This Week in Startups - Bill Gates foresees massive AI job loss: these VCs disagree | E2330

Episode Date: August 26, 2026

This Week In Startups is made possible by: Lightfield https://lightfield.app Northwest Registered Agent https://www.northwestregisteredagent.com/twistdomain Rippling https://Rippling.ai/twist   Today's show: *Bill Gates dropped a 6,000 word warning: AI will be "the greatest equalizer ever invented, or the worst sort of injustice." The Microsoft icon has an AI agenda for the US: new national institutions, AI use taxes, and jobs legally reserved for humans only. Our VC roundtable guests — Sheel Mohnot (Better Tomorrow Ventures), Dave McClure (Practical Venture Capital), and Hussein Kanji — push back hard. Is taxing profits a better fix for AI taking jobs than taxing the tokens themselves? PLUS: Meta's $17B kids safety settlement… does it go far enough? Why does Stripe want OpenRouter? A peek at the VC's actual portfolio mark-ups. AND begun, the AI agent wars have. Our panel chooses between OpenClaw, Instinct, and Grok Bot. Guests Sheel Mohnot on X: https://x.com/pitdesi Better Tomorrow Ventures: https://www.btv.vc/ Dave McClure on X: https://x.com/davemcclure Practical Venture Capital: https://practicalvc.com/ Hussein Kanji on X: https://x.com/hkanji Hoxton Ventures: https://hoxtonventures.com/ Relevant Links GatesNotes: "The turbulent AI era is here": https://www.gatesnotes.com/a-turbulent-ai-era-and-critical-choices-to-make NPR: Meta settlement coverage: https://www.npr.org/2026/08/26/nx-s1-5944781/meta-settlement-child-safety-lawsuit TechCrunch: Stripe agrees to buy OpenRouter: https://techcrunch.com/2026/08/16/stripe-will-reportedly-acquire-ai-gateway-startup-openrouter-for-7b/ Skild AI S1 Demo: https://www.skild.ai/blogs/s1 Instinct AI agent (waitlist): https://instinct.co/ TechCrunch: Instinct coverage: https://techcrunch.com/2026/08/24/instincts-powerful-ai-assistant-is-raising-privacy-and-security-concerns/ CNBC: OpenAI CFO says IPO is coming in 2027: https://www.cnbc.com/2026/08/19/open-ai-ipo-timing-2027-friar.html Basis: https://www.getbasis.ai/ TaxGPT: https://www.taxgpt.com/ Cusp AI: https://cusp.ai/ Abacus: https://goabacus.co/ Micro1: https://www.micro1.ai/ Mottu: https://mottu.com.br/ EquityBee: https://equitybee.com/ Kiva: https://www.kiva.org/ Timestamps: 0:00 It's Hussein's first time on the VC Roundtable! 2:09 Gates says "turbulent era" for AI is here 8:56 Microloans, Kiva, and "universal basic income" 9:23 Thanks to our partner, Lightfield, the AI-native CRM that updates itself, so you never have to! Try it for free at https://lightfield.app 13:00 Why sole proprietorships may be AI's biggest beneficiary 20:29 Got a new business idea? Northwest helps you bring it to life. Get a free domain, email, phone number, and more, with no purchase required! Learn more at https://www.northwestregisteredagent.com/twistdomain 21:00 Should the gov't take a stake in AI labs? 30:24 Thanks to our partners at Rippling! Head to https://Rippling.ai/twist to get the only AI built to give you full visibility across your startup and take complex actions across your entire business. 32:44 Meta's $17.1B settlement 45:14 Is anything still fundable outside of AI? 46:29 Stripe and SpaceX deals 55:54 Skild AI's pancake flipping demo 59:49 Sheel's Hottest Takes 1:04:37 Dave's Charts 1:09:07 Who loses money when there are no IPOs? 1:16:49 The Agent Wars heat up 1:24:56 Everyone's favorite investments   Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.com Check out the TWIST500: https://www.twist500.com Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp   Follow Lon: X: https://x.com/lons   Follow Jason: X: https://twitter.com/Jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis   Thank you to our partners: (0:00) PARTNER - AD BLURB (0:00) PARTNER - AD BLURB (0:00) PARTNER - AD BLURB Check out all our partner offers: https://partners.launch.co/   Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland   Check out Jason's suite of newsletters: https://substack.com/@calacanis   Follow TWiST: Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Instagram: https://www.instagram.com/thisweekinstartups TikTok: https://www.tiktok.com/@thisweekinstartups Substack: https://twistartups.substack.com

Bill Gates published a 6,000-word essay today called The Turbulent AI Era is here. AI will, quote, either be the greatest equalizer ever invented or the worst source of injustice, and that right now, quote, there is no plan. Some jobs are probably going to go permanently, go away. Humans just kind of sort of get in the way. It is probably like a real thing. I trust tech more than I trust government. Every time somebody really adopts these tools inside of my firm,

three or four new opportunities open up for our company. This week in startups is brought to you by Rippling. Don't settle for AI that's all talk. Head to rippling.aI slash twist and get the only AI built to give you full visibility across your startup and take complex actions across your entire organization. That's R-I-P-P-L-I-N-G. Sign up for exclusive access today. Northwest Registered Agent. Got a new business idea?

