stuff must be working really well. So break it down. Certainly, yeah. So I guess started the company about two years ago,

launched the product just a little under a year ago. Now, let me talk. Tell you what we do. So we are developing distributed energy storage for the grid with the ultimate mission to fix the grid in the U.S. I think if you look at the sort of modern energy industry and power companies there within, you'll see that there's a lot of money and smart people

and technology going into making more electricity generation. You guys report on in a lot, SMRs and solar and wind and oil and gas and such. And the same thing on the consumption side, more EVs, more heat pumps, and better consumption and cleaner consumption all around. But the grid is the thing that connects those two. And that has been sort of woefully under-invested in from a technology and operation standpoint. And so that's what we're really here to do is to ultimately fix the grid. Where we're starting today, or about a year ago with our first product, is distributed energy storage. So what that means is we install batteries on homes that we own and we operate and we

used to support the power grid. We're based here in Austin, Texas, and we have operations in Austin, Houston, and Dallas, and San Antonio, the kind of the Texas triangle. And that's the business today. Today we're announcing the Series B fundraised, as you mentioned, and using that to sort of fuel the next stage of growth in and out of Texas. Can you talk to me a little bit about what this means for the grid long term? Is this something where it reduces the variable load on the grid, and we can train more AI models in the data center or something? Like, how does this play out? Like, like, how bad are the problems? Are we just, are we fighting like the basic fires or are we dreaming of like a utopia here? Yeah. So I'd say we're, we're still in the, uh, from the grid writ large,

we're still in the fight, fight the basic fire. So so here's why, here's why batteries and in particular distributed batteries are, are good for the grid and, um, help add capacity. If you look at any sort of average wire going through the grid, whether it's on the transmission side, sort of think the stick-built steel structures on the side of the highway or the distribution grid, think the wooden poles in your neighborhood, any one of those lines is heavily underutilized with respect to its capacity. So let's say that a, you know, a line can carry 100 units of energy in any given moment, units of power. On average, that line is used on the distribution side, 20 or 30, with 20 or 30 units of energy.

So it's heavily underutilized. But the problem is that certain times of the year, think August 15th at 6 p.m., when everybody came home and turned on the air conditioner and plugged in their AV and turned on their oven, that line is at 100%. And so the grid has to be built for the peak load. It's not built for the average load.

It's built for the peak load. And so what distributed batteries allow you to do is reduce those peaks in specific areas. You can choose where those areas are. Our software does that. and therefore utilize the existing grid infrastructure for far more load. So that's AI data centers, as you said, that's more EVs, that's more electrification of heavy industry and such.

Can you talk about the decision to start in Texas? I have some ideas around it, and then I want to ask you about what's going on with the California utility providers. Apparently, I live in Malibu, and apparently, like, our local utility provider is in like an adversarial relationship with like the city government. They're basically just like fighting all the time. And so what that means they just turn off the power if there's any any ever any issues. But maybe let's start why you know with kind of why you guys got started in Texas and then where you're thinking of expanding to and then and then maybe and then really kind of like

that dynamic between cities, utilities and consumers. Certainly. So the reason we started in Texas was was pretty pretty much the obvious place to build to start building. a business like this, so there's a few reasons. One is, folks might know this, Texas is actually its own grid. So there are three grids in the U.S. There's West, there's East, and then there's Texas. Texas is basically an island from a grid standpoint. And so what that simply means is you can't borrow from your neighbors when you need more and you can't share with your neighbors when you have too much. And so that leads to a lot of volatility on the grid where you have sort of supply demand crunches, for lack of better term. Additionally, there's a ton of renewables in the grid in Texas.

a little bit perhaps counterintuitive, but there's more solar and wind on the grid in Texas than in the grid in California or anywhere else in the US. And so that also drives the need to store energy when the sun's not shining or the wind's not blowing. Furthermore, in Texas, there's a sort of regulatory aspect. And so our first go to market motion is what's in called the deregulated portion of the grid.

All that means, by the way, there's a ton of regulation. This does not mean it's the Wild West. what it means is that you can sell power to people. So if you're a homeowner in Houston or Dallas or North Austin or other parts of the state, you not only can, but you have to choose who you buy your power from. So if you're in Malibu, you're probably, your utility provider is probably LADWP or maybe SoCal Edison. And if you want electricity at your house, you got one option, only one game in town. Here in Texas, companies like us can start and become a utility provider.

And what that means is that we buy electricity from the generators. We pay the poles and wires companies to get it to the house, and then we sell it to the house of retail, and that allows us to monetize the value of the batteries behind the meter at the customer's home. So again, we own and operate the batteries as opposed to sell them outright to customers. And so what that means is that customers don't have to shell out tens of thousands of dollars to go buy a battery like they would if they went and bought a competitive product or they bought a generator. And so that's the other sort of fundamental reason why Texas. Now, you also asked about cities and utilities and such. We can spend hours on this topic, but very simply, there are a handful of some utilities in the country like LADWP, which I think is your utility, is actually owned by the government, by the city of Los Angeles. It is a government-run utility.

Funnily enough, actually here in Austin, Austin Energy is the utility that's owned by the city of Austin. In other parts of the country, like in Orange County, where I used to live in Southern. in California, that's a private company. That's a company called SoCal. A lot of us in, they're publicly traded. And so you have this weird dynamic between cities and utilities that can result in frictions around technical standards and permitting and all this and shutting off power when there's too much wind and all this other stuff.

And it's, I think the thing that you, that you guys, maybe your listeners for this in Southern California is different in the Detroit area where I grew up, it's different. and Florida, et cetera, it's kind of a very state-by-state thing. And the state governments typically have a lot of authority and control over how the energy markets are run and how the utilities are regulated. How are you guys reacting to the tariffs? There's a lot of, I mean, the, the only thing you can lean on right now is uncertainty. We don't really know what's going on.

I imagine there's businesses in the energy space and solar that are, you know, specifically like low margin completely dependent on on china and maybe aren't even viable at this point base powers like you know sort of got i think a more um sophisticated model but i'm curious what your guys is reaction how you're thinking about it and then kind of the broader industry how you think people are reacting to these changes yeah certainly so you know as part of our series b announcement one of the one of the big things that comes with that is us building a factory here here in Austin. And so that very much puts the supply chain in the manufacturing in our hands.

We already do some assembly. This will further that and will really mean that we assemble the whole unit, both the battery itself and all of the power electronics that are built on top of it. Today, the tariffs are certainly uncertain, as you mentioned. And the battery cells, like the individual, you know, things that modules that sit inside of the battery, Those are typically made in China, and we're working aggressively to bring that supply chain here to the U.S., and we're very close to doing that. But do the tariffs affect the industry, certainly?

A lot of energy products, even in oil and gas, come from manufactured goods in China and around the world. Yeah, what was your take on the Skydeo news that their battery supplier was sanctioned or something, and they kind of lost that aspect of their supply chain seemed like a very rough go. Now you focused on the consumer markets, so probably a little bit less, but even Skydeo, I don't know that they have a big DoD business. And so it was a weird shock to the system. Yeah, certainly. I don't profess to have a ton of insight into them.

Sure. In particular, having spent a lot of time at Ander, although I can't say there are a number of, you know, sort of commoditized products, batteries, one or one of them. that the supply chain is primarily in Asia or in China. And us and a lot of others are working quite aggressively to bring that here to the U.S. or at a minimum to more friendly, friendly nations. So, yeah, the batteries are, go ahead, sorry. Just given that you spend time at Anderol, can you walk me through the decision to go consumer first?

You could imagine that someone's saying, oh, I'm building battery packs and yep, I'm going DOD with this. It's a defense tech company. We've seen that even with some like nuclear energy companies where they've said, hey, yeah, we will sell the oil and gas companies, but this is going to be, you know, a power unit that's dropped on a military base instead of a diesel generator. Is that on the roadmap or do you think that like the real opportunity is just in consumer? And how did you get there? Yeah.

So, you know, I don't think we looked at it from like, is it B to B to C, B to G. Like that wasn't really the sort of initial thinking. It's more about if you look at the grid writ large in the U.S. or even in a more microcosm like it is here in Texas, where is the actual problem to solve? And a majority of the load on the grid comes from residential single family homes, which is where we're starting. And so we more looked at it from that perspective rather than like what is the sort of, you know, hypothetical best go to market. On the consumer side also it allowed us to build a brand. So we're very focused on the brand of base power, the resilience. seem reliability that it adds to homeowners with a backup power. And that can carry itself into a

more B2B model. As we grow, we're moving towards working with the regulated utilities. So utility like LADWP, like SoCal Edison, like DT Energy, where I grew up in, again, in Michigan, that's a different business model, but it's the same technology stack. In that case, we go deploy a battery on that utilities, on a home that that utility serves. We don't sell power to the homeowner, but that utility actually pays us for access to that battery. It's like a basically a distributed power plant in a box, so to speak. That is a not B2G, but sort of more B2B motion that we're starting. And we've actually already announced our first partnership here with a regulated utility starting in Texas near San Antonio.

Can you talk a little bit about the actual customer experience on the consumer side? If you, is this, is it like a prepper argument? I just don't want to, or is it purely economic? Who's the ideal customer? What's motivating them? And then walk me through the actual like installation process. Is this something I need to get permits for? Does it take months?

Like how does all that work? Where does it sit in my house? Is it in my garage or basement or outside? Is it huge? Is it small? I want to know everything. Yeah. Yeah, all great questions.

So in terms of the ideal customer, it's really a very wide swath of, of, of, Today, single-family homeowners in Texas and in the future renters and small commercial business owners. Our view is that batteries and generators have been sold as a luxury good previously, that basically rich people have put these on their homes so that they don't have power outages. And you'll see a lot of these in wealthier neighborhoods and such. And our view is that the battery really should support the grid, and it also support the home and the power outage, but really it should be a grid asset. And so, again, by this business model whereby we own the battery, we don't charge the customer

for the capital cost of the battery, that really opens up the market. And so we have sort of first-time homebuyers, we have elderly folks, we have everybody in between. Certainly, there are some people that are thinking more about their energy resiliency and sort of the maybe prepper mindset that you're referring to, but that's definitely not all of our customers. We've got now thousands of customers that are, again, from all. all walks of life. In terms of the experience, this is an area we put a lot of focus into,

and a lot of our software stack is built around. And we think about it from start to finish like a factory. My background's in manufacturing. And so the concept of having a customer sort of start at the beginning of the line, which has put their information in on the website, and end on the end of the line with the battery installed operating and providing them backup and supporting the grid. And every step in between is this sort of regimented, highly documented and relatively automated process. What that actually looks like in practice as a customer puts in their information, they send us a handful of photos of the side of their home, basically to make sure that there's a place for us to put the battery. Then we go and handle all the rest. So some cities require permits,

some do not. We handle all that. We also work with the utility to do the what's called the interconnection. Again, it's kind of like another permit. And then we have our own installers come out and install the battery. That typically takes a few hours. It's installed on the side of the home right next to your meter or very close to your electric meter. And you can see on our website, base power company.com, but it looks like, kind of like an air conditioning unit, roughly. It's a white box that's about two and a half feet cube, roughly. And that supports the home for, you know, a day or more depending on usage during an outage.

How much has, you know, your time at SpaceX and Andrewill influence, like just the way that you guys operate, obviously, you know, 10 years ago? investors, you know, my, you know, we shied away from these sort of like, uh, businesses that are capital intensive and just sort of like logistics intensive, but you went and worked at two companies that have done this. And, and basically set the bar of like how quickly you can spin up these sort of like real world operations. Um, but I'm, I'm curious, like the kind of key learnings from, from both companies. Yeah. I feel extremely fortunate to have worked for excellent leaders at both companies and have learned a tremendous amount. Yeah, I think you're right.

Look, I mean, you guys talk a lot about this. There's a large number of startups in the sort of hardware physical real world space funded by venture capital than there was not, you know, five, ten years ago, in large, large part, thanks to companies like SpaceX and Andrew. You know, I think the big learnings from those two companies are a combination of operational, technical, and cultural, maybe starting with the cultural. You've likely heard this, but there's, you know, the cultures at SpaceX and Andrel, both were extremely high ownership. They had a really high talent bar.

They're very execution and operations focused, especially in the areas that I was working in, which were more manufacturing production operations. Execution and how do we get, how do we produce more units, more drones in Andrel, more rockets at SpaceX? How do we install more batteries here at base power? There's a lot of similarities on the culture that you sort of build around that and being very data-driven and metrics-focused. And how do we get dollars per kilowatt-hour down, kilowatt hours per day up,

and we're like laser-focused as a company on that. So I'd say that's some of the cultural learnings. On the technical and operational, right, we're taking a pretty vertically integrated approach, right? So we're developing the hardware. We're writing all the software that runs on that hardware, all the software that manages the operational stack that I, outlined from the customer journey, we're directly interfaces.

And so both of those companies take a very vertically integrated approach, and they're able to drive costs down over time because they've been able to do that. And so that's something we're also sort of lessons that, you know, I learned and that others that joined me at the company here who have worked at SpaceX and Andrew, learned from both of those companies as well as Tesla, ramp, Apple, et cetera. That's awesome. Well, I think we'll let you go. I'm sure you got a busy day with the launch.

Thanks so much for joining us. We appreciate you taking the time out of your busy day. Yeah, you're our new energy, official energy correspondent. So get ready to get regular appearances. Yeah, yeah, we'll have you on again soon. Have a report live from the field, guys. Really appreciate it. Love it.

We'll talk to you soon. Congrats again to the team. Bye. See you. You know, if you're managing a wander, maybe you should throw base power on that. Do it. Great idea. Luxury home.

Go to wander. com. Find your happy place. Book of Wander with inspiring views, hotel great amenities, dreamy beds, top tier cleaning and 24-7 concierge service. You just,

you know, the power goes out, you call your 24-7 concierge. That's a luxury. You get at Wander. It's a vacation home, but better. We got some other news from Lair Hippau.

They launched their next fund. This is their ninth seed fund. They've been in the game for quite a long time. $200 million dollars, new capital. They'll invest in pre-seed and seed-stage companies. This fund represents an increase from the last fund, which was $140 million,

continued commitment to supporting the next generation of founders while maintaining a focus in approach. This fund also includes several dozen LH portfolio founders as limited partners. They like taking the money from LH. Now they're putting the money back in LH. One hand-wash the other. You love to see it. Yeah, it's great.

That must be one of your favorite phrases. Oh, it's the best. It's the best. So yeah, go raise some money. Go raise a precede from layer hip out. Or seed. Yeah, or seed. And then buy a billboard for your company on AdQuick.

Out of Home advertising made easy and measurable. Say goodbye to headaches of out of home advertising. Only AdQuick combines technology, out of home expertise and data to enable efficient, seamless ad buying across the globe. And breaking news, TBPN will be having a billboard. Our first ad quick campaign is going out. It's going out. It's going out.

we're not going to leak the strategy. We're still debating it exactly what the image will be. But you can expect to see it in the timeline. We're going to be spam that thing. We have been in the works for a while, but in close collaboration with the AdQuick team. So very, very excited. Yeah.

I like this post. Since we have a couple minutes before our next guest, let's go to Matthew Prince, the founder, CEO of Cloudflare. He says, I'm playing everyone's favorite party game. Guess the Trump administration. strategy. Like most of you, I have no inside information, but that's what makes it fun. Here's my best theory. Some assumptions first. One, they're not crazy. There is a strategy. It doesn't align with

conventional economic principles, but there's something they're playing toward. Two, they're not stupid. I know enough of the players involved to know that they're not idiots. They may be making what will turn out to be accurately predicted and to be horrible decisions, but they do have a plan and it's coherent. As part of this, while I think that they, well, I think they can bring, while they can increase U.S. manufacturing, they don't really believe they can bring everything on shore. So they're not completely naive about that. Three, they're intentionally being opaque as to what the real plan is. Trump fashions himself a negotiator, holding his cards close to his vest, even lying about what cards he has is part of the game, hard of the deal. Four, they're not just in it for themselves. I get that

this has become non-conventional wisdom, but I'm going to assume that this, that for this, that the goal isn't merely grift, even if you believe it is, suggest that's an easy out to thinking through what may be more complex motivations. And number five, which we are starting to see today. China is the real enemy. China has done some things in the last two years that have made it even, have made even the China doves in the last administration into Hawks. Again, I know There's lots of media saying Trump wants to kiss up to Xi Jinping, but having spent enough time with folks in this and the last administration, they really worry about China morning, afternoon, and all night.

So with this context, I posit the strategy is entirely destabilized and ultimately decapitate China. If that's right, you could just impose tariffs on China, but China has lots of export markets, so goods will flow through those. What if instead you impose tariffs on everyone? While China and the U.S. have similar GDPs, China is much more dependent. on exports. That means while the countries of the world like cheap Chinese exports, they don't depend on the Chinese market for their exports yet. China has actually been on a nationalistic spree recently. So foreign brands are more out of favor. We saw this with Tesla and some of the luxury

goods manufacturers declining in sales in China, meaning they're an even less interesting market to sell to. The U.S. on the other hand, is the world's largest buying market. We are the consumers to the world. If we stop buying, everyone suffers. That means nearly everyone needs to come to the table with the U.S. if there are universal tariffs. The U.S. is also unique in that it is among the only countries that don't need to import anything. Don't get me wrong. We want to import iPhones and PlayStation and French wine and German cars, but we don't need oil or food or water or most of the other raw materials to make sure people stay alive. So the U.S. will hurt under a high tariff regime, but it won't collapse.

Some manufacturing will move back on shore, but the biggest thing is every country needs to negotiate with the U.S. So what does the U.S. ask for? I'm sure there's a bunch of nits with every country, but what if the big ask is it's us or them? You either trade with the United States or you trade with China, but trading with both isn't acceptable anymore. For some countries, Vietnam, Indonesia, Philippines, the promise is to be the next China. But this time, under more careful rules dictated by the United States, for most of the rest of the world, there are already massive net. importers from China forced to make a choice between selling to China or selling to the U.S., I guess that most would pick the U.S. German automakers are terrified of BYD, and the Italians and French haven't proven they can sell wine or cheese to China at any real volume. So what's China's response? It's tricky because they've preached self-sufficiency and internal focus, but if the world order

suddenly aligns against them, what do they do? I have no idea if this is the Trump administration's actual plan, but it is the only thing I've come up with that passes the sniff test. What do you think, Yeah, I mean, this is already somewhat out of date, but in the sense that where I think it could make sense is that Trump is basically saying, you know, 90, you basically have 90 days to like recommit to aligning with the United States. Otherwise, the tariffs are back on for you. Yep. And yeah, I think I like these sort of like thoughtful attempts at analyzing what's going on. I think Trump is happy for people to believe that he's crazy because it sort of plays into a strategy, but I don't necessarily believe that everybody involved is completely crazy.

And I believe that they aren't very clearly being as intentional as they can be. But who knows? I was, this is. I'm hoping that I'm hoping that Canning. we can shift back to talk, you know, SaaS espionage. Yes, yes. I mean, seriously, I do get a lot more energy from deep diving Lama than tariffs. Although this is a very important story, so we are covering it,

because this is the technology business production network. Programming network. TbPN. Technology and business is our focus, but politics creeps in there every once in a while. But as you know, we never talk about politics. Never. But I was thinking about in terms of like geopolitics, there was this, you know, alignment of like you're either with China or you're with the U.S. And China has the Belt and Road strategy.

And they've kind of brought like when I was doing, I was interning at a venture capital fund that was investing in Africa and India. And a lot of the deals like on the ground level, the government would kind of have to decide like do we want to align with an American company or a Chinese company to do this like infrastructure build out. right? You're going with like Halliburton or some Chinese company. And one of the things that leaked in the cable gate news was like on the ground, a lot of American embassies were highlighting that developing nations were more inclined to work with China because they felt like the government was more of a backstop. Whereas in the U.S., if you had a deal with an American company and they didn't come through and

they went bankrupt, there wasn't going to be, you weren't just going to ask America to, hey, hey, the company that we were doing business with is in America. company and they didn't come through. Can you come fix it? But China would. And that was kind of the Belt and Road strategy, a lot of debt stuff. And so you can kind of imagine that there's a new order kind of building around China aligned with Russia and Iran and some African nations and some other nations in Asia. And then on the flip side, you have America, the West. And that kind of bridges us into our next discussion. I'm sure we won't get too into geopolitics, but we are joined by someone from Palantir.

So we have Akshay here. Please welcome to the stream. Thanks so much for joining. How are you doing today? I'm doing great. Hopefully you guys can hear me okay. Yeah, you sound great. Look great.

Everything's fantastic. With the fake plant in the background, of course. No, it's going to be with you guys. My name's Akshay. I'm the chief architect of Palantir. I've been here for about 12 and a half years, lived a lot of lives. Things are still moving super fast, but I'm excited, kind of given where you guys are taking the discussion and everything you guys have been talking about throughout the day and morning as well.

Yeah, yeah. I mean, I don't want to go too into the whole thesis of Palantir in the West, but maybe we can start with like what you're working on today and really, what does Palantir actually do? Yeah. I'm kidding. It is a meme, right? How do you describe it?

And I think it's funny because it's been this, in some ways it's been so consistent in intention, but I think the way the technology has evolved has been because, like, we had to kind of keep pushing the frontier of what we were limited by, what we built originally and what we had to kind of fulfill. And long went a way of saying, like, it was always about how do we help people in operational context make better decisions. So it was very simple early on of like, these are people who are working in counterterrorism and specific defense workflows.

And it's like they need to be able to do their jobs better to avoid roadside bombs, to be able to uncover intelligence networks. Like these are the actions, the decisions they're taking. And like, you know, the cheeky kind of naive first version of that was like, can't we build like a fine terrorist button or do some cool like algorithmic, you know, kind of analysis to do this. And it's like, well, you first need to build like the dirty, dirty data integration plumbing to be able to then enable people do the interesting stuff. Right. So that's the whole data integration, bringing together disparate systems piece of Palantir. And then it's like the requirements keep changing

on you, right? Because it's like, okay, that works for the first intelligence workflows. What about the next set? What about then going into war fighting, which is much more kinetic, much more real time? And so you have to keep building new parts of the stack to be. able to enable different types of decision-making. And then there's kind of the whole commercial journey, right, which is like, okay, if we think about all these pieces of technology, being able to reconcile complex systems, enable decision-makers, it's like at BP, those were now petroleum engineers or at Airbus, those were like people working on the A350 ramp-up. And it's like kind of a different problem set, different nouns and verbs, but kind of the same kind of utal loop of like, how do we get people to

be able to make decisions better in these contexts? And so then you see kind of more layers of the platform and the architecture evolving to kind of meet all of these different needs. And it's like, I joke, it's kind of like building something through back propagation. It's like you keep doing this forward deployed approach, seeing what doesn't work, seeing what you built isn't sufficient, than having to understand kind of from the coal face what to build. Can you talk about the potential trap? Because you guys, like, made the sort of forward deployed model. And, you know, I think startups now can kind of like look at your,

you guys and your success and be like, okay, we're going to do the same thing, but I don't necessarily think that's always going to end up in the same place. I'm curious how you thought about kind of, you know, as you were rolling it out, the sort of traps, what you wanted to avoid and how to make sure that, you know, you were actually building a, you know, real software business behind the scenes. Totally. And, you know, I could make it sound like it was all, you know, predestined and perfectly planned out, which certainly what was not. But I, But I think like the funny thing to me also is that it's become such a meme because it's like it was the ugliest of ducklings back in like the mid-2010s or it was like, you guys are working

for the government deploying and doing what. And it's like, you know, it just was the complete antipode of like the consumer B2B SaaS kind or B2B SaaS kind of thing that people expected to see. And I think now it's become very in vogue, which again is just very bizarre, I think. But to me it's like it is like I think you're intimating here. It's like it's easy to say you're doing it and just put a label on what somebody might be. might call it's sparkling sales engineering. It's not forward deploy engineering. I think was one meme, right? And it's like, to me, it's like it kind of comes from how the organization is run. So like the first

forward to point engineer was Sham Sankar, right? Who's our CTO. And like basically the organization was built around like the field has this primacy. It's the primacy of winning and showing up for the outcome. And product has to, you know, it was Bob McGrew and folks back in the day and a lot of talented folks on both sides now. But there's always this dialectic between like field and core. Right. And so it's like as the field is uncovering what needs to be built, like how is the core responding and how much circulation is there between the two? I think it's very different than the normal construct in Silicon Valley, which if you kind of go up and down the peninsula here, it's like we have the kind of high priests or the privileged engineers that sit, you know, eating berries in Palo Alto or in New York.

And then if you're like a sales engineer or like a solutions architect, you go into the field, or we delegate that to somebody who's like a consultant, right? And I think that is kind of, of the inverse model, right? Where it's like if that, if you're just relabling that team as being a forward deployed engineering team, that's not kind of the same thing as saying the way you do product development is kind of front to back. And like you have to orient kind of your entire organization around that. And I think to your point, it's like you have to think that there are complexities or

worthwhile things to uncover through that method to make it worth it. Right. It's not something that's going to make sense for maybe, you know, simpler product schemas. Yeah. Can you talk a little bit more about the forward? deployed engineer. In a lot of B2B SaaS, if you think about like the implementation of like an ERP or even like an email client or email SaaS product like MailChimp, there are agencies that pop up and

effectively act as forward deployed engineers. And maybe they're like partners, gold tier, silver tier or whatever. I can imagine that that doesn't make sense in a security environment. But was that ever evaluated on the commercial side? Or is that just completely off the table? being able to kind of like have those like automations or sorry specifically like specifically like independent agencies or companies that are building an entire business just around palatir implementation yeah it's interesting because like that's now coming to life through alums that we have sure

who've actually gone on to kind of make these kind of like more spartan i'd say smaller squads that are kind of dedicated consultancies now i think the joke back in the day was like nobody who was a consultant or was external would like bother to do this because like we're trying to build this plane in midair we're trying to like understand like your job as an FDE is not just to service the demand or to implement the use case. It's also to figure out what to build. And like you are given kind of that creative power to say like you now have to spend your your nights, your evenings, you know, the off time you don't have talking with product about what to build. And then showing up the next day or two days later with the new version. And like it's much more collaborative with a core

engineering org. And I think that's where like if we tried to outsource that. I think there was always fantasies in the painful moments about like we just get other people to do. do some of this stuff. But it's like the real magic is saying, like you are all part of that shared engineering core. And it's the same, by the way, like kind of hiring profile of somebody who's kind of a core dev or somebody who's an FDE. And all the people who are like core product leaders now

were FDE's before. And so I think that that kind of results in a different kind of profile between the two. Yeah. Can you talk a little bit about where just some case studies on the commercial side? I remember hearing about the Airbus case study around manufacturing logistics.

When everyone someone asks, oh, what does Palantir actually do? It's very easy to say, like, you have a bunch of parts. You need to know where they are and how much they cost and whether or not they're in stock and all this stuff. But are there other, how are you explaining it to like a non-airospace Fortune 500 company today? And I think that very much is the kind of progression over the past couple of years. I think as the business has really grown. There is, of course, like, the industrial, like, I love this stuff, right? It's like it's the new warp speed cohort.

It's like it's seronic. It's Anderil. It's Epirus. and it's like nuts and bolt stuff. But I think what's more subtle and I think what's kind of unifying among all these things is like what are we actually doing with the software now,

especially with the AI platform with the gen AI piece. It's like you're modeling the world, right? Of course the other Palantir meme is ontology. They just say ontology to everything. Right? It's like what do we mean by that? It's like it's a shared model of decision making.

And it's like you have to model, of course, all the objects and links. Like it's the underwriters, it's the claims. It's the movements across those things. But then it's also all the actions you can take, and it's all the compliance and security requirements around who can take what actions, and then it's like the reasoning or the business rules that govern how all of these

states can change, right? So it's kind of almost like a digital twin of not just the asset, but the business process. And so in that sense, like you're seeing a lot of really cool workflows now in hospitals. So like Cleveland Clinic, HCA, Tampa General, where it's like they're talking about nurse scheduling. And what's cool is like you have this kind of teeming between human users like the nurse schedulers and then AI able to actually be useful in those context because you can kind of measure when and how you're injecting the AI. You can put guardrails around what it can do and what it can't do. And it's kind of right there with you in the same context. So it's not like this weird black box off to the side where you're like, I hope the

AI does something useful. And then if it doesn't, like I'm just going to pivot back to doing my other thing. It's this kind of like incremental rollout within these existing workflows, staff scheduling, you know, patient life cycle, things like that. One that's really cool is, is AIG recently talked about underwriting and like how they're driving automation through underwriting, you know, with all their core benches. And Dr. Carp and Dario from Anthropic were on stage with the CEO. And they were talking about kind of how this incrementally happened by, you know, first modeling the underwriting process in the software and then gradually driving more automation through it. So I think domains like that are showing a lot of really interesting and like kind

of colorful usage outside of what you might typically associate with Palantir. Yeah, it must be so funny to be using Palantir. in the global war on terror and then as like a field medic and then you get your job as a you know someone in a hospital and Palantir shows up again and you're like yeah the software defines everything how do you think that just agents in a B2B context are are sort of overhyped underhyped has your thinking around them changed at all I mean when you guys started the company agents were just called bots and now they've got a shiny new name and it's very exciting. But I'm curious how you're thinking around sort of the high level concept of agents has changed from, you know, basically over

the last decade. No, it's a really good point. I think it is interesting to see kind of the nomenclature shift on you over time. And I think our perspective is there is something, you know, unique and significant about the rise of generative AI, like all the transformer-based architectures, what you're seeing, especially with the latest generation of frontier models. As, being essentially like a reasoning engine that can be used in concert with decision making. And so, like, from our perspective, it's like what these agents are showing is the ability to actually creatively be able to deal with that decision graph, with that model of decision making, and then actually provide real horsepower that first augments human users, then can kind of

slide up to automation. But I think to your point, it's like, how is this not just hype from our perspective is, like, is there an actual story you can tell around like it could be 10% useful with maybe the first phase of underwriting, like the exploration. phase. And then I can actually have a smooth curve up as I start to drive more agentic behavior through the workflow. I think where we tend to see like the hype bounce off of people, especially enterprises at this point in the cycle especially is where they're saying, you know, when people are telling them, just trust us, you know, it's just you're just going to like flip a bit.

It's not going to be a sliding scale. It's going to be a bit flip and hope that it works. Because I think we all know that that's not how it works. And I think what's actually kind of ironic is that's not how it works than a human user either, right? It's like if you're training an employee or like the Japanese call it like Deshi, like an intern, it's like you're gradually leveling them up over time, right? And so I think we're very bullish on that. And I think we're seeing a lot of very cool use cases in that sense. Can you talk a little bit about the tariffs? I'm sure that a lot of customers are rethinking their entire supply chains potentially. How does Palantir play into making great business decisions in uncertain times? Yeah, I think it kind of gets

what you were saying at the very beginning around ERP systems, right, and kind of these rigid legacy systems. And in some ways, you know, these system shocks, these exogenous system shocks, especially are a bit reminiscent of things like COVID, where it's like, it kind of tests the state of your software, right? It's almost like an environmental pen test against the state of your operations. And so I think where, you know, we've tried to provide value for existing customers and where we're engaging new folks is where they're saying like, hey, like we feel trapped by the rigidity of the existing system structure, right? Like, you know, our ERP models things one way, Our second, third, and fourth ERP models things in a discontinuous slightly different way.

Same with our MES systems, our PLM systems, our ordering systems. And it's like what we really need to be able to do is understand, A, what's going on across everything, and then be able to impose strategy and kind of reconnect strategy with operations in a way that can actually be adaptive, right? I think what we're not doing is going people and saying, hey, there's a magic wand that will magically fix all the tariff issues, you know, no matter what the circumstance is. But can we instead give you, like, an operating system to be able to say you can now actually like, kind of like you're a pilot in a jet, be able to navigate through as conditions are changing, test things, get leveraged through AI and automation, and kind of be on the front foot when it

comes to this stuff. And I think, you know, we've had customers who have talked about their supply chain journey with Palantir with General Mills, Tyson, others. And I think they're great examples of people who have like, it's almost like they're retaking control from like all those legacy systems. Can you talk a little bit about the kind of the broader Palantir ecosystem? I know that obviously Palantir sits on top of a lot of like on-prem servers and cloud, different mixes of cloud tech. And then now with AIP, there's now companies that are building on top of Palantir, so they're kind of sandwiched there. How are both of those going? Where are the pockets opportunity that you're seeing in like the high growth that's maybe indexed to Palantir's growth,

which has been fantastic, but outside of the Palantir direct ecosystem? Yeah, no, it's a great question as well. Unlike the stuff below, I would say, like, it's like the infrastructure we deploy on. There's, of course, like a broad strategy to keep adopting more and more infrastructure like substrates we can deploy on, right? So whether that's metal, that's the three major hyperscalers, that's Oracle that's being able to deploy, you know, in sovereign clouds. Like we've built our Apollo platform to allow us to be able to kind of do this in a highly leveraged way without having to rebuild those core components in every single environment. I think, like, kind of there's a general trend towards more options there. I think we're

also to your point, like kind of writing the wave around people have gotten to the cloud, or they've lifted and shifted a lot of data and maybe some data science workflows. But now it's like it's time to operate. It's like, okay, like am I actually like are the core business workflows, those nurse scheduling workflows, those underwriting workflows actually changing. And I think there's a ton of like kind of tailwind from people saying I did the first step now, like, what's the operating system I'm using in the cloud? And I think that answer more and more is paleteer. Things on top, I think that are really interesting. There's of course like there's partnerships with the AI providers. There's partnerships with.

with folks like Databricks and others. But I think what's really cool, and we actually just announced, I think a couple minutes before we went live here, is like it's the startups cohort. So it's people being able to actually build their entire kind of businesses on top of Palantir and say, I like the leverage I get from the integrated,

you know, data tooling, model tooling, workflow tooling. It's like I don't want to start from scratch, like 2016 style with the hyperscale. I want to build like on the 10th floor now. And so there's a ton of great startups there. Yeah. Talk about why,

companies should be taking that product extremely seriously. Because I remember there was not that long ago when people said, oh, you know, don't like don't build a Shopify app. Like, you know, and then you have like all these unicorns that kind of like started as Shopify apps.

Don't build a Chrome plugin. And honey sold for a billion dollars. Yeah. So I think, if you want, yeah, if you want to do anything in, especially in industries around national security,

I feel like building on top of Palantir is a way to like, you know, potentially accelerate trust and things like that, but I would love to hear it in your words. No, I think that's well put. I think there's two dimensions I think about, right? One is, like you said, it's being able to get leverage in kind of the, it's access and compliance and these sorts of things. So it's like I want to work in, I want to get access to problem sets or mission sets. And so our mission manager offering on the government side allows you to be able to get high side, get into these domains and deploy your products. And there's a ton of great examples of that.

And I think people see a lot of value. That's kind of more. the infrastructure enabling you as a startup, I think there's then building with kind of the platforms that are at kind of the above the infrastructure level. So this is Foundry and AIP. And there are folks saying, like there's Helmgard and others who have presented recently that say like to build the like the AI enabled applications that I want, this is the tool kit I want to use to build them, right? Because kind of everything from that data integration layer, the ontology layer, the workflow layer, the SDKs, all of that stuff is like now it's the equivalent of like the, you know, in the personal computer era, like the, it was great to build against core components on my IBM PC or

my son workstation, but it's like I could really use an operating system to be able to like build at a higher level and build much more sophisticated things. So I think that's what we're seeing. We had our second developer conference three weeks ago and they had a bunch of startups. They're kind of telling that story in effect. I think I already know the answer, but do you feel like you guys are just getting started? I imagine with these, you know, customer relationships you have right now and the existing products every single time you maybe like think you hit the end of the product roadmap for like a certain category it's like you know you get the next uh you know requests from a customer and it's like hey there's this whole area an opportunity that we weren't even thinking about

a year ago much less five years ago you took the words out of my mouth it's like it's kind of an incredulous thing to say i realized a little bit of like self-awareness in silicon to say like you're 12 and a half years in and it still feels like it's been a blink and there's like it's just it's like the I joke it's like it's the end of dune book one in like the first but it's like it's like we're just getting like we haven't even gotten off of iracas yet or whatever or like whatever metaphor you want to use and it's like I totally feel that way because it's like a lot has happened a lot has transpired and it's meaningful and there's so many people that were part of the journey that are now in the ecosystem of folks you guys have been talking to and others broadly but it does really feel like it's just the beginning like I want to know about the shift in security mindsets, specifically in the commercial sector. We've heard a lot of talks about corporate espionage, even in B2B SaaS, but obviously there's a bigger national story around security, even outside of a government context. Are you seeing increased demand from corporations that maybe don't need to be ITAR compliant just around taking their software and data more? seriously in terms of security?

100%. And I think that manifests in a few ways. One is just like it's the core kind of like hygiene or meat and potatoes part of that, which is like it does feel like the, you know, the threat vectors are increasing. The threat profile against any prominent company in America is increasing. So, you know, the way that we operate our core workflows, the way we secure our data, I think is more top of mind. It's not just sort of in the purview of the CSO or the CIO. I think everybody's thinking about it now, especially given kind of global volatility trends, writ large. I think there's also this sense of like if we're going to have to take these big leaps forward with AI or with building the next generation of digital applications, like these seem

like they're going to be big shifts in the business. And they're going to affect a lot of, you know, they're not just the technical users, but the business users, the operational users. So for building like essentially the next foundational parts of the business, like I want to be very sure that we're building it in the right way. And I think as you guys probably know, like a lot of people have battle scars from the prior generation of stuff, not having built. been built the right way, or there being, you know, things that people have had to deal with off the back of those designs. So I think people are definitely tuned into that. You're totally right. Yeah. Culturally, what's changed as Palantir has become a public company? I know you've been

there before when Palantir was private. Now you're public. Is it stressful having a stock price out there every single day? Has it, have things kind of been business as usual? What's the shift been? I think, honest, for those who have been around, you know, I think what's cool is that the hiring profiles and the people that are coming in seem as good now as they ever have been. You know, this is the shameless plug for we are hiring, all the things. But it's like, it's still a very young and vibrant place, which is why maybe like the temporality in my mind is a little bit broken as a result of these things. I will say one thing that's different for sure is like your friends and your family and your college friends like talking about the stock up and down. It's like

people couldn't pronounce the name. People had no idea what it did for like most of the time I've been here. So like it's still very bizarre, I think, for anybody who's been along or been around it to be like, people care this much about this? And it's like, of course, we always cared, but like, that's still kind of bizarre. When you get these paying like, you know, LinkedIn requests from somebody went to high school with and he's like, hey, man, I'm in the retail investor community. Keep it up. Or it's like it went down and it's like, hey, can you do some of it?

It's like one or the other, right. Can the devs do something about the stock price? How do you personally think about AI safety? So not speaking for Palantir on this one. And my, you know, one of the reasons I'm curious is, you know, reacting to AI 2027, which, who knows if you even had time to, like, read through from last week. I'm not halfway through, but I, but I did the mistake of, like, watching the interview and then reading some of it.

Yeah. Yeah. No, but, like, in the sort of, like, doomsday scenario, like, I imagine, like, you and the Palantir team are, like, in a war room with the president. And it's like, hey, we got to, like, figure out how to, like, you know, save humanity from the bots. but I'm curious like, you know, general maybe reaction to that piece and then, you know, how how you're thinking about it more broadly.

I mean, just the shift from deterministic computing to probabilistic computing injects, like just so many risk factors. I'm dying to know. What do you think? No, I think, again, I'm on the same wavelength as you guys. I think like, A, I like those pieces. I think even if people dismiss them or try to critique them for being kind of sci-fi, it's like I think it's good that people are doing some definite thinking, even if it is a bit

forecast it. I think this is true of like, you know, the piece, you know, machines of loving grace that Darya put out as well. And it's like, I think it's worth having these sort of like future looks just to be able to at least game theory through some of the implications here, as you're saying. I think what you touched on, John, I think is exactly it, which is like, if you assume these things are probabilistic or probabilistic in some degree and are going to have more agency over time, like what is the outer shell of assurances that we're building to keep the machine subservient to the human, right? And like the grand sense. of like human agency, right, as people of the world. And I think like that's where careful system

design from our perspective is so key. It's like there's kind of testing the models in isolation, but then there's like the live fire exercises of how do these things actually perform an indicative contexts, like whether that is a battlefield or that is a production line or that is a hospital. And I think like we have to evolve the testing frameworks to take into account more of the operational theaters, so to speak, and then be able to pull back the requirements from there. There's a lot of pontificating. I think that's easy to do when you're just looking at the models themselves against benchmarks. But it's like how do you evolve past benchmarks to operational testing?

And this is kind of what we've done with other sectors, right? With like whether it's electrification or it's like other kind of core or assets to make up the digital world, not in the same level of sophistication, but we had to evolve how we're measuring efficacy. Right. Yeah. For sure. I feel like Palantir has taken a pretty foundation model agnostic approach, kind of a bring your own bring your own. foundation model if you're a company. Obviously, you do have some partnerships that are bigger than others, but that makes sense from a commercial or DOD perspective. But what has been your

reaction to DeepSeek? It's open source and people think, oh, if I run it on my own hardware, I'm all good. But there's been kind of a sci-fi-esque debate about is it possible to embed kind of a Manchurian candidate in the weights that wakes up when it is like, hey, it turns out I'm in a DOD data center. I want to do something different. Is that pure sci-fi? Is that something that we need e-vals for? We need extra testing.

We need to air gap and then kind of test in an offline environment first before we deploy these. Or do you think it's all sci-fi and it's not worth worrying about? I think there's probably some like Aristotelian mean there, right? Where it's like I think even if it's not all sci-fi. It's like I think there are real challenges across like the intersection of different different considerations. One is like our like our ability to mechanistically interpret these models is still limited. So like even if you assume it's not malicious behavior on part of the deep seek

or the or a CCP proxy, you could still have a situation where the model is not understandable and therefore you can't trust them for the spectrum of utility. I think given that ambiguity and also the ambiguity around like how, you know, what was the story behind deep seek's creation? I think there's less ambiguity around the control that the government kind of can exert on them in China. I think it all points to like, why would you add up that composite risk profile and kind of go all in on that if you had open source options or equivalent options in the Western world, right? And I think this is why it's important for us to have the ecosystem of proprietary models, commercial models are great, but also open source models like the Lama release that we saw.

And you're going to have different cases where like the abilities, the capabilities and the controls provided by each of those different types of models is going to be suited for different domains. Like, for instance, there are going to be certain government domains where a commercial model provider will not be suitable. There are going to be domains where it will be. And it's like we want to have as the West, as the U.S., especially, the full range of options to come to the table with. I don't think we want to be in a case where we feel like we're backed up against the option of having to go with a. foreign model, especially one from a rival regime. Yeah. Do you think every kind of Fortune 500 company needs their own set of e-vals for when these new LLMs drop? Because you see what happens on LM Arena and it's kind of driven by like the vibe of whoever's voting that day or even MMLU and some of these like IQ

tests don't necessarily translate into better business value. And so I'd love to know what you're seeing from, you know, Fortune 500 folks or bigger business folks on how they make decisions about what models to use is just cost to benchmark, or is there more nuance to it? Yeah, I feel like there's a great tweet in there. I mean, like, evals vibe, like vibes are not enough for something like that. But it's like I think, absolutely, right? I think this is part of like the idea or the thesis we have for like this shared model of decision making that is this ontology system.

Like how we design evals is literally around that, right? You can say there are sample workflows. There are unit tests that have to pass every time you upgrade the, you know, the agentic logic for that underwriting workflow at AIG or whatever it might be. And, you know, it's not just like an abstract set of tests. These are actual like in vivo tests that, you know, have to pass and yield certain results either deterministically or probabilistically for us to be able to go forth and continue with this workflow. And so even if nothing is changing, maybe we're just periodically running these tests because these models, like you said, are probabilistic, right? So things can change over time. So the underlying model is shifting on us.

We want to know that. But I think you're totally right. Like enterprises have to get into a mode. I think of thinking about the way they're instrumenting and validating the application of AI as being kind of one in the same with rolling out these e-vows in an operational sense, right? You can't, you can't control or improve what you can't measure, right? And I think it's kind of the same concept here for bringing AI into these critical spaces. Yeah, it's kind of like the way a hedge fund would backtest a strategy and see, okay.

Yeah, if we apply this to all of our historical data, it's like new model comes out. Let's just reevaluate every piece of debt we've ever underwritten or every policy we've underwritten and see if we get a better performance. That'll be fascinating. I imagine that there's a business to be built there. Maybe it happens at Palantir or somewhere else, but very, very cool idea. Jordy, do you have a last question? No, this is fantastic.

We let you get out of here two minutes. Thanks so much. Looking forward to the next one. Yeah, this is fantastic. Yeah, looking forward to it, guys. Thank you so much for having me. We'll talk for making the time. Cheers.

Let's run through some timeline to finish it out. Cole Rotman says Mazeltov to Open AI Fund for turning $8 million into $600 million of paper gains from just two deals in $175 million fund based on his math. Did you see this? They did Harvey. They led the $5 million seat in 2022. And now the Series D in 2025 is a $3 billion evaluation. Sam Altman is pretty good at being a VC when he wants to be.

It's insane. And then Cursor, they led the $8 million seed in 2023, and the series B is at a 2.6 valuation and might be getting like a 4x markup soon. I think we saw some leaks around. So could be, you know, a 5x fund off of two deals in just three years, which is remarkable, remarkable. You'll love to see it. Anyone who's in that fund, anyone who's exposure to those deals, they're going to be sleeping well, but they could be sleeping better if they got on an eight sleep. nights that fuel your best days, turn any bed into the ultimate sleeping experience. Go to 8Sleep.com slash TBPN. Lindyman says there's nothing to fear. Smart people adapt. In the 2010s, they went into software. In the 2020s, they will open up factories. It's all the same thing, finding angles and edges. I thought this is kind of an interesting white pill you threw in there. It is interesting that, like, that's the nature of capitalism. It's, you know, water finding cracks in the middle, midst of jar full of pebbles or the way sand flows through a jar of pebbles. If tariffs go up and there's a bunch of incentives, like, you know, the Hadrians and the

base powers, they're ahead of this curve, but that's not the end of the story. There will be plenty of people that see the news if the tariff stick and say, hey, this fundamentally changes the economics. I'm ready to write checks if I'm a VC. I'm ready to build a factory. And yeah, maybe it will be a slightly different in work environment than build a B2B SaaS, but I'm ready to make it fun. I mean, a lot of the, one of the coolest things has happened over the last few years has

just been like the El Segundo movement and like the Aaron Slodovs and the reindustrialized folks just making, you know, that meme obsolete of like everybody wants to reindustrialize, but no one wants to work in a factory. Well, like, a lot of people are down to work in factories now because it's not that dirty. It's actually like, oh, there's just a big machine over there. There's still some offices. It's quiet. Throw on headphones, you're fine.

Anybody that has ever made. made something, you know, in the context of the business. It doesn't really matter what it is, right? Even if it's a startup and you get a little bit of revenue and you make some merch and you can suddenly hold, you know, a product in your hand. It's amazing. So I actually do believe that people, many people would rather, you know, work in a factory or work around factories and be involved with producing things, not just software.

Well, after you produce things and you start selling it online, what are you going to have to do? You're going to go to numeral. H.Q. You're going to go to numeral HQ. It's sales tax on. Autopilot folks spend less than five minutes per month on sales tax compliance go to numeral HQ and 25 states are now Taxing software sales get in front of it just do it and we had a really cool launch video from Zipline This company's been around for a long time

We should ideally pull up the video if we can but Regardless Zipline is a drone They're kind of vertically integrated drone delivery. They make the drones but then they also run the service. And so they were in Africa doing blood deliveries via drone. So it's very important to get it there very fast. Someone's bleeding out. You need a blood transfer.

Send it from the central hospital as fast as possible. So even though drone delivery is expensive, totally makes sense in that. In that case, they built out a ton of technology, ironed out a bunch of problems, and now they're ready to bring it to the United States. And they are launching in a few states, Texas,

and a few other places. Seems really cool. And we were talking to somebody, here we can watch this video because I think this is so cool. I love to work on things I'm passionate about. I think when you're passionate about something, it doesn't feel like work anymore. You might observe it as like type two fun.

Because often if you're passionate about something, you're willing to do things that people would find harder than anybody would want to do. But it turns out when you're passionate about it, it's just, you know, it's fun. And it's just such a different vibe than the normal hard tech vibe real that's like really intense with like, over the top music.

We would be proud to hand to our kids. just like chilling is about as cool as it gets. I know it's been a lot of sacrifice for a lot of people to make this happen. I don't think any of us thought it would be easy. Yes, the drones are going to be a little bit noisy. But we thought it would be a lot easier than this. Yeah. The magic now of pressing a button on your phone and getting an item.

Totally. In, you know. And we were talking to someone who I think was an investor in Zipline and he said that something like 80 to 90% of all of the goods in a Walmart fit in that drone. Yeah. And so, yeah, you're not going to have drone delivery like a couch, but like for most things, you can actually use the service and hopefully the economics pencil out in a viable way. I definitely want to have the team on the show soon and talk about it, but really like above

all else, it just stuck out that they went with such a different style and aesthetic for their launch video with something much more ethereal and it just feels like summer and it just feels like you're just relaxing and a drone comes deliver. and it's like, yeah, this is cool, this is sci-fi, this is tech, but it doesn't need to be cyberpunk. Like, it's the future, feels like the future, there's something futuristic about this, but it's still very pastoral, and it feels like something that integrates with just like the kind of vibe of like hanging out on a ranch in Texas. It was just a really nice video. And it was just, it was just cool to see someone take a very different direction from what we've seen that it's been a cool meme.

We've played into it a bunch, but it's maybe at the end of that road and maybe something like this is what's next. So go watch the full video and sign up for Zipline if you're in the delivery area, I guess. Will Nitzie says the only career question that matters is what can you be world class at? Everything else is noise. I like that. It kind of paired with what we were talking about yesterday with the intersection of two novel ideas or areas of expertise being something that LLM struggle with. And I think this will be a continual. Big opportunity for humans.

Big opportunity for humans. Yeah, I mean, I think AGI in many ways has been achieved, but very few people would say LLMs are world class at really anything. And they kind of go through this gelman amnesia thing where if you don't know about a topic and you ask an LLM to talk about it, it can kind of get you up to speed. But when you talk to somebody who's much deeper, much more aggressive, much more definitive in their world,

you around that topic, they're going to give you much more insight. And that's why, why, well, John, I would disagree. They're world class at creating Studio Ghibli copycats. That's true. Or, you know, pennies on the dollar. That's true. They're, the world class of creating viral content as I tested because the actual studio Ghibli photo I posted from the real movie, spirited away, not a banger. Flop. But when I took Oppenheimer and made it Ghibli, it got like 30,000 likes. So people like that. Let's go to MDA. they say VCs told me, build a pitch deck, design a roadmap, hire a dev team. But no one told me post TikToks, trigger FOMO, make it look like a trend, not a tool.

That's when I started thinking like a drop shipper, not a founder. What do you think? Insight. I don't know, I don't know where to take this, but I think if a lot of companies posting TikTok's a good way to get customers. I talked to a Gen Z founder who said that my distribution strategy is if I'm in a if I'm building something for consumers, I'll make viral TikToks. And if I'm selling something B2B, I will hire Nepo babies because the nepoes will have parents who are involved at businesses.

Yeah. And they will be able to get my product. One thing this made me think of is this guy Cormack, who's built a company called Oasis. he started posting information about water quality, started posting TikToks, and eventually built out a database where you can sort of get access to different data. And he basically tapped into something that was like very much a trend of people wanting to understand what's in their water, what's in other products that they're consuming. So yeah, I think in general powerful to tap into it, you know, make sure that your tool is part of a

bigger trend. Otherwise, it's going to be really difficult to get a type of real traction. Totally. Yeah, the hype can get too much and you can get lost in the sauce and you can just become like a TikTok company. But there's something about the communication and casting a wide net that clearly lets things ramp. I think we probably saw that with the, the, the, the, the, the, the, the, the, the CREA team, they had like, what, 20 million users or something? Like, you don't get that without going viral. I'm not sure if they did it through TikTok, but they certainly became a trend and that enabled a lot of fundraising and stuff. Speaking of fundraising, a 25-year-old police drone founder, Blake from Brink Drones,

just raised a $75 million round led by Index. I met him camping like a year or two ago. He's a teal fellow, great guy, and fascinating. I love this photo. The drones are just hovering behind him. Yeah, yeah, yeah. He's a fantastic builder. He's like, they come with me everywhere.

Yeah, yeah, yeah. And he has a very interesting use case. So I really want to have him in the show to talk about, like, how do we build the American DJI? you know obviously like how do you get to market with something reliable he's going after drones for police because the police legally cannot buy DJI anymore or in many jurisdictions they've been banned but if there's a broader ban I'm kind of getting burned out on the defense tech stuff and I want consumer products now I want I want there to be you know

world peace and then everyone's like oh yeah actually we can pivot back into hardware well yeah I know. This is the obvious thing with Neros, right? Soren was a drone racing pilot. I imagine he wants to, you know, save the world and then get back into his original passion of racing drones. Yeah. Yeah, yeah.

You can imagine Nero's doing something in consumer. Totally. And it's just like a, it's just a nature of the market that if Sorin at Neros had said, hey, I'm this fantastic drone pilot, I'm going to build a consumer drone FPV product. People would be like, that's too capital intensive. You'll never be DJI, blah, blah, blah, blah, blah. there's a million reasons why this won't work. He wouldn't be able to get funding.

Let's bring about world peace and then get back to having fun with some drones, making some cinematic videos. That's what I want. Anyway, any other posts you want to close out on or I think we're good for you. This was a fantastic show. Thanks for watching, everyone. Don't forget to leave us five stars on Apple Podcasts and Spotify.

And stay tuned for the next one. Just do it. We will talk to you soon. We're looking forward to tomorrow. Bye.