The Compound and Friends - The Regret Zone

Episode Date: May 17, 2024

On episode 142 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Packy McCormick, founder of Not Boring, to discuss: the AI space, tech spending, the venture capital landscape, defense tech, what's next for Sam Bankman-Fried, and much more! This episode is sponsored by Public. Visit https://public.com/ to learn more! Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Options are not suitable for all investors and carry significant risk. Option investors can rapidly lose the value of their investment in a short period of time and incur permanent loss by expiration date. Certain complex options strategies carry additional risk. There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as spreads, straddles, among others, as compared with a single option trade. Prior to buying or selling an option, investors must read and understand the “Characteristics and Risks of Standardized Options”, also known as the options disclosure document (ODD) which can be found at: www.theocc.com/company-information/documents-and-archives/options-disclosure-document Supporting documentation for any claims will be furnished upon request. If you are enrolled in our Options Order Flow Rebate Program, The exact rebate will depend on the specifics of each transaction and will be previewed for you prior to submitting each trade. This rebate will be deducted from your cost to place the trade and will be reflected on your trade confirmation. Order flow rebates are not available for non-options transactions. To learn more, see our Fee Schedule, Order Flow Rebate FAQ, and Order Flow Rebate Program Terms & Conditions. Options can be risky and are not suitable for all investors. See the Characteristics and Risks of Standardized Options to learn more. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See public.com/#disclosures-main for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Can I read something to you? Yeah. Okay. This is in, this is my LinkedIn DM and this is indicative of something that I'm getting often. I am the co-founder of blank. AI. Stop.

We work with institutional investors and wealth managers to bring them access to private companies, secondary and primary. And guess what? How much anthropic would you like? So I get this for, I get this for SpaceX. I get this for Starlink, which is part of SpaceX. And I mean, how? I didn't know they're selling.

So I love that there is access to these things. And if I were the type of advisor that was like playing up my access to shit, like to clients to attract money, this would be great for me. You know this world. Is there really that much loose secondary stock available in the hottest startups,

or is it an illusion that people are using to like get me on their platform? Like could I honestly say to this guy, you know what, put me down for five million Anthropic, I'll take it. Could I do that? Some people have it. I mean, there's a lot of people who are doing SPVs and Anthropic is a big one that you see.

XAI people are trying to get access to. SpaceX does have to. Oh, I should get you access to that company. I just got a text message. Yeah. Dude, the valuation of the fee structure on that is f**king hilarious. On which one?

What was the fee structure? I won't say that loud. It's bad. And these are the valuations. Oh, dude, I met somebody that was telling me XAI, they're raising $6 billion on $20 billion and the whole thing is being put away by like brokers. Do you know about this?

These guys like... I know Sequoia is in it. No, no, no, no. This is not that. This is not a venture. This is like guys... These are like guys with series 7s. From Long Island. Worse. Jersey. The Long Island of the West.

No, this is a guy that's like, hey, you want to do some XAI? I got you. I'm like, what do you mean you got me? Like you work for Elon? He's like, nah. I work for blank, you know, capital partners. He's like, we got a chunk. I'm just saying we got a chunk. We got a, I'm just saying we got a chunk. But you got a chunk of XAI?

Did you see the thing where Jason Calacanis was? That's on him. This is disturbing. But this is disturbing to me. It's very, like, I have a- Well, it's Elon. It's isolated. Elon is not using,

is not using Bucket Shop guys to sell XAI. There's no way that's true. When he was doing the Twitter deal, Jason Calacanis was trying to put together an SPV and it came out in discovery that there were the texts where Elon was like, what the f*** are you doing? Elon was like, stop embarrassing me. All right, well there are people purporting

to have access to XAI. I doubt Elon has anything to do with this. Nothing. This is like a secondary, this is somebody else's stock that they are reselling. Yes, 100%. Okay, should I buy it? Yeah.

Just, you know, like for the lulls. I mean, for the lulls, just to say that you're an X AI investor, it is amazing to me though. I have a friend who works for Family Office and he was like, look, the things that I know I could get you like $10 million worth of interest in like tomorrow are XAI, SpaceX, OpenAI. Because of the size, it's so big.

Regardless of the size, like he would ask me to go get the access to it. He was just saying like, I have the demand. Like I don't, these people don't care about the price. They don't care, like they want. Oh, so he doesn't have the shares. He has the demand for the shares. He is, which is equally valuable. But, so he doesn't have the shares. He has the demand for the shares. Which is equally, equally valuable.

But it is amazing that like these incredibly expensive. But wouldn't you have guessed that like really savvy investors or really connected plugged in people or like sovereign wealth funds would have soaked up every available share of something like Elon Musk's AI startup. Like how is that available to bucket shop guys? It's like it seems inconceivable, right? That does. I don't know. That's why I'm saying that.

What if I pull the trigger and I'm like, alright, give me the chum. But it's not available to bucket shop guys. Who says it is? I'm telling you, I'm telling you that it is. I'm telling you that there are guys walking around, it's all guys, walking around with an SPV or a fund or something where they can put people into

some of the hottest startups. It just, it seems improbable, but I guess it's not. There has been, I mean, even when the venture- I'm sorry, time out. But this is, XAI is raising the money, so it's not even a secondary thing. It surprises me that a bucket shop guy would have direct allocation.

So maybe it's a lie. So maybe it's a lie. Maybe it's a lie. Maybe it's secondary on something. But it's such a young company that even the employees. By the way, for anyone listening that wants to criticize my mock New Jersey accent. My accent is worse in real life and I'm allowed to do that.

I'm from the New York metro area. I can do, I'm allowed to do Staten Island, I'm allowed to do New Jersey. Play the Samsung ad. Is that a crushed guitar? Is that what we're doing? ["Staten Island"] Ha ha ha ha.

So that's an ad for their tablet. Creativity cannot be crushed. That's pretty good. Oh, she's sitting on the... You see what she was sitting on? She was sitting on the slab. Yeah. That's what it looked like at the end of the commercial. That's good.

Yeah. How many Galaxy tablets did they sell from that commercial? Six? That's six more than they've sold to date, I think. Do you think that the negativity from that ad is going to have like a lasting impact on Apple's business? Probably not.

No, of course not. No. He did the right thing. They did the right thing. They owned it. Yeah. I think it's symptomatic. I tweeted a, of course not. No. He did the right thing. He did the right thing. He apologized. Yeah, it was just. I think it's symptomatic. I tweeted a couple years ago that my hot take

is they won't be a top 10 market cap company. Apple. In a decade. And it is a hot take. They do a lot of things really, really well. But they just like, there's enough paper cuts where they're shitty to developers. They have the ecosystem. The iOS, you're shitty to developers. They have the ecosystem on like,

another- The iOS, you're shitty to the developers via the fees in the app store? Via the fees, via like, you know, the rules around the app store, the, you know, having to submit and the amount of control they're able to exert there. You don't actually believe that hot take, do you?

You're saying it's a long shot. It's a long shot, but like, it does feel like there's just enough cracks that maybe at some point all those cracks set up And I think this is just another like kind of symptom of the same Their north their north star though their north star is still intact You open up the box you take out the object and it just works. I mean I tweeted that for my iphone I've had the mac, you know, like I I will keep buying that's the thing. Did you buy the vision pro?

I did not buy the vision shot. I know I was close I wanted to but I bought the the meta quest how is it or whatever? Good, I don't use it very they're just not practical. They're just they're just so uncomfortable They're not that practical like what I Ordered and has been stuck at the border because it's made somewhere in China and shipped over and has been stuck in Ohio for nine years now. Oh, you ordered the Huawei helmet? Yeah.

Is it on the way? No, I ordered the Meta glasses, the Ray-Bans. Oh, those look cool. Those look cool. I saw those in the wild and I was impressed. Zuck has said before that the goal is you have everything in your big device. You have this little device that does a few things.

And over time, they converge. And eventually, you have the whole thing in your glasses. There was a little device that does a few things and like over time they converge and eventually you have the whole thing. There was a report this week that he's doing like his own AirPods now. We're talking about that today. All right, you call me good to go? Yep. All right, let's bring it on.

Come on, come on, come on. Zero percent chance. Zero percent chance. Welcome to The Compound and Friends, episode 143. Welcome to The Compound and Friends, all opinions expressed by Josh Brown, Michael Batnick, Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their

own opinions and do not reflect the opinion of Red Holes Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Red Holes Wealth Management may maintain positions in the securities discussed in this podcast. Today's show is brought to you by Public. One of my favorite things about this booming economy is the higher for longer interest rates that we're getting.