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Used by thousands of startups. Free at lightfield.com. All right, everybody, welcome back to this week in startup slash this week in VC. Every Wednesday, we do a VC roundtable 10 a.m. on the left coast. 1 p.m. on the right coast. And here in the great state of Texas, we go live at noon on Wednesdays. With me today, what a lineup. What an amazing amount of news.

The docket runneth over. Shil Monat is with us. How are you doing, Shiel? Great. Good to see you. You and I getting into it, minimum wage, jobs. I love it. Great debates on-

I love it. Dave McClure, founder of 500 startups, not 500 global. He's got a great podcast about strip mining the VC industry called Trading Places. I just came up with that. Trading places. He's using my podcast to promote his podcast. But I guess. I give him a promo for his podcast, instead of paying him the $400 minimum wage for his SAG after

appearance here, he's with Practical Venture Cab. We launched on your show a year ago. Yes, and I get your shorts. Your shorts are great. Tick-Caw shorts are great. He's talking about my video clips, not my pants. No. Dave is known for wearing shorts in completely inappropriate settings like conferences,

his office, etc. And with us, I think, for the first sign, Hussein Kanji is here. Hussein, it's the first time you're on the program. Yeah. I'm dialing in from London. Oh, great. And Dave, where are you dialing in from? I'm in Sunnyvale, which is very sunny today.

Awesome. She'll, I assume, San Francisco? San Francisco. All right. And I'm in Austin at the ranch. Lots to talk about today. Three great investors on the program. And I think we start out with Bill Gates.

Bill Gates published a six. thousand word essay today called the turbulent AI era is here. The choices we make now are critical. Obviously, you have to hit exactly 6,000 words. That's what Jensen and Zuckerberg did recently. If you don't hit 6,000 words, we don't know if you wrote it yourself. I didn't run this one through an AI checker yet. So we'll see if it's a drunken miller or not. But he argues AI will, quote, either be the greatest equalizer ever invented or the worst source of injustice. And that right now, quote, there is no plan. Gates warns AI risks are outpacing its benefits. Interesting. Threatening jobs across law, medicine, and software. He's calling for a new national institution

of some type and AI usage taxes and making some jobs reserve jobs that can only be done by humans. Dave, you read the manifesto or at least the summary of it. Your thoughts on Gates coming in at this moment now. So from a meta-commentary perspective, why is Gates commenting now? And what resonated with you as true and what resonated to you as not true or, God forbid, a worst take? I don't know particularly why now, although maybe Gates had some bad press that he's trying to get past in the last six. Okay. I like that theory. That might be some reason. I think the three main points, I kind of agree with. some jobs are probably going to go permanently, go away. Bad actors get superpowers, that's probably true.

Not just due to AI. I mean, drones are already seeing bad actors get superpowers with not too much money. And then kids and human connection. And I guess that might be topical today because meta is just paying $16 billion in fines for, I guess, potentially getting kids addicted to social media.

Yeah, well, definitely getting kids. addicted and that'll be our second story. Shield when you read the missive, any thoughts on why now? Or any thoughts on what resonated as true? I think everything he says is broadly true. There will be a lot of job losses. I still in my head don't have an idea of is this like, is this actually going to change everything? Or is it some subset of the population that, you know, gets job, gets their job displaced, jobs displaced. And it starts out. with like the jobs he's talking about, many of those were already displaced when we started outsourcing, whatever, 20 plus years ago. In terms of why now, I don't know why now. I think now is as

good as time as any. I think he talks about the enormous potential that AI has, which is awesome. I can't say I understand enough about why, about like what we should do about it to have a strong, fully formed thought. He proposes that the AI companies should contribute. and like there is a democratic participation where everyone everyone has a say in how this goes, which I think is a reasonable idea. I think we've been operating as if the AI companies

can just do anything and clearly the public sentiment is very bad on that. So I think there probably does need to be some change and I think his proposal makes sense. I think the public sentiment, I just saw something recently where it was mostly coming from environmental, you know, sort of impact, not so much the economic impact, which I think, you know, maybe is a little surprising. Probably energy and power usage are, you know, primary

on people's concerns. I still wonder whether, like, you know, whether there's job displaced or not, shouldn't we be, like, thinking about AI, kind of like the new oil? Like, shouldn't we be creating sovereign wealth funds with our surplus coming from AI and sharing that broadly? I don't I think Bernie Sanders taking 50% is the right story, but Sam was trying to get in front of this and offer like 5 to 10%, I think. So a tribute as the world's jobs evaporate Hussein, any idea of how you would get a coordinated effort, because Gates points this out in his missive, how we get the world coordinated in either reserving certain jobs, not using robots for certain jobs, which I think would be

factories maybe or health care he brings up over and over again. And then how to tax it. This is a tragedy of the commons, I guess, where you would need Hussein everybody to agree, okay, yeah, we won't give these jobs over. But if my company decides on the slide and sneakily uses AI to solve the problem, now I've got a better profit margin, right? So is there any way to coordinate the world if we can't get rid of nuclear bombs or can't stop global warming, can't stop burning fossil fuels to get people to stop using AI tools in some coordinated fashion. Is that possible? I mean, the idea of coordinating global, like, world, different world countries since, like, first World War II, I mean, is there any evidence that we are good at kind of figuring out how to

tackle any of the big problems? I mean, so, like, you know, this is a human problem, not an AI problem. And maybe, you know, the keys over to the AI, maybe they might do a better job. Like, it might do a better job. But the general idea that automation is going to happen, AI is going to get better at the automation, human jobs are going to get deprecated, and as a result, well, like, society, like the economy will be so much better run by automation that you actually, humans just kind of sort of get in the way, it is probably like a real thing. Like, I mean, I feel like that's kind of sort of playing out. And if you really believe this idea that like a dollar of compute equals, you know, $10 of intelligence,

I think it's only a matter of time before even the higher cognition things in society kind of get replaced. And then there is like a genuine problem. And this is not a new topic. I mean, like science fiction authors are usually like decades ahead of everybody else on this stuff like Kurt Vonnegut wrote about this stuff, player piano. It's like the first book, Cory Doctor wrote about this stuff. Not in his book.

It was walk away. Like the old idea like in terms of coming back. But it's manifesting. And I think almost everyone who's in AI has thought about some variation. of this. Like, you know, Sam had the UBI, you know, initiative, like that debt fee, like, five years. It feels like an eternity ago in our industry, but like, this is, I think of, which notably didn't work. Which did not work. I think that's just implementation details. I think, you know, not giving people money, but giving people access to capital with some

amount of debt repayment is probably a better strategy. You think microloan was like we saw. What was the microloan site that we all lost our minds are 10 years ago? Kiva. That actually worked, right? Do we need to double click on that again and go? back to like micro loans for micro entrepreneurs? Micro lending. I was on the board of a company called Unitas that basically helped solve micro lending in India 20 years ago and was successful enough that now micro lending is a commercial asset class in India.

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Let's be realistic. I don't think anyone trusts us as techies to kind of figure this problem out. And then the problem is you look around, you look across the aisle, right? Everyone in government. Like, I don't think any one of us would really trust any, and I don't think you can converge on decisions in government to figure us out and then make the problem like a global problem. I trust tech more than I trust government. Well, if you trust capitalism, if we look at, if we parallel AI and intelligence, job loss and this technical wave, and we compare that to say energy. Capitalism and demand and supply, innovation. in the form of solar becoming cheaper and cheaper and cheaper, and batteries becoming denser and denser and cheaper,

seem to have solved the problem. It's now more expensive to either retrofit a coal mine or build a coal mine than it is to build solar. Great state of Texas, we're the largest provider of solar in the United States, and I can tell you that people here are not precious about their oil. They're not like, we're team oil will never touch solar. there, what is the best, most profitable next energy supply I can create? And in, I think, four out of five times, it's going to be solar unless you can build the data center right on top of a

NADCAS field. And so that would lead me to argue, well, maybe there's going to be a lot of displacement in jobs. I think we all know that's going to happen, displacement. But what I'm seeing is the people with these tools, every time somebody really adopts these tools inside of my firm, three or four new opportunities open up for our company and the ability to go faster and solve more problems happens. So this carkins back, Shield, to the quote that I think Jensen got right. You're not going to have your job replaced by AI. You can have your job replaced by somebody using AI. That's what I see in the field in white collar work. Now, for blue collar WorkSheil, I think it's distinctly different. Watching what I'm watching and I have a

only matter of time. I have a lot of investments in self-driving car companies in all of them, essentially, from Zipline to Uber, you know, anything that's public. I, I dipped in. I don't know that a person who learns AI is suddenly going to deliver more burritos or do more airport jobs. I think they just lose their job, right, Shiel? I think that's probably right. Now, that also was true, like 120 years ago in the United States, everyone was a farmer pretty much. And now we're not. There have been other jobs where things have been displaced. I think the timeline, we talk about it.

And even Bill Gates talks about it as if it's instant, but it's really not. Like, it actually, these things will take time. And your door dash driver is probably safe for the next five, ten years. And in that time, by the way, like, I don't think 10 years. I don't think 10 years. Okay. But five, you think. So we're between.

I said five to ten. You take the lower end of the range? Yeah, I think, you know, we're seeing job displacement in knowledge industries very fast, but like physical. You're not seeing it in the data. Yeah. Not yet. Not yet.

I think, I think. You don't think like the jobs that we've been doing knowledge-wise are much easier now with AI. Definitely easier, but we're not seeing the job loss. Yeah. But we have data on this and it's not happening yet.

I'm sure it will. I agree with you. But it's not. feel, we're still in the early innings of a lot of this stuff. I think the thesis question is not that this is, I mean, you could argue this is not going to happen and jobs will get created, or you could argue that this stuff compounds so well that it becomes so much more competent than any of us needing the jobs. And then the question is what to do with us.

Yeah. I think hiring in tech industries has definitely been like slimmed down a little bit. It's flat. We're not hiring as fast as we are like increasing productivity, which is already to be a good thing. Well, I think that's the nuance between both of your positions. When Sheel says we haven't seen the job loss and you say we're seeing massive productivity, both of those are true. And if you look at a company like Microsoft or Google or Uber or Facebook, in many cases,

they have the same relative number of employees over the last five years plus or minus, let's say 10%. And if you were to do that, Claude search or you did a search on like employee account per year, you'd probably see flat across them and you would see earnings growing 35%. 40% and top line growing 10 to 20%, which is extraordinary. And that actually is AI making the people working in companies more efficient. I think you're going to see massive net positive benefits for small business and small business creation due to AI. Like I think actually the biggest beneficiary of AI will be a whole bunch of sole proprietors and small business. Totally. Why? Unpack it. Why will

we see a lot more? I think I have a gas. Because they will move fastest. They can move fastest. They can be creative, you know, the benefits of AI tools to someone who's running a small business is probably like pretty immediate. Like if you learn how to like get customers better, do your job better, faster, you know, you get the gains immediately. They accrue immediately. There will be AI software companies that help people run their sole props much better. So like if you're a therapist, you used to have to have a receptionist. You had to have somebody schedule like all this stuff billing. Now an AI can do all that stuff for you, which does speak to job loss. but also speaks to sole props being able to function much easier than they could before.

If the virtual person doing each of five jobs and now they're doing like 10 jobs with AI. Yeah, I mean, simplistically, if the virtual humans are better at doing the jobs than the actual humans and they're a lot cheaper and you can deploy a thousand of them like overnight versus having to deal with interviewing, hiring, etc. Anyone who hires people is going to probably benefit from this thing. That's a simplistic way. The big question to me, though, go back to this, the big question, like, what happens if humans are deprecated, right? Then how do you build a market-oriented economy to figure out what the heck to do with the humans? Because you probably can't get an autocrat to figure it out. You probably

can't government institutions or global institutions to do it. So how do you build a market-pranexed economy to figure how to solve this problem? Like, this is, the problem stuff is, like, kind of trivial to me. Like the solution stuff is like the real intellectual stuff. Let's, let's pull that string. I'm going to agree with Dave and Sheel on sole pri, sole proprietorships booming, but not just because the existing ones are going to be run better and then they maybe make more profits. So, hey, the person who's the therapist is like, you know what, I just want to have an assistant to manage all the AIs and keep that train going because I'm so much more profitable. But I don't need the second and third one, right? I don't need.

the outsource the accounting firm, we can just do that in-house. So there could be less people per sole proprietorship, but if you can't get a job coming out of school at Uber, Meta, Facebook, and Microsoft, because they're not hiring, but you have been using AI to cheat your way through school and you're an expert at. And you know how to get, you know, straight A's. Well, you're talking about my kids right now. I've got a softball. It is. It is what it is. As far as I'm concern if you learn how to cheat on your way through Harvard and then you're perfectly positioned to use AI to actually create a company because it's the same tools. How do I get this task? Here's the goal. Go get the goal and you just motivate it, set the loops up, etc.

So I think we'll see a Cambrian explosion in sole proprietorships because you're just not going to have four job offers. People graduating from college, you're not going to have like, Mike, unless they happen to be a PhD in AI, but they're not going to have people competing for it. But let's talk about your question, Hussein, which is, what are practical solutions? I have one that I've been talking about a bit. People tell me I'm a Lib Dard when I bring it up. Because, God forbid, we even consider humans and employment in this occasion and giving them, you know, it's just complete weakness to have empathy for somebody who's an Uber driver or a door dasher. But in China, they are now giving out licenses for self-driving vehicles, and they have stopped giving them out.

So they have a cap, essentially, right now. Because in Wuhan, in Beijing, in Shanghai, and the markets where you have three or four different people flooding the zone with these, young men who are not making as much as drivers or, you know, can't get a driver job, are getting restless. My prediction is the socialists in the country who are rising up right now and saying, hey, we're going to defend workers, we're going to make sure you have a more affordable life. Two ways to do that, cut prices, which they can't do. That doesn't work. Second way, give workers protections through unions and minimum wage, etc. They can successfully do in all likelihood, where it's an easier path. I bet you we see AOC and Mondami and Boston and D.C., L.A., just say, you know what? If you want a self-driving car license and you want to deliver burritos, and I'm talking against my book right now, you just need a license. The licenses are auctioned off at $30,000 starting price. I think that's literally what we're going to have in the next two years as people respond to it. Do you have solutions to you'll in the case that we had a quick job displacement occurring,

a brisk one as opposed to a manageable one? Okay, so you've identified a real problem and you put together a solid solution. and a business model that you believe in. So you're all set to launch your new company, right? Not so fast. If you want investors and potential customers to take your new business seriously, you need to consider forming a Delaware C Corp,

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around the clock. They're not overwhelming your inbox with spam, and they make it easy to cancel at any time. So get all the advantages of a Delaware C-Corp, independent, regardless of where in the U.S. you're operating from. Visit Northwest Registeredagent.com slash twist for more details, and the links are in the show notes. I think that's a reasonable solution to say, so there's a license for a self-driving car, and there are externalities that develop from that. Now, there are huge positives that come from that. Like, you have more trust, you, you have fewer accidents. Self-driving cars are amazing. But I do think that it's totally fair to say to society that we need to tax these. And I don't see immediately a bad, that that's a bad plan.

Dave, any thoughts here for if we do see any kind of acute job loss? as Bill Gates is predicting, ways society can manage it, do you think that we should be taxing consumption of tokens in corporations in some way? Should we be looking at the people providing the tokens and saying, hey, you know, when you sell hotel rooms,

we put a 12% tax on it in New York City, whatever it is, and that goes towards, you know, whatever infrastructure, do you think there's a, it could be a time where there's a federal token tax of 5% or 10% that goes into the unemployment pool? I don't think that's a great idea.

because token costs are going down to zero, so you're going to be taxing a diminishing return asset. I do think Gates is correct that right now incentives are probably, you know, because you can depreciate infrastructure and capex spend, you're more likely to hire, you know, agents and things that you can, you know, depreciate. So we've probably got to do figure out some way to make that a little bit more level playing field. But I think what we're really trying to do is how do we recreate the new deal? program in an AI era where like before, you know, Tennessee Valley Authority, you know, building the highways, doing all that stuff, you know, back in the 30s and 40s and 50s, made sense.

But these days, I would say, probably going to think about more human-oriented stuff. So like, you know, maybe some kind of care economy for seniors and people, you know, human services. Maybe we have an advantage in providing emotional support and care for people over agents, at least for the short term. Probably not to sound too, you know, liberal, but hey, arts and culture. You know, if everything is, you know, jobs are being taken away

in productive industries, maybe we create, you know, cultural art that people actually enjoy. I don't know. I think it's going to be hard to create, you know, hundreds of thousands, millions of jobs if those get displaced. But I do think we need to start planning for the equivalent of retraining budget and or support budget for people who are going to be displaced.

It's not going to go well if those people feel like there's a small percentage of humanity which is empowered and rich and a large percentage which is displaced and poor. That's going to end up looking like France in the 1800s. Dave, the China model feels like it's trying to stymie progress, right? You're trying to put a barrier. China has some big problems. Like we're taking a group of folks to China, October, about 50 people were going to go to Shenzhen and Shanghai and take a look at what's going on. But China has significant unemployment problems for the youth.

But let's assume if this thesis is correct, you don't want to stymia it. You actually want to accelerate it. I agree. I don't. Get the automation to be as fast as possible. Because remember, since the Industrial Revolution, we have largely lived to work. You know, there is a theory where we may not have to do that in you. anymore. We could go back to kind of purpose.

Completely agree. Especially, and then like, it's very star-tracky, right? You know, the stuff just happens. But you want to, then there's going to be a 20-year period, maybe a 10-year period, like a decent amount of time where it's going to be awkward as heck because the jobs are going to dissipate, you know, it will be as offset. But once you get past that funding trap, like, I don't think it'll take 20 years. You think it's longer?

I don't think it's 20 years. I think the big benefits of AI, like three big benefits that I do think will happen is we will get to free energy, we will get to free food, we will cure cancer and major disease. Those things are definitely on the horizon. But the distribution of those benefits to all of humanity will be incredibly uneven. And that's where I have concerns. Like if we solve all those problems, but like two billion people on the planet are still, you know, hungry and don't have access to power, that's not going to be pretty. I agree with you on the power one. I recently have somebody on this week in startups who has robots taking panels, driving them out,

and installing them, and then goes back to the factory, grabs another panel, installs them, and there's a human, like, watching it occur, and just making sure, yep, that bolts good. And I just said, wait a second. We're going to have a 24-hour factory, like Elon's going to pop up a solar factory in the middle of a desert, and it's just going to go out in all 360 degrees and just lay solar panels. And then we just have to obviously get the hookups to go to where it's needed, which then would, of course, Dave, from our time in the Middle East, would make for free unlimited water if lunatics don't stop desalination because they're concerned about like the guppies.

So you have free energy, you have free water, free water plus free energy and a bunch of excess optimises. And Elon showed me like one of the latest optimists. He's not showing them publicly anymore. but he just happened to show me on his phone and I was like, whoa, that's moving faster than what he showed me six months ago when I visited the Optimus Lab on a Sunday and it was packed. Like, he's going to make a billion of those.

If a million of those were out there, you know, planting strawberries, like the price of strawberries is going to be a dollar a pound, 25 cents a pound. It's going to be nuts. Shield, your thoughts on the benefits of it. I agree. I mean, I feel like we don't talk about the benefits enough.

And all we talk about sort of like what Dario says, everyone's going to lose their job or whatever, I think taxing tokens doesn't really make sense because you actually want to promote the use of tokens when it makes sense. But I think it is fair to say, hey, if these companies have enormous excess profits that concentrates wealth, then tax the excess profits. it also makes sense to say like, hey, if we believe that there's a particular type of harm that's happening and it creates costs, we should tax that. So like, you know, the robotaxie, maybe there's a per mile tax totally reasonable. And then I think if people talk about the energy usage or water usage, I don't think is real, but people talk about energy usage, which is real. and I think if it's consuming a scarce resource, then we have the right to charge for that scarce resource. So I think you write about the water usage.

There's more water usage by pistachio and almond farmers than there are. Totally. It's all bullshit. But people still, people, I don't understand. But the power usage is real. Power usage is going to raise bills for people unless we subsidize and take care of power. Which anybody building a data. Center has the brains to know that they should just go to the community and say, not only are we

not going to increase your electricity, how does free sound? Free for five years. Sound good? But that's basically like we're doing redistribution on a piecemeal basis. And I think it's probably just better to get ahead of that and say, look, let's take 10% of Anthropic and Open AI and solve our national debt problem. Because they probably will be able to. So you're proposing just the government takes 10% of the companies. Is that where you're proposing? Or you're proposing. I know that sounds anti-capitalist,

but I actually think it's a reasonably good thing. I mean, Trump is doing that all over the place. We have positioned. Not in a very normalized way either. He's putting it in his own pocket. He's doing it with threats is what you're saying, Dave. Literally, he just threatens people and gives them the carrot. They give their shares.

I mean, how is it different, though? Norway. Let me ask you a question, though, Dave. How is it different the way Trump uses his carrot stick method to extract shares for the American people because he likes doing it versus the socialist saying, hey, you got to give us 20% of your open AI and Claude to pay down the debt. How is it different? Just an open honest question. Let me give you two extreme examples of how that can go right and how that can go wrong. So Venezuela and Norway, both have extreme oil reserves. One country has done an extremely good job

of providing for their citizens and their wealth and preparing for the future. And one nation has not. Rule of law? I don't know what the implementation details were that went different directions. Rule of law. It happens to every business at some point. You're nearing the end of the month or maybe it's the quarter and your sales team is at risk of missing their quota. You could waste days pulling together data from across the entire organization or you could just ask Rippling AI. Rippling's already built on your real-time people in business data, obviously. So Rippling AI can pull metrics from both Rippling and your CRM into a meeting ready dashboard. See exactly how close you are to hitting that quota. Break down your

revenue by region or sales rep or more, all in just seconds with Rippling AI. Look, you're running a company, you're busy. You have critical questions that you need immediate answers to. And you can't just pile a ticket and wait a week for your team to get around to sending you a report. And you don't want to sit around waiting for reports. We need an actionable insight right now. So if you're ready to rule your business, head to rippling.coma. slash twist. To get the only AI, belt to give you full visibility and let you take complex actions across your startup. There's some really interesting historical reasons why Norway went that way that actually had to do with the shape of the country and how the timber industry developed. Actually, they

developed hydropower in Norway before oil was discovered, and that was an actual resource. Like Norway is a country like four or five million people that became a timber and shipbuilding powerhouse across Europe. And I think the things that they did early to, like developed timber and hydropower actually went very well once they discovered oil. Fascinating. What do you think she owns about this? If the government owns, let's say, 10 or 20% of Anthropic and Open AI, first of all, like, how do you decide which companies they own a part of?

And then is there a regulatory challenge? Like, is the government going to then be easier on the regulations? And I think that's probably what Sam Altman, why Sam Altman is proposing it. part. The government would have a financial incentive to protect their valuations and go easy on them. So I'm not sure that that makes sense to me. All right. Let's pivot to another technology that caused a lot of social harm and a lot of hand-wringing finally coming to what it seems to be closure for parents and Americans. Meta is agreeing. to a $17.1 billion settlement with 29 states over claims. It hooked kids on Instagram and Facebook.

The remedies are well beyond just writing a check. This is the most intense settlement I have ever seen for a technology company, and I think the previous record was set by our friends at Meta. So you get this huge settlement of $17.1 billion. But in addition to this, they are going to put hard limits similar to what China has done and other countries are considering. Productive pauses interrupts scrolling after 15 minutes of continuous use, then again at 60 and 90. This is a self-imposed feature that Instagram will give to kids. They will also have a nighttime block, no access from midnight to 6 a.m. to make sure kids get sleep.

And then no push notifications during the school day, 8 a.m., to 3.5. p.m. They're adding age verification. They're redesigning the features that they believe or that studies have shown will cause harm to kids like beauty filters. Oh my God, the fact that they even added those visible light counts and then add stronger safeguards against bullying. And they'll obviously be, as they're typically are with these independent auditors. It would have been nice, Hussein, if Mark Zuckerberg and who's our guy running Instagram. Adam Masseri, as I believe both parents looked at this data five or 10 years ago and said, we'll do this without 29 attorney generals bringing us to court and embarrassing us and shaming us.

But here we are, it's getting done. Hussein, what do you think of this unprecedented? settlement? Long time coming. I mean, I think the harms are pretty clear in the academic literature. And your parents definitely notice this thing if you have kids. And you're starting to see other governments actually crack down. Australia was a big one.

The real question is, are all of these changes really enough? Like, I'm in the view, like, you might actually not want, like, prepubescent teens and maybe teens to be using some of these things. You might really want to gate these things. Like this might, and this is a reason, and this is a big number in terms of a fine. It's a small, small, small portion of Mehta's market cap. Like, this is, this is a drug. It's a small portion of like meta's free cash flow.

Like, it's not that big of a fine. Probably 10% of free cash flow. I'm guessing they have 200 billion. I mean, meta stock is up. And meta stock's up probably larger than $17 billion is if I'm going to guess. It went up more than 1% on settlement. So it paid for itself. And you've failed the problem.

Jason, first of all, so my wife works at Instagram as a lawyer. But, um, disclosure. You're wrong, actually. Instagram instituted this stuff two years ago. Okay. So they actually have teens, uh, have sleep mode from 10 p.m. to 7 a.m. There's an automatic notification if you spend 60 minutes on the app. They did a lot of this stuff.

The, the difference in the settlement is it's now across apps. So it's Facebook and Instagram and I believe WhatsApp. But, um, they actually self-instituted this, this policy a couple years ago. Got it. So we can give them a little bit of credit. Give them some credit. Yeah. Um, yeah.

I think that they have, and like the AI world, I think social media has totally bungled the PR. I actually think there are so many benefits from social media that are never talked about. During COVID, I was depressed. I'm an extrovert. I love talking to people. You are. Social media cured me, I think, like from depression. There's so many outlets for creativity that teens have that they're.

they did not have before. So I think there's a huge positive that we never talk about. The studies show some negatives, which I think are real. Sure is. Do you have kids? I don't. Got it. Okay. Dave, you have kids. I have kids. Our kids grew up on this. What's your take as somebody with kids and watching up close and personal what that generation experienced with these tools? I have a really funny story about this because one time I was in Palo Alto having, brunch with some friends and my kids were there. I think they were probably like three and five at the time. And one of them was playing with an iPhone, one of them was playing with an iPad and looked over at the table next to us. And Steve Jobs was sitting at the fucking table right next to us. And at the time,

I went over and said, hey, you know, these are actually really fun tools. My kids are learning how to like, you know, draw and read and do some other stuff. Thanks. And he sort of said, you know, you're welcome, whatever. Later I found out he didn't allow his own kids to have that chance at that age. I would say we've had a mixed experience. I think, you know, at least with one of my kids. Well, yeah, sure, sure. Tell me about average kids, you know, that you, in Silicon Valley. I live in Silicon Valley.

I don't know what average means here because it's like completely weird and different. But, you know, I think there are some great things about Silicon Valley. We live in a very diverse community. Like my kids went, you know, to school with people from all over the world. They got to experience a lot of other cultures. But, you know, everybody had technology all over them. Everybody had very high expectations. You know, one of my kids went to a pretty high pressure, you know, private school where, you know, a lot of negative things happen to kids.

Some kids actually committed suicide. Many of them had stress related from pests and things. So, like, it's a mixed bag living in Silicon Valley. I kind of agree with Sheel. I think there are both pluses and minuses, but there are definitely some minuses. And particularly, I think, when kids. are, let's say, between 12 and 17, there's a lot of social pressures and challenges. I mean, without technology, kids can be assholes to each other.

And, you know, sometimes that's amplified, not because of the technology, but because of the people who are on the technology. And so bullying and shaming and like... Social pressure, body issues. Yeah. It's all contained in that window. That exists in a real life. It's not like the technology is what's causing it. Well, it amplifies it, I think.

to a level that is superhuman. So the same way, you know, you could become famous and go viral and help your business or, you know, get people to read your novel, whatever it is, all those positive things. Or if you're feeling melancholy, I can't believe you would be depressed, She'll, I'll just go with melancholy. If She'll hit a level of melancholy and, you know, talking to people online and, you know, having never-ending threads debating social topics got you to be less melancholy. Holly, I'm for it. You know, I just had a hard rule. You know, the kids were allowed to have a certain number of hours with the controls Apple Belt, but no social media until 17. And my oldest daughter is 16 and we're just, you know, she'll be 17 shortly. And we're just doing read only

accounts. Read only accounts because she's really giving me the full core press. I'm the, she's literally saying, I'm the only one dad. I'm the only one without this now. And I look at What are her friends posting? Most of her friends are great kids, and they're posting pictures of their outfits and their friends goofing off and nature and food and, you know, anything that we would all post. But it does start you down a, how many followers do I have, how many likes do I have? And already kids are coming back to the phones and back to the iPads. And this creates the same addiction you and I have, Sheel, with Twitter. You and I get pulled into it.

It's not just kids. It's us. Like we have these problems too. It doesn't stop at 18 or 21. Yeah. But the kids are... I bet you median time in the bathroom has doubled or tripled. 100%.

100%. Yes. Hussein? Go ahead. You want to add to this. Do you have kids who say? Do you have a... I have a 40-year-old, so much younger.

But these kids are just so much more sensitive to it, right? And they're in like these development cycles where the number of likes and if someone leaves a mean comment, we're more resilient than they are. Like, we've lived through more and we've had to deal with this stuff. And maybe the argument is kids have to go through this stuff, but I think shielding kids from this stuff is actually a good thing versus a bad thing. I would- Despite the problem.

Yeah, I would love to see Apple and Google put this into the hardware level of the products in America. So if you're a parent and you buy an Apple or an Android-based phone, you're kind of bought into the same, you know, both of those ecosystems allow protection of kids at a very root level. And the controls in Apple's products were extremely confusing and complicated. And after hours and hours of managing them, after like a year, and I'm a technologist, you know, I've kind of got a grip on what I want to do. As an example, I'm into audiobooks. I like to listen. I like to listen. to them. I'm an audio listener. I like to hike around the ranch. I got the girls into

audible. They're addicted to audible. I put audible. You can listen to audible 10 hours a day. Now we were having like the sleeping thing. I let them put a sleep timer on. They can listen to an audio book. They put a 30 minute sleep timer on. You know, of course, we'll read them stories, but they're kind of getting to the age where that's not cool anymore, 10 years old. Like, they're like, I don't want you to read me, you know, a story, which is sad. But they do want to listen to something when they go to bed and I'm like, hey, if I can get them addicted to audio books, that would be fantastic. And so, you know, I'm starting to have the controls work in my favor. And if you want a child to behave, well, if they've got a device and you can say after, after

these chores are done, go to the, clean the chicken coop, take the dogs for a walk, yada, yada, then you can earn more time on the device. You'll be a, amazed, Sheel, when you have your kids, how quickly chores get done when the iPad does not work because you remotely turned it off? Oh, my God. They just have to come to dad. And I'm like, okay, you were arguing with mom? You're disrespectful to your mother? And you didn't, oh, she asked you three times to empty the dishwasher. Okay, great. Let me know when the dishwasher's free off. I'll turn on your iPhone again. Problem solved. Or let's get into venture capital, unless anybody wants to add anything there,

but I think we beat it to death. One funny thing. I saw Taylor Lorenz posted a thread of all of the past moral panics. And there were studies done around novels

that said they were bad for teens. There were studies done around jazz music saying they were bad for teens. Radio is bad for teens. Television, of course, bad for teens. And actually... Dungeons and dragons. All remarks.

remarkably similar to the stuff that we talk about social media today. D&D is definitely detrimental to your dating life for sure. Yeah, dating life, but it's also good for your creativity. You're definitely not going to get a lot of dates for that. Yeah, she's got a point except, you know, I don't think we've ever seen anything into humanity as addicting as social media. I'm trying to think of like cigarettes and social media seem to be the two. And I guess sugar and fatty foods, right?

And so if you were to think of those three that just came off the top of my head, the damage they've done, the damage that, you know, processed foods have done to Americans. Tobacco, alcohol, and carbs. Tobacco, alcohol, carbs. And then you add to it the mental health issues with screen addiction. That's a pretty big, those are the four horses of the apocalypse for humanity. Hey, question for you guys. is there anything left to fund outside of AI right now for us? Has anybody looking through your last couple of investments?

Was the company, because there's two things, a company that uses AI to build a company, you would be foolish not to. That would be a sure sign that your company is going to fail. But then