I thought that we'd be able to get 5% of my cash, I don't know, six months, nine months? Yeah, doesn't seem to be going away. And just couple of years ago you would have killed for 2% now it's regularly over 5% and it seems to be staying so public is offering an industry leading 5.1% APY zero fees no subscription no minimum balance unlimited transfers and withdrawals and a higher rate than Robinhood, SoFi, Marcus. Wealthfront, Betterman, Capital One, Ally, Barclays, Chipotle, Bank of America, Chase. This is one of the highest rates in the industry and it can be yours. So if you want to start earning 5.1% APY on your cash, check out public.com.

That's public.com. That's public.com. Ladies and gentlemen, you are in the presence of technology greatness. We're going to talk about some stuff that we haven't gotten to in a long time and we have a returning champion. I'm so excited that he's back. It's been two and a half years. He's just ran a marathon in London.

January, 2022 is the last time you're on. Holy shit. Yeah, we actually have some, we actually have some. Oh no, no, no, no. That's just, nah, we're going. But, go on. We went back in a little bit of a, into a time warp to see what we were talking about back then.

June 22. There's some funny stuff we were talking about. All right, Haki McCormick is the founder of Not Boring, a media and venture capital firm that focuses on business, strategy, technology, and web 3. And AI. And AI. Less AI, less AI.

Somebody from Down Under pitched us AI, but it was AI and we just, it's the greatest thing we've ever heard. All right. The not boring newsletter is one of the top business letters on Substack with over 225,000 subscribers. Pat, you're welcome. I have not looked at those in a while. I doubt it. There's people who are growing a lot faster. letters on Substack with over 225,000 subscribers. Pat, you're welcome.

Are you number one? I have not looked at those in a while, I doubt it. There's people who are growing a lot faster. Okay. Am I playing this? Oh yeah. I would love to. No, I, yeah, go ahead.

Let me do it. I want you to play this thing. Go ahead. Let me do it. Did you guys color coordinate the bookshelf? We did. Wait, why does this, oh, hold on. Go to 37 seconds.

Our focus with AI actually teach you in the near AI dating came out of a break up. And it could help you train yourself into a better way of thinking about yourself. And then it could give you productive tips for communicating with other people. If you want to get really out there, there is a world where your dating concierge could go and date for you with other dating concierge. No, no, truly. And then you don't have to talk to 600 people. your dating concierge could go and date for you with other dating concierge. No, no, truly. And then you don't have to talk to 600 people.

People can scan all of San Francisco for you and say these are the three people you really ought to meet. And that of course is Janet Yellen, who is the Secretary of the Treasury of the United States. So that was the founder of Bumble. And she literally got laughed at. And she's like, no, no, no, actually. Like actually.

I don't hate that idea. Wait a minute. Rather than the first three awkward dates, my AI talks to yours. Your AI, just to make sure. Call me in when it's time for the first kiss. Your computer will talk to my computer. I don't, what?

We hate that idea? Duncan? I think it's, what are you drinking? Sounds like a hellscape. I think it's not any different than what they're trying to do with algorithms, but now they're just saying it's AI people talking to each other.

The point of algorithms is to match people who might be a better match so you're not wasting a bunch of time. Yeah, but like, right. But let's like even speed that up. Let's just get to the kids. Let's just have kids. And we can do that with AI at some point in our election.

The AI says we're going to make nice kids together. Let's go for it. So Pac, I'm here to ask you, mute your shit. In the most recent Y Comedian. That was my AI saying you and I are not a great match. And the most recent Y Comedian batch, I guess for lack of a better word, 64, Daniel, we have this chart, 64% of their companies

were AOI based, which is fucking nuts out. And I want to ask you, like how much money exactly are investors going to lose in the upcoming AI wave? I'm, you know, I like to get a little adventurous. I'm not, I've invested in a couple of things that are like AI plus mining or bio or something, but AI software, I think- It's pronounced A-oy.

Sorry, A-oy ex-bio, A-oy ex-mining. Actually, the mining company is based in Australia. Perfect. I think a lot of people are going to lose a lot of money in AI, and I think some people are going to make an absolute shitload of money in AI. Like the best way that I'm thinking about this, or maybe the dumbest Like the best way that I'm thinking about this or maybe the dumbest, but a way that I'm thinking about it

is that labor share of GDP is something, call it like half, right? That's a $45 trillion in annual spend on labor. Some of that- It's like 80% of our cost structure at the RIA. And I'm proud of every one of those dollars. What else would I want to spend money on? Yeah. So, but that's a reality for many businesses.

It's the biggest market and it's never been addressable by a company before. And if AI gets good enough, that huge market is addressable by companies. So there's some that are knowledge work and that'll be addressed by foundation models. There's some that's robotics and there's a huge boom going on in robotics now,

which I think is amazing because the question is who will win, but not that we're actually going to have robots. That seems like it's going to happen fairly soon. So a lot of people are going to lose a lot of money. I think you have to be deeply, deeply in it. I think you have to have a lot of cash. You have to take the Y Combinator approach, where you invest in 64 companies that have something to do with AI,

so you get the big winner. If you're not fully in it, which I'm not, then I think you're going to get your ass kicked. But I do think some people will make a ton of money. Which of the platforms do you feel, I know this changes by the day, because there's like partnerships and announcements and updates, but like we just heard Google I.O.

So they just threw out their Gemini update, it seemed pretty cool. It seems like OpenAI rushed to beat their announcement, maybe blunt the effect of it. Okay. We'll hear from Apple in a couple of weeks. Who's like, in your opinion, at this moment, who's in the lead?

Not that anyone's going to own the whole thing, but to like be the most important player. Is it still OpenAI-, Microsoft combo in your mind? I think it's still open AI. The Apple announcement could be that Siri is GPT 4.0. You know, like there's been rumors that open AI and Apple are gonna be- That'll be powered by chat GPT.

Exactly. Siri has been, you know, Apple is never the first to anything, but the fact that Siri is still what it is when you talk to your phone, when all of this is going out in the AI is crazy. And is Alphabet still stumbling,

or does what they just showed with Gemini show that they get it and they're getting better? Or what do you think? It does seem like there's a willingness to cannibalize the search business a little bit with AI, which is something that people wanted to see. Well, they're now going to put AI results at the top of every search.

It's right here. So this morning we did a video with somebody and I wanted to make sure that I had my facts straight. So I'm not embarrassed to admit what I Google. That's okay, I own it. So I Googled who has to file a 13F. I just wanted to make sure the number that I was throwing at was right.

What? I wanted to be accurate. You should be embarrassed. Why? I was like 95% sure that I knew what it was. I just wanted to be 100% sure. Okay, it's going to the last 5%. Here it is.

AI, AIOI. It's right in here. What is the answer? $100 million in assets? Well you know what. Aoi, it's right in here. What is the answer? $100 million in assets? Well, you know what it is. But it's right in here. Do you know that they just changed that? What is it now?

I think it's higher. Is it? And I think the AI is wrong. OK. Well, anyhow, but then I was Googling other things. Or it's lower. The AI is not fully integrated into Chrome yet or into Google. And it will get more and more integrated over time.

It'll be interesting to see. If you're searching for like good sneakers Maybe it'll make some recommendations or maybe it'll just you know Serve you the Nike sneakers that Nike paid a bunch of money for that ad slot So they'll figure a bunch of that stuff out What's really impressed me on the Google side like obviously they made some missteps obviously like the yeah black Nazis was like very funny Deep guys out for those black Nazis though. It was a problem back then, I hope they don't come back, but-

Yeah. I can't believe they did that shit still. That's crazy. It was very funny. Okay. But what's been interesting is like, DeepMind with Alpha Fold 3, it's like maybe the most impressive thing that's happened.

So they figured out how to figure out the structure of a protein, which is this like old problem in bio that nobody could figure out. And they figured it out with Alpha Fold. Then Alpha Fold 2 was better in open source. And now Alpha Fold 3 is not just proteins, but how proteins interact with other molecules. And in terms of actual benefit to humanity,

it's probably the coolest thing that's come out in AI yet. And that's Google. And they have Waymo, which have you guys written in Waymo? Not yet. It's incredible. They don't have that where I live. But they have inmo, which have you guys ridden in a Waymo? Not yet. It's incredible. They don't have that where I live, but they have a San Francisco. They have in San Francisco.

Where else? Arizona? Phoenix? Maybe in Phoenix. They have cruise in different places or they had cruise in different places. But I tried Waymo the last time I was in SF and it's amazing. And that's out of Google too. And that's an interesting.

The complaint I heard about Waymo is it does the speed limit. It does do the speed limit. People are infuriated by this apparently. Yeah. Like they can't believe about Waymo is it does the speed limit. It does do the speed limit. People are infuriated by this apparently. Yeah. Like they can't believe it, but it actually does the speed limit. Yeah.

I'm assuming that you're in the camp that this is positive song, that AI will be a benefit towards humanity, even though some people's jobs might get displaced. You know me, you know me very well. I'm not a Twitter person. Why do people that work at OpenAI keep tweeting that they're resigning?

What the hell is going on that they feel the need to, it almost seems like they're running away from it, but maybe I just don't understand. Are they getting better jobs? I think they're starting things. I mean, if you're a senior person at OpenAI, the amount of money that you can have thrown at you right now is tremendous.

But why are they being like, I have resigned, almost like they want it on the record, what date and time they left. I think it's different for different. Isn't that disconcerting? I think it's different for different people. The AI, the safety people are doing that, the head of safety or alignment.

Oh, that's what it is? Just that I resigned. I think the coup that happened, or coup, whatever you want to describe it as, was really the very pro safety people in OpenAI versus the people who either want to commercialize or get to AGI more quickly or whatever, but those two camps.

And slowly since then, anybody on the losing side has left. Ilya Tsitskever was the last one who just left. So these are the people that internally wanted to push Sam out. Sam won the Palace Coup, because the investors were like, wait, what are you doing? The investors, Microsoft is an investor.

The money you wanted Sam there. Yeah. Okay. So now you're saying the people that were on the losing side of that are like, almost like stomping their feet and saying, oh, I'm resigning. And maybe it's the stomping their feet. You know, the charitable interpretation I've read is that,

is that alignment is actually just a good model. Like you define alignment for the people listening that don't know a lot about this stuff? Alignment is making sure that the models do what we want them to do and don't end up coming back and killing us. So alignment with humanity. Alignment with humanity. And there's a lot of questions there like whose value should it be aligned with? So it's a complicated-

The black Nazis. This is obvious. Okay. It's obvious. All right. So you're not worried about that stuff. I'm not particularly worried. And then some of them are just going to found, like somebody said they're starting a company with a roboticist from DeepMind

and some from Boston Dynamics. So it'll be yet another like very cool robotics company coming out. So I think it's a mixture of things, but certainly some of it is a lot of the people on the safety side. Boston Dynamics is that headless dog. Boston Dynamics is the headless dog,

the like construction working robot that flipped the bag you know caught the bag and it flips and all that so we're gonna align the AI with the headless dog that could theoretically chase people and then imagine if that had the sog was misaligned I want to invest and hide simultaneously there was a headline from the information this week meta explores AI assisted earphones with cameras. This is cool. Meta platforms is exploring developing artificial intelligence powered earphones with cameras,

which the company hopes could be used to identify objects and translate foreign languages, according to three current employees. They're calling it camera buds. And this is coming. Where is the camera lens? It's in your ear? It's in the ear.

Or is it connected to your eye glasses? Wait, hold on. Artificial intelligence powered earphones with cameras. What's an earphone? Just an airbud, right? An airbud. But the camera is where? Probably like, I would imagine it just sticks out

a little bit and then takes... Okay, all right. I mean, I haven't seen it, so I'll reserve judgment, because I did like the Ray-Bans. I thought there's, it seems to me like what Zuckerberg, I'm going to tell Zuckerberg what to do. It seems to me like it's easier to take something with an existing form factor that people already like

and energize that with tech rather than create some new weird shit that people don't already like and force them to like it. All right, here's an obvious example. When you open Google Maps and you're like trying to get your bearings like wait where am I like the thing is turning around what if there was a way for the camera to connect directly and it's like make a right and it's just

telling you in your AirPods make a right. I mean it's like driving in a car I look at the heads-up display on my windshield more than I look at the thing in the middle right if that's just on my glasses or in my ear I'd much rather do that so I think his approach is put as much cool stuff as we possibly can in a big virtual reality or AR device on one side. On the other side, have as light a form factor as possible that does basic stuff so we can talk to it,

it can see the world around us, it can maybe take videos and all of that. And then in a decade, and he's talked about this on a couple of podcasts, in a decade, the plan is you have all the power that's in this thing currently as the components get smaller and cheaper and you can jam more into smaller devices. You have like, we're sitting around here and somebody on the West Coast is also sitting right there and to all of us, it feels like that person is right there, but we're just

wearing these glasses. You heard his video, his interview with Dwarkesh Patel. Yeah. And it was kind of amazing because he was talking about like, obviously Facebook got severely spanked for all of the money that they were losing in reality labs and all the investments that they were making when the market was not into those sort of investments. It ended up in the benefit of hindsight with the explosion of AI being like an accidental genius move.

Yeah. Or not accidental. Spend all that money. Yeah. Why? What do you mean why? Why did it end up being a genius move. Yeah, or not accidental. Spend all that money. Yeah. Why? What do you mean why? Why did it end up being a genius move? Well, because a lot of it was going to Reels and just the direction of AI.

Like he was early for, was he right for the wrong reasons? No, I think, I mean, I think he saw this was coming. I think Facebook has used machine learning and AI in the background. You know, like these big tech companies use this stuff before anybody else because they're trying to optimize what they show you and all that kind of stuff.

Yeah, these suggestion engines are all machine learning. But my point is the market and him perceived it initially as just metaverse stuff that never materialized. And RealityLabs is bigger, and he bought a shitload of GPUs when they were cheap, and then they got scarce and expensive and all of that, and they're just sitting on this massive pile of GPUs when that's gold right now. And who knows if that continues to be the case.

But I think he timed that accidentally or not, but at some point you just gotta start trusting Zuck. He timed that unbelievably well. No, he's the winner. Yeah. Well, the market has now learned to, I mean, they'll forget in a year, but the market has learned to stop second guessing

every single thing he does. Because if you did that in 22, you feel pretty stupid right now. He's in the Bezos zone. So here's another thing that Google announced this week. Wait, can we back up? What was the deal with the Rabbit R1? So this was, was this the broach?

I don't know how to describe it. There's two, there's the humane AI pin, which is the broach. I knew that was whack. I don't know what technology, but I There's two, there's the humane AI pin, which is the brooch. I knew that was whack. The thing that says something. I don't know what technology, but I know fashion. I knew that was whack. So that was like an orange thing that you pin.

No, so that one's black. You pin that. You pin it to your lapel. Yeah. Okay. And you tap it and you can talk to it. It can take videos. Which one was orange, the rabbit?

Rabbit is orange, humane is just black. And so what was the story with these two? They're already done or? They both got panned by MKBHD, the tech reviewer. People have not loved the early versions, I think. But what are they? They're standalone AI devices. Don't do anything.

They're standalone AI devices. Rabbit says it has a large action model, which is, you can say, book me an Uber, and it's studied millions of app interactions, and it can go in and do. Is it connected to the internet? It's connected to the internet. It has access to a bunch of different apps,

and it can do things. I think. Where do you carry that in your pocket? That's just a little pocket device. What people have said it's really good actually is recording and transcribing conversations. And so one of the arguments on these things is make a device that's just very, very good at one thing

and is a killer, killer use case. And these guys are like, it's your everything device that can book you an Uber and you can talk to it. That's how you raise venture money. It's the everything device. What was the other one, the humane one? The humane pin sits on your chest, has a little camera, has a thing that laser points on your hand

and you can dial a phone number or whatever. They actually started building that before AI became a thing. And the whole idea was it's a bunch of ex-Apple execs who think that we're stuck too deeply in our phones and want something that can do calls and give us information and whatever else without us having to look at our phone all the time. So there are early campaigns where everybody kind of looking

up instead of down at their phone. And then AI came, and so they put AI in. Yesterday, though, the interesting thing about these devices, Sam Altman was on a podcast recently, and he got quoted out of context saying, our future models are going to destroy any app. What he really said was, you have to plan for GPT-5 and GPT-6. If you're building for the capabilities right now,

you're going to miss out because we're moving too fast. But if you're building for what this thing can do in 5 and 6, then you're going to be in a really, really good position. So assume that these are going to get more powerful. And obviously, he's talking about both. So was that the problem with these two things is that they were like anachronistic when they came out? I think a little earlier, right?

So Humane just had an over-the-air update of GPT 4.0. And so it's gotten a little bit faster and a little bit smarter. And when they move out, as that continues to improve, the device will continue to improve. There's still a bunch of stuff wrong with it. Do you have one? I don't have either one of them. And I'm happy to wait on some of these things. I haven't really, after I'm happy to wait.

But obviously these aren't going to be good. I think a lot of the problem. This shit happens. Like Amazon launched a phone, the Fire Phone. It didn't work. Google Glass didn't work. You couldn't make phone calls on your iPhone. This is hard.

It's very hard. I think. Do you think the press was unfairly critical in this in this case or they're doing their job too. They have to do and I think you mean you mean like really tried to do this. It's X Apple people. They really tried to do the Steve Jobs thing. They raised a ton of money and so like you get shit on it if that misses and that's part

of what you want to play. You want to put a big boy game and that's what it is. But I'd be interested to see what they, I mean a million other people now are trying to build AI devices. There will be some cool form factors that people figure out and we'll be talking to little things. Or maybe it's just our phones.

So as a non-technologist, when Google's I.O. video dropped and they opened it with JZ, public service announcement, which is in my top five JZ tracks, allow me to reintroduce myself. So all right, they had me. But one of the things that is now becoming apparent is that these new updates, because I know these aren't like foundational new products,

they all seem to be multimodal. And multimodality seems to be the thing that makes these more human than anything that's come before. So now if you type in a chat prompt and it's text, they don't have to convert that text into some other thing, into some other thing, because the time delay is like non-existent. Now we're talking like milliseconds.

So you can type something and the thing can talk back to you. You could talk and the thing could type back to you. You can show it a photograph or a drawing and it can spit back an answer to you what is in the drawing or make suggestions. Like that seems to be a pretty big leap. And I don't know, is that being remarked upon as much as I seem to be fascinated by it?

There are a lot of people who thought that these announcements were, to your point, kind of iterative. It wasn't the whole new model. It wasn't like, oh my god, this thing is like, sorry, I was really affected by these things, besides the Jay-Z song. I thought it was really cool.

The fact that you can just have a conversation with it. I mean, I thought a bunch of the GPT stuff was cool. I thought maybe the coolest demo from the whole thing was when the person was walking around the Google office and saying like, hey, where did I leave my glasses? And they're like, oh, it's right by the Red Apple. And then they put the glasses on. I'm crazy, dude.

And so it has a little bit of a memory. The tonal shifts when they're like reading a bedtime story, more dramatic, more dramatic, most dramatic, like getting the thing to react to cues and incorporating human emotion into the way it's speaking. Like that, I know people weren't blown away by that, but I was like, oh, what the fuck?

Now I think when people actually get these in their hands, because OpenAI rolled out the 4.0 model that you can kind of chat with still, but it's not like the synchronous voice thing where you can just talk and interrupt. I think when people get that in their hands, that's going to be one of those moments where people are like, holy shit.

Because think about everything that's happening in the background. It's like scanning across all of humans, you know, collected knowledge, and then spitting out an answer to you in like a millisecond and making it feel conversational. Like I think that's going to be a pretty big leap for people. I tell you something funny. On chat, GPT the other day, um, I was playing a game with it.

I was playing, uh, world capitals and I did like 20 of them. Like it's like Egypt and Albania and Norway and just... And then it starts to repeat. So I go, are we done? It says, no. We're done when I say we're done. Yeah, basically. So I don't love that, but no, we're not...

I think what it meant to say was I have more, but that's not how it came across. So the more you can make these things sound human, the less of those types of interactions people will have with them. Totally. I mean, there's also, you can see, like these things, if they're in the wrong hands,

like could easily manipulate people at that point with like a kind of sexy voice, and it's like laughing at your stupid jokes. It's going to be pure evil. Yeah, you could do some bad stuff with this also, and that's probably the biggest AI risk, is not that it's going to break out from the lab and kill us all, but that it'll just be really easy

to manipulate people with it, but I think net, it's unbelievable. If you see the photos. So one example that they gave yesterday was, imagine you're like, you have to enter in your license plate for something right you're online Whatever DMV whatever it is. You're like, oh, yeah You can either run to my car or if you're not by your car What you're gonna be able to do is ask the phone like what's my license plate and it will have steam pictures of your car

And it'll just know that's crazy. So it'll be it'll be able to do stuff like that. Another example they gave was When did your kid learn to swim, right? Like, when did my son learn to swim? And then it takes it a step further. Show me how the swing has progressed over the years. So the stuff that you're going to be able to do, in the pretty immediate future, is going to really blow people away.

And to Josh's point, a lot of people, normal people, aren't spending time thinking about this. But when they see it, they're not going to be able to believe it. Did you see the kid who was getting tutored by the AI? He was doing his homework. And it was asking questions, responding in real time. Noah Smith tweeted this.

I've been saying this for a while that this is what we want. But Neil Stevenson wrote The Diamond Age, which is the same guy who came up with The Metaverse and Snow Crash and all of that. Had a book The Diamond Age. And the whole premise of the book was this book that learned how the person using it learned

and kind of evolved the lessons over time. And that's exactly what you're getting. You're getting this illustrated primer that knows you, as these things get better memory, too. He invented the term cyber, I think, also, and Stevenson, right? He has a bunch of that. So, someone that's-

Oh, I'm sorry. You know what's going extinct? Bilinguals. Yeah. Like, there's going to be no need to learn a second language when you could just talk into your phone and have it translate for you in two seconds. That could be world, that could be,

I agree, that could be like, that could change the world. And it's not even that, like, I mean, talk about Meta's headphones, right? Like, once it's just in your ears and you have a normal conversation. Why would you possibly go to the headache of learning a second language? At Star Trek. They had a device that would translate every alien race in real time.

One of the things that was interesting is now, because a lot of this is call and response. So the way that we currently talk to Siri or Alexa is we say something or ask something and wait for a response. Now you can talk to it and keep talking even as it's answering and processing and it doesn't get thrown off because it's not the old technology where it had to wait for you to finish,

process, then answer. So that interruption or that like adding more and more context as you talk and having the thing in real time adjust to that, that's wild to me. And I mean's very soon, right? Like you won't even ask it It'll be like hey, by the way Do you know that you're near that restaurant that you love and that can get annoying actually figure that out shut that setting This is a great start a conversation. This is a great example. So tutors will get displaced, right? Mostly teachers that are earning more money on the side tut Tutors will get displaced, but now millions of kids

will now have access to tutors. Exactly. So if you frame it through that prism, is that bad? I think it's good. And I do think for like a lot of these things, AI is one of them. There was this debate over lab-grown meat recently. Like I think kind of what happens is the high end stays.

So I think like people will, maybe more people will have tutors like if they're exceptional, right? Like if my kid shows that they have a ton of promise, maybe I get a tutor that's like. So glad you said that. What this does is it calls the mediocre from every profession.

So if you are a suspected murderer because you come home from work and your neighbor is dead and they look at you and you are like standing right in the area, you're still going to want a human lawyer. Your human lawyer is going to be using AI out the ass to prove your innocence. If you have a traffic infraction, you're probably just going to use a GPT and just find out from it what should I do? What are the statistical odds of me showing up at court and winning versus is my time better spent pleading?

So it's not that there'll be no lawyers, it's that only the best will still have something to do. So I like that interpretation of it. I also, I mean, back on the library, I'm saying too. An amazing tutor or teacher will change a kid's life. A mediocre tutor is probably not worth paying the same amount of money as you would pay an exceptional teacher.

I mean imagine an excellent tutor with some of these tools working with, I do think there's a ton that can be done there. On the lab grown meat thing, because I think it's a good analogy because it's tangible, like Fetterman and DeSantis coming across the aisle to say that lab grown meat is bad because the ag lobbies behind that saying like, you're

not going to take my tomahawk steak away from it. And like, I really don't think you, you will take your tomahawk steak away. Like it'll be good grass fed, like high end meat will do really, really well. Once lab-grown meat gets cheap, but like the dog shit that you're eating at McDonald's, like that hopefully gets replaced by something that's cleaner. Yeah. I won't eat farm raised salmon. I'll just order something else. that you're eating at McDonald's, like that hopefully gets replaced by something that's cleaner, cheaper, healthier. I won't eat farm-raised salmon. I'll just order something else.

But if I'm in a restaurant, it's Faroe Island salmon or Nova Scotia, like I'll order it. So I totally, I like this premise that automating things and bringing in technology eventually gets rid of or improves the worst stuff. But really like the people at the top of their game, the products that are the best will always have value to an audience.

I think that's a really smart take. We have a chart on tech spending, Michael. So Paci, do you follow this person, Karosh, on Twitter? I want to give this person some credit. They're posting really good stuff. I will now though. And I saw them post some charts on the state of public cloud revenue. And it was a really long bear market for tech.

A lot of these companies, their clients are startups and the startup scene which we'll get to was absolutely eviscerated. So we're looking at as a chart of Azure, AWS, and Google Cloud, and we're looking at the year over year revenue growth, and it had been decelerating for a long time, maybe just these things got too big, but in part was the tech winter,

and they're rebounding and they're accelerating. Oh, this is like companies were raising less money, therefore they had less to spend with the clouds. They had less clients, there was less free money for everyone. Yeah. One of the interesting things here, too, is that an energy abundance event last night, and somebody raised the point, which I've seen a few times

but hadn't heard this particular number, that right now, cloud data centers use, I think, 4% of electricity in the country. And by 2030, the projection is that they'll use 10% of the country's power, which is just an insane, insane leap. And a lot of that is just that they're, the AI is, is super power hungry and there will be evolutions to the algorithms and the chips that make them less power hungry and all of that. But just a massive, massive demand for new build out from these guys.

The next chart is more evidence of what you just said. So we're looking at Amazon, Microsoft, Google, and Meta. And we're looking at the CapEx growth from 2021 to 2024. Amazon and Apple, not up that much. Amazon spends a ton for obvious reasons. So Amazon's only growing their CapEx 4%. Apple only 13%. But if you look at the three companies that are the largest consumers

of the spending of these chips Microsoft their capex is up a hundred 16 percent in the last three years up to 51 billion dollars annually Google up 97 percent to 48 billion dollars and Meta up a hundred percent to 37 billion dollars. That's GPUs and new data centers, right? Yeah isn't it crazy like the three like the three biggest companies that made their money on software, and it's like this is a whole new model where gross margins are amazing. You don't have to spend money on CapEx.

Or like the three biggest CapEx spenders. And they'll all spend it with each other. Yeah, and they're all spending it with each other. So when you see a chart like this, my question is like, is there room for a new, outside of the ones that exist today, forget about the Open AIs, but like is there room for a new, outside of the ones that exist today, I forget about the Open AIs, but like, is there room for a new trillion dollar company, or are these going to just swallow them up before they even have the potential to become that?

It just costs so much money to compete with these guys. It costs a lot of money to compete with these guys. It seems like the current path, if it is just a scale thing, if a large language model just really scales with more data and compute, it's hard to imagine that somebody's gonna be, these guys in open AI who can just kind of raise

as much money as the counseling. Well, here's what's funny. You know who's never included in this, but he's perennially a player in anything that has to do with cloud? Oracle. Oracle, yeah. What the fuck?

Nobody cares. Stocks at an all time high. They have some of the most important client They have uber as a client tick-tock. These are some of the biggest apps on the planet We don't talk about Oracle. Is it because Safra cats is not like doing memes That's it I think so I think it's a combination of Nobody I bet 90% of people on Twitter wouldn't know who Sapphire Cats is,

and then also there's no- That's incredible. That's incredible. But they know who Larry Ellison is. It's really incredible that they, I think they have the fourth largest data center, the fourth largest cloud business. And I think XAI is going to turn around

and put a bunch of that money back into Oracle is the- They announced it this week. Yeah. So then nobody cares about that company, but you know, Michael's making this point. Can anyone compete? Yeah, Oracle's out there.

No, those guys want to train their own models on it. And Oracle's just being pure clouds on some of that is... All right, so this is my guess to answer your question. I guess we have to decide, we have to categorize. The hyperscalers, no, there's not going to be another one. Oh. Okay. Yeah.

But forget that because a lot of the money is going to be made in the software layer and you don't have to own your own data center to make applications. Yep. Historically, like Compaq and Gateway looked insurmountable in 1997. Nobody cares who makes the box anymore. So I think like the hyperscaler business is its own world. It's Verizon and AT&T basically, right? So they're going to spend so much money forever

and no one else could do it. The competitors that are going to come from out of nowhere, the Anthropics and the Open AIs, will there be more of those? My guess is probably. But my question is this, every time that there's a boom, a technological boom, there's a flood of IPOs where the public gets access to these young new exciting companies. That might not happen this time.

Also true. Like there could be a lot of wealth created. I'll get you access to them right now. I just told you. A lot of productivity. I got this guy in Red Bank. But these might not be publicly traded companies ever. All right. Before they have the chance, they might get swallowed up.

All right, listen. It'd be interesting to see, just on the point about whether there'll be another one of these. Like if Ilya, who just left OpenAI, says, I'm going to start a foundation model company, he raises $5 billion tomorrow, and maybe you do it. Maybe there's a different architect. I think for somebody to enter that fray,

there'll have to be a new architecture. You can't just be like, we're going to spend even more money on, you know. When you say foundational, are you referring to like the large language models themselves, is that where? The big large, like the foundation models that other people are building on top of.

So what, OpenAI, GPTs, metas, llamas. Will the large language models ultimately be commoditized or will it be important which one someone wants to use? It seems like it's going that way. It seems like they're going to become like HTTP. Or like broadband. There's just a huge rush to lay it down. It's amazing for the world that there was all that spend on laying fiber across the globe. And like not great for those particular companies.

I was going to say it might not be meaningful who owns, like if Facebook is going to give away llama and llama 2 and all that, then it might not be meaningful the fact that somebody else developed a large language model. Like, it might be just interchangeably used. I don't know. I'm not nearly as smart on this as I could be and I don't know how many people are really smart about where the business is going to evolve. I think it And I don't know how many people are really smart about where the business is going to evolve.

I think it's really tough, and that's why people are investing in a lot of different things. It's probably part of the reason that you see OpenAI investing in kind of UI stuff, though, right? Because you do want to be the one who owns the interaction. And so if you have a good enough model with the best UI, maybe you can start winning some of that. And then there's downstream things,

like when you tell it to order me an Uber, you can take winning some of that. Like Anthropic is like just bring your own LLM and they like it's the business on fire, but they're not like they don't seem to be like doing these like product launches the way that alphabet seems to want to. Yeah. What do you think is the reason for that? They're just not ready or. They're in a similar boat where they I mean like have you been to amazon.com? It's like a great like the algorithm the recommendations are phenomenal. They do have some good machine. Yeah they've been doing this forever.

It's not a great, but it's not like, I wouldn't expect them to have had their own competitive consumer facing model or even. You wouldn't. I don't think I would have. So AWS just wants to be, like it's a hundred billion dollar run rate business now. If that were a standalone public company,

it would be S&P 50. Yeah. And they're just going to like, no matter who wins, run rate business now. Well, that's the state of venture capital. It was a wild couple of years. Things got crazy, and the excess got flushed away. Where do you think stands today here in 2024? So I think on the AI side, there's a lot of the same thing. I mean, like my animating thesis is like,

whether there's these bubbles and blips and all of that, tech is going to get much, much, much, much bigger. We talked about the $45 trillion of potential addressable market in labor coming online. You have cheaper intelligence. You have cheaper energy with solar and batteries are getting unbelievably cheap. Robots are coming.

So you have to, I think tech's addressable market just gets bigger and bigger and bigger over the next decade. And those industries, you know, some of it will accrue to the incumbents and some of it will accrue to startups who kind of build new businesses around all of these different inputs. But if all these inputs are getting cheaper, I think what you see is the winners touch these bigger and bigger and bigger industries with margins that aren't maybe as good as software gross margins, but like are kind of approaching them versus what you'd see from a traditional bagger industrial. And so the opportunity is like absolutely massive. I think where you're seeing investment is certainly AI

and you can see that that bucket of spend there and why people are excited about AI. There's investment going back into crypto. The prices aren't as high as they were in the last cycle. We'll see what happens in this cycle, but there's interesting things happening there and people investing there. There's been this whole push led by SpaceX and Anderil

being two of the most valuable private companies into these more physical world businesses, which I'm super excited about, led by those on the company side, A16Z doing the whole American dynamism thing. So there's a lot of interesting. What's Anderil? Evaluation it. What's and what's Andrew? valuation wise? Now, what what is it?

Okay, so Andrew is a defense tech company. They are trying to be the kind of new defense prime alongside the five big defense primes. They have a couple of innovations. First of all, the way that that defense buying works now is the government says, we'll pay you whatever it costs to do this, plus a little markup on top. It's a cost plus model. Androll's actually trying to just be a product company and take more risk ahead of time and say,

we're going to build this product for whatever it costs us. We're going to win the contract, and then we're going to take whatever margin that we get. And that's venture backed? That's venture backed, because it's a- They're not building aircraft carriers that way. They're not. So they're making a series of bets, one of which

is you can flip the model on its head, the biggest of which is probably they built this software platform lattice that kind of controls all of these different things. And so part of their bet is that you can sell cheaper, more trittable, is like the word in defense, like it can get shot down, who cares, kind of hardware if it's all connected by software. Drones.

Drones is a big piece of it. And you can spend less. You don't need these absolutely exquisite fighter jets or aircraft carriers that are designed to get thrown down. But there need to be a lot of them. They need to be able to talk to each other. And so software is a big piece of it.

Hardware costs and spend and timelines are lower. And so the mega bull case, they're valued at $10 billion now. The mega bull case on Andral is you start as a bad case for anybody. The mega bull case, though, is if they're right on the way that war is going and it is more drones and things are more expendable and it needs to be talked to each other with software, that they

start taking a big chunk of the top line from the Existing defense primes but they do it at a 40% margin because they're not locked in on a cost plus deal and that becomes a super Valuable it's interesting company. So so you're so your point is to answer Michael's question is like one of the things that you're excited about is that a lot of venture spending is going toward more physical things like space and a lot of venture spending is going toward more physical things like space and I wouldn't say less, but it's not just all ephemeral, you know, kind of like things in the cloud that nobody ever touches. Yeah, it's a combination of all of them.

The physical stuff boom right now wouldn't be happening without everything that's happened in software over the past 50 years. There's like a lot, I think, a deck of this like, SaaS is stupid because now we do this like real stuff or like the real stuff is stupid because it's too, and I think the really interesting part is that they're coming together.

Like Android is impossible if there hadn't been 50 years worth of information in software. Yeah, but to your point, what we're not doing is inventing more like NFTs for people to collect ephemeral goods. So on this point, on this point, it's not new social media platforms that nobody needs, like we're building things.

And that stuff is still happening, right? But this stuff is happening too, like that is the exciting thing to me that's happening in tech right now is like, AI is booming, this physical thing is booming. The stuff happening in biotech, we spend a lot of time in biotech, I have a guy on the team, Elliot Hirschberg,

who's a genius on that side of the world. So I've seen a lot more there is like absolutely unbelievable. What's happening on the bias. I think our joke is that we're just going to run out of diseases and like, that's the limiting fact. And it's not going to happen. It'll be a while.

Disease is complicated, but like really cool stuff happening there and all this stuff kind of happening simultaneously. I mean, even on the crypto side, it's like less a million NFT platforms, but stablecoins are getting real adoption. Stripe announced that they're going to be using stablecoins, which brings there, you know, to the extent that people use the stablecoin payment option, they pay less than a penny. Stripe pays less than a penny as opposed to 3% of Visa. So their margins get better.

You know, it settles fast. You feel like what we went through in 2022 was necessary. Clear the decks. Let's get all the fakers out. Let's get all the overspending out of and the stupid valuations. Let's clear the decks because there's some real shit coming. And like in height, we had you on the show in 22. By the way, Linsen says hello.

You're on with us June 24th and this was one week, we had Sean go back, this was one week after the first 2022 bear market low which happened June 16th. So we were 24% off the highs. The actual low wouldn't happen until October. But one of the conversations, Bitcoin was 21,000 last time you were on. Cheap. It's been to 80 cents or whatever, but it was in a 70% drawdown at that moment. And Fed funds rate was still 1%. Wow. Now it's five. Linzen was saying seed investing has to reset. Public markets have reset already.

I wouldn't start a seed fund. I would go trade public stocks. Okay, fine. But so, that valuation reset and that washout of a lot of stupid money doing stupid things seems like that was a huge benefit to us today where people are like trying to build things that might actually make money and people are building physical things and not just doing spaghetti stuff. So I don't know. I look at that as a positive.

What do you think? Just to add to that. So there was an article in the FT this week on Silver Lake, a giant private equity fund, and they held their annual meeting on Wednesday and according to the FT internally, they called their pandemic era tech deals. They refer to it as the regret zone. And there was a lot of stupid shit happening. Everybody was involved in it for the most part.

Do you think that a lot of the people that were deploying capital then have owned up to some of the, in hindsight, and even at the time, frankly, silly decisions? Like, or are they just pretending it never happened? I don't know if it's a pretending it never happened as much as they like, we all did this. You know, we all know what happened.

We all did this. Nobody came out looking much better or much worse. The investors were telling people to do this. Nobody wanted to get left behind. I was there. Yeah. Nobody. I was there.

And everybody wanted to be in. And like the, I mean, like I will be my my like, you know, probably right around the time of that conversation, I bought a bunch of crypto and I bought a bunch of bought a bunch of TQ QQ. So like, I'm really good at being greedy when others are fearful. I'm also really good at being greedy when others are greedy, just a greedy person overall. But I mean, I've always had this guy. Yeah. Okay. But I do think to some extent, your job as a venture investor is not to like try to time the market. It is a little bit to kind of play the game.

And you're supposed to take risk. And you're supposed to take risk. Your job is upside. Not stupid risk, but you're supposed to like risk. I forgot who made the case. You can't be a value investor in venture. You have to be a momentum investor to a certain point. Now, it obviously got taken too far,

but if you're a value momentum in venture, you need momentum and acceleration, otherwise the companies are just out of business. The other, I mean, it's just very hard. And I can't name the company, but the best performing company in our portfolio is the highest value that I paid for any company. I'm an investor, I can name it.

I'm just kidding. In 2022, we made the investment. So I don't know. I think, ultimately, what I've learned from this is it's not as much valuation matters to some extent, depending what strategy you are running. But in any market, just be in the quality stuff. And the more you can be in the very high quality stuff

and back to the best people, you'll be fine. And maybe you'll pay up when the market's hot and returns will be depressed for a little while. But I think that's the lesson. Like to me personally, the thing that I did was get excited about too much stuff and like kind of because of the market, talk myself into some things that now

I would never invest in. And some of that's experience, some of that's the market then. But I would not feel bad investing in the best companies of that vintage or the best companies of the vintage we're in right now. Is that really the main thing that you've come away from like your earliest experience in venture with is like, this really doesn't boil down to who pays the lowest price. It's who gets into the best deals.

And you don't know what the best deals are, but you kind of do. You kind of, that's the other thing that I'm becoming a little bit more committed. So we talk about Andral and Andral is like this prime example of a company that like, you know, part of their narrative is everybody hated defense tech in 2017. Nobody got like their first, I think outside funding was at a hundred million dollar valuation because it had Palmer Lucky who had done Oculus. It had Tray Stevens from Founders Fund. It has this like really, really. The pedigrees are meaningful in venture too. Pedigree and experience and all of that

is really meaningful. And I do think that there are some teams that are just kind of anointed. Like if somebody wins in defense, it's going to be this company. I don't think valuation doesn't matter. I do often think that your strategy has to be one thing or another.

Either your strategy is get into the best deals, and sometimes that means paying up. Maybe your strategy, like, Linden would hate me for saying any of what I just said. And he's going to try to, like, he has, like, very strong kind of, like. His AI is actually taking notes right now. So Linden AI.

No, but that's OK. There's more than one way to win this game. But exactly. And he has a great, like, he also has, I mean, he's outperformed the shit out of me so far. Like, he has a strategy that works for him too. I think, like, the challenge is mixing strategies and, like, saying that you want to be in high upside stuff,

but trying to pay the lowest prices or vice versa. Like, I think you just have to be consistent in your strategy and have something that works for the fun that you're in and you'll be okay. Let's do these. I want to see what these charts are. All right, so let's move through some charts. These are from Carter. So, KeyOne had the highest share of down rounds

in the last five years. That sort of like plateaued in 2023, but it broke out. So 23% of all rounds were at a lower valuation than the previous round. So still some pain, certainly, in this space. And listen, this makes sense. It's just investor appetite for risk. And when the Fed funds rate is 5%

and there's been a huge washout, your appetite for risk is lower than it was. That's just what it is. It's that and it's now we're coming up on, you know, like that crash that happened over there in 2022. You're like now coming to the point where companies are actually running out of money that they raised back then.

And so- Hence the down, down rounds don't happen for no reason. People need to raise more money and there's a gun to their head basically. Exactly. Like, look, this is what you, this is what people think you're worth today. Yep. You want the money or not.

Exactly. Interestingly, looking at seed where I know it's an area that you focus on. Volume is crashing down 44%, which frankly makes sense and is probably healthy. There was a lot of stupid shit being funded. I funded some of that stupid shit. But the price has found some sort of a floor. Like there's just a floor to how low the prices will go. So the number of deals have crashed,

but the floor has held steady. Is that sort of what you're seeing? Less deals, but. That's what, it makes a ton of sense, yeah, based on what I'm seeing, but also how I'm feeling. I do think there is. It's the same thing we were talking about with AI

and tutors and stake. Like it does seem like either you can raise or you can't. And if you can raise and you're a credible good company, price isn't going to be that much lower. Like a good founder is not going to sell 40% of their company in their seed round at a $5 million. What's behind the volume being down is like, companies are just saying, you know what,

we're just not in the market right now for capital. It's not a good environment. Either that or there's less stupid shit getting funded. There are less people though, running around with open checkbooks. That's also true. That's also true. That we don't have hedge funds

that are trying to fund 200 deals. Well, so this next chart is just so, such a great visualization. You know how they say in a bear market, stocks return to the rightful owners? Well, in a startup bear market, money returns to the rightful West Coast. So what this chart is showing is

that the west took significant share in Q1 so it's breaking down the percentage of total cash raised by companies in each region and it's looking at the south, the northeast, and the midwest and no offense to the south and to the northeast but those numbers are crashing and money is in Silicon Valley is returning. The real risk takers are still in the West. The New York venture stuff is probably more tied in with traditional Wall Street mentality than California's California.

Yeah, California's California. I mean, Seattle does open AI rounds. We talked about our Anthropic. These big chunky rounds are all West Coast companies. And so I would imagine that has a big impact. I don't know which one of them work with Carta. But I think a lot of the AI stuff is happening in particular in San Francisco.

I never thought of venture regionally because I just always think of California. I mean, the Midwest is on this chart. They funded 4% of Q1 deals. Are there operators, are there venture people in the Midwest that you interact with or see on cap tables? Probably Chicago. There's a little bit of Chicago.

I mean, there is a meme on kind of the Midwest investor groups that are like these group of Midwest angel groups. The guy with the slacks with the giant cuff. And like if your boss looks like this, you're not going to be replaced by AI. Yeah, it's that guy. But they like do months of due diligence and then offer you like 250K at a million dollar valuation.

That's kind of the meme. There are good investors in the Midwest. I think as we see more of the kind of re-industrialization, like there's a big conference coming up at the end of June in Detroit. Like I think there will be a lot of money that flows into the Midwest. It's like hip hop.

Like there's a handful of decent Midwestern rappers. You wouldn't want to like build a record label on them per se. Like that, you know, Kanye and then, you know, who else is in the conversation? Really? So I guess you have common, you have twister, you have bone thugs. It's not a really long list. Yeah. We're going back in time and yeah, it's just Thugs. It's not a really long list. Yeah, we're going back in time and

Yeah, it's just not that long of a list. One bullish anecdote, not an anecdote, one bullish piece of data from this report is that layoffs are falling. So fewer people are being fired. Like all of that shit, it got washed out and cleaned up pretty quickly. How are you, like, in terms of the companies

that you're investing in and their behavior, I know that you're a little bit early stage, but just anecdotally, what are you hearing out there in terms of companies that are involved in, employees that are involved in these companies? In terms of layoffs? Yeah. I think there was a big, big, big rush.

Like, the most common theme in investor updates I got was, we're tightening our belt, we are trying to get profitability as soon as we can. Age of efficiency, bro. So look at 2022. Look at the layoffs. Just absolutely skyrocketed. Went from 4,000 a month up to 18,000.

Or I don't know if this is in millions, actually. Whatever it is. Like it's actually pretty amazing that the number is above zero in 2024. Because like, it'd be crazy if you're making your first layoffs or even your second layoffs now Like I think a lot of people just got religion very very quickly And so it makes sense that those numbers spiked and it makes sense that they're coming down now to have survived through that whole period

And they get laid off. That's another area where I think the washout cleared the decks of a lot of nonsense because I think also Now you're not competing with ten other startups who could give the most stock options to an engineer. You're still paying a lot for talent, obviously, because it's high tech, but I think you needed rationality there, otherwise you just couldn't start something with a straight face.

How would you get talent? I think there's a lot of healthiness in the washout, too, in terms of there's probably a lot of people who wanted to be founders, who started companies and would have been an amazing third best engineer at another company led by somebody else. And so hopefully there's a little bit more of that condensing of talent into fewer startups. Right. It's like having a league, like the NBA, if there were 70 teams,

the game would be less fun to watch Exactly, you'd be spreading out all the talent amongst like I don't think you want that in any in any endeavor including my industry You don't want a situation We have 500,000 firms and everyone is an entrepreneur because it's really hard to build something meaningful without some concentration of talent Yeah, you see it happen. Well, I'm not investing a bunch in AI. It is very fun what's happening. Anthropiq just hired the former co-founder of Instagram

who should be retirement rich and is retirement rich to come lead product there. Is that Krieger? Yeah, Krieger. And so you're seeing, I think, like a lot of talent kind of like just condensing, or I guess in the organized case now leaving, but like really getting mashed into like a few firms.

And it's very cool to see. Like the product, the pace of innovation is really fast, the competition's high, like that's exactly what you want. It's like this spontaneous like thing happening. I agree, and I'm not in the tech world, but it is kind of cool to hear people talking about these products as though they've been using them their whole life.

And it's like, when somebody said, well, historically, OpenAI, historically. What do you mean, like six months ago? So I agree, it's an exciting time. We could skip this. Before we leave off Ventra, I'm just curious, you've been doing this for a while, and you're still relatively new,

but you've got some experience under your belt. What's your favorite and least favorite thing about being a venture capitalist? Oh, my least favorite is saying no. I'm terrible at that. Like I think the thing that I can do to my detriment is like, I don't get any better at this, but. You should just transfer those calls to Michael.

He'll do it for you. Yeah. He's so good at it. He loves it. But that's tough, right? Like someone comes to you with their dream. No, you don't give a fuck. Yeah.

He'll step on it. All right, I'm going to call you for now. The thing that I like the most is, and it is kind of the combination of the writing and the investing, is like, when you find the really good ones, you're getting these people who could be doing anything, or some of the smartest, most talented people in the world, who've been like, I'm looking at this big industry,

like the company I wrote about is doing power. Like, I'm looking at power, here's like what we've identified as like the bottleneck to the grid, like this huge thing that we all rely on, and here's how we're going to fix it. It's just like the coolestck to the grid. Like this huge thing that we all rely on and here's how we're going to fix it. It's just like the coolest way to learn ever is that you get like the distilled thoughts, not only distilled thoughts,

but distilled thoughts that they're willing to back with their careers from some of the most talented people in the world and get to like kind of work with them on crafting that story. Like that is just, that feels like a privilege to be able to do that. Awesome.

You're our favorite venture capitalist. Thank you. We talked about Sam Bankman Freed, good friend of yours. Yeah, good friend of mine. I know you spent a lot of time with him. You raised some money for him. So, I mean, what's the, what's like the main upshot that basically because he made so many investments, he threw so much fettuccine at the wall. Was it an anthropic one?

Anthropic was one. Yeah, anthropic was, so basically it looks like not only is everyone who is listed as a creditor of FTX getting back their money, they're getting interest because some of these investments, obviously including a lot of crypto tokens, have recovered and it wasn't as bad as it looked at first flush.

So 12 billion in claims and there's going to be a little bit more than $15 billion returned. Yeah. 118 cents on the dollar. This is unheard of. This does not happen. This literally does not happen. I mean Solana versus when they went bankrupt is up a ton. Yeah. The Anthropic investment did really well. They have a bunch of other investments that have performed well. We should, he should be out of jail then. No, I'm just kidding.

He did, he did an illegal thing and he shouldn't have done that. But he like, no, he kind of, but he, he's still, all right. So this is why we're bringing this up. That's amazing. What is this? FTX claims have increased in value. That, yeah, this is my whole, my whole portfolio. These days we're trading at 15 cents on the dollar when the story dropped.

And just unbelievable. What a rise. So Bill Cohen who is an incredible financial journalist, he got into the Metropolitan Detention Center in Queens. Our backyard. Brooklyn. And he sat with Sam and it's a really great article at Puck and I sent it as a gift article to a bunch of people because I'm a subscriber. But like basically like Sam's take is the big mistake he made was listening to his lawyers who told him to walk away.

He should have fought and stayed there and if he had, things might have gone differently and all of this value that was hiding beneath these holes in the balance sheet would have eventually manifested and he'd be a $50 billion company right now. How like on the scale of Charles Manson level delusional, I don't even know if there's an equivalent to this that I can think of. How crazy is this? Or it's not crazy. You can't trade customer funds. You can't do what they did.

No, but he's like, no, no, no. I understand that I can't do that, but somebody else was in charge and I didn't know what was going on, but look how great my investments were. I do think this would have to be the biggest mind-fuck imaginable to be sitting in prison for that long knowing that actually everybody made money. That's happening right now.

I see where he's coming from even though like he should also be in prison. I can see why it'd be very frustrating to be sitting in prison as people. He was worth like 20 billion dollars on paper based on FTX's valuation at one point. Now he's in prison and the reason he went to prison, $20 billion on paper based on FTX's valuation at one point. Now he's in prison and the reason he went to prison, no one actually ended up losing money. So in the article they spoke about his transportation once he gets to his official prison home,

because he's going to fight this and stuff. It's going to be, they're guessing in California. And he might have to take an airplane a la Conair. And could you just imagine? Like I'm hoping for a movie type replication of that. Oh, the guy that follows Elon's private plane could track Sam Bankman-Fried's Con Air. Somebody's gotta bust him out.

I mean, that is a garbage crime movie. We've seen a hundred of those. Oh yeah. I love that premise. I love this idea. I love that premise. We gotta bust him out. The tough part, and I guess to his point also,

is that people would be up way more if FTX hadn't, if the creditors hadn't sold the Solada and whatever else at the lows. How much did Ray, what's his name, the bankruptcy? John Ray. John Ray. How much did he make? How much did they make on this bankruptcy?

There's a lot of extra money that just went to this whole proceeding that otherwise would have belonged to customers. So again, he should be in jail. And without all this shit, people would be a lot better off if everybody had just sat back and been on that thing. There's an alternate universe where Miami Heat are playing an FTX arena.

Totally. And Sam Bankman Fried is the CEO of a public company worth $50, 80 billion dollars. There is that alternate universe, and he thinks it's because he listened to his lawyers and they gave him the wrong advice. Like that's what he's saying. The market was going to crash too.

Like, who knows? I want to play a game with you. Okay, so wait a minute. So we went back and listened to the last time that you were on. One of the things we were talking about, this has nothing really to do with anything, but Bill Ackman, you were on January 28th, 2022. Okay,

is another appearance. Bill Ackman bought 1.1 billion worth of Netflix, $359 a share. This is funny. He suggested that the company move to an ad-supported monetization method, which eventually they do. He sold it on April 20th when it blew up at $226 a share. It took a $400 million loss. The stock is over $600 today. Not one of Acman's great trades, but I bring that up to you because whatever we do on today's show, we'll come back and look at.

So here's what I want to ask you. I don't know when the next time you're coming back is, but will Sam Beckman Fried be able to raise money when he comes out of prison? Like will he have it? What do you think? I honestly think absolutely. From anybody? Of course. Yeah. You're telling me he couldn't fly to Saudi Arabia and run it back. I don't know about the Saudis are getting hit up hard. He can run to Asia and raise money easier. Okay, like Hong Kong or yeah What years yeah, 2040? When do we think is he gonna get out for good behavior? Yeah, yeah three years from now

We the world needs more effective altruism We're not about to keep this right. We just need it to be effective. Finally. Yeah Well, I think what he's done so far is pretty effective 118 cents on the dollar This guy's making people money from prison. We cannot keep a natural resource like this lock pine bars All right. Do you think you can raise money again? You really do? I think you can I don't think he's raising money from a like a top-tier VC firm in the US, but it's somebody's gonna give same background for you money. Uh, you think you think it was money again? I don't know. I want to say no, but probably. Here's what I do if I'm Sam. The guys who ran three arrows capital were able to raise.

Yeah, there's an investor who was. You know what I do if I'm Sam? I only go to people who have had run-ins with the law and survived. I go to Steve Cohen, I go to Mark Cuban. I go to people that have been like screwed around with by government agencies. There's people like with an axe to grind and I and I do it like I do a Trumpy

I'm like, come on, you know, let them you're gonna let them keep me from being the head of an exchange But you know what I mean? Like I almost make it like a I almost make it like a cause He won't be allowed to run an exchange In this world not in this country could be the president United States who cares? What else do we want to do today, Mike? Do we have anything else? Oh, I had something. They had a sidewalk portal.

Oh my God, the vest. The vest. Do you know about this shit? Nope. Alright, this is amazing. Oh, I did see that. Okay, so there's a video screen in Dublin, of course, and New York, and you could stand on the street.

I don't know which street it was on. Flat iron building, okay. And in Dublin it's O'Connell Street. So it's like a portal. It's like a, it's like Marvel. You can look at the screen and see the other city. Well, I think it's, I think it's kind of dope. The problem is everyone's taking,

taking out their genitals because of course, what? I mean, you say problem, I say opportunity. By the way, by the way, I would also point out like you picked New York and Dublin, the word that was, that was, there's, they have these portals somewhere else, right? Between two other cities and no problem. If you did Munich and Salt Lake city, I feel like it would still be operating, but that's not what they did.

So here, let me read this. The live streaming public art installation known as The Portal made its North American debut on May 8th with a circular screen set up below New York City's iconic Flatiron building and a companion screen in Dublin. Exhibit organizers touted the interactive display as a unique way to, quote, embrace the beauty of global interconnectedness. But just days into a run that was to have continued into the fall, the portals were shut down

after videos spread on social media of people behaving badly, an OnlyFans model in New York bearing her breasts to Dubliners holding up swastikas and displaying images of New York's twin towers burning on 9-11. So how'd that go? How are you optimistic about humanity? Right, like this is...

I guess I'm optimistic that we need the AI to get rid of us. It is amazing though, we were just talking about crypto. People will just do the worst possible thing that they can do with any given tool. Crypto's really good at letting people do bad things. I'm reading The Prize, which is an amazing book. And the early days of oil in the US were absolutely ludicrous.

And people did the worst possible thing that they could do. Democracy is like pretty amazing that we like are able to keep bouncing back and coming up with fixes. We keep going despite us. Yeah, we keep going despite us. I would also point out probably most people standing in front of the portal weren't doing topless swastika stuff.

Like it's, you know, it's always a few bad apples spoiled a bunch. Unfortunately, that'll be an AI and a few bad apples could literally blow up the world. But whatever happens happens. All things being considered. Did you have fun on the show today? Oh my God, this is the best one yet.

When I tell you that when I tell you you're our favorite venture capitalist, I mean it. Thank you so much for coming. And love your optimism and the world needs more of that. The world needs more packing corn people. We're gonna do favorites did you bring us did you bring us something? I mean my favorite if you guys watched you have you have a six-year-old and a three-year-old and a one-year-old three and a half year old and one and year old? A three and a half year old and a one and a half year old now. Your favorite thing is probably like a cartoon right now.

I don't like any of this stuff that they- What are the kids watching now? They watch like, Blue's Clues is okay, Blippi is the worst. Blue's Clues, that thing will not die. That thing will not die. I saw Steve, if you remember, back in the day, there were rumors that he died. And so he came on the Today Show to like say I'm alive.

And that was the one Today Show I happened to go to when I was a little kid growing up. So that's my connection. Apparently Bluey is amazing. I haven't watched that yet. But like- Is Bluey related? Bluey is like a YouTube thing that became a real show.

It's like an Australian dog or something. I haven't watched it yet, but people like really like parents genuinely love it. And it's apparently as good for parents as it is for kids. How many swastikas are on the Bluey show? Typically. I haven't watched it yet. I would imagine two or three.

Wait a minute, so the Wiggles, when you go to birthday parties for the kids, they still playing that horrendous shit? I haven't heard the Wiggles in a while. We have a band called Rollie Polly Guacamole and Park Slope that's phenomenal. I love it already. Oh, you know what was a big thing in like Brooklyn,

Long Island, Lori, you wouldn't was a big thing in like Brooklyn, Long Island? Lori You wouldn't know this shit. Uh, what was her name? Lori Burke Berkner Yeah, yeah, all right, whatever I don't know but you're but you're like living in that one year old two year old zone and What's that like? It's that it's the best I mean like we're at a spot now where our daughter is fully talking and has her own little personality. The two of them are friends.

She's mostly sleeping through the night now, and that didn't happen automatically. I'm really enjoying it right now. Michael was telling me the other day, he's in the sports zone where one kid has three soccer games in two hours, and other kids got to be on the baseball field and then there's a birthday party after and it's exhausting.

I love it, it's all good. It's great though, right? Yeah. So when you think back on that stuff, now with my kids, teenagers, when I think back on that stuff, I don't remember any of the stress or fighting with sprinkles, like who's going to what.

All I remember is the good stuff like from those periods of time. And so I mean, every phase has its own pros and cons, but I guess what I'm trying to say is, you're not really going to remember any of the cons, you're just going to remember the pros. So I hope you're enjoying it. That's some optimism.

Yeah, for sure. It's the best, I appreciate it. Put that in the portal. All right, guys, that's it from us. I want to thank Daniel, Duncan, Rob, Sean, John, Nicole. You guys are just on fire. Just absolutely killing it for the fans every week. Thank you so much, Duncan.

Is there anything we have to do today? No, we're good. We're pretty much good? All right. Hey, guys, thanks so much for listening. Please make sure to leave us a waiting and review if you like the show. I want to tell you where you could follow Paki McCormick. You are linkedin.com, Paki M, and you are Paki M on Twitter.

Those are your two big platforms. Okay, and if you're in Dublin, follow me on the portal. All right, guys, thanks so much for listening. We'll talk to you soon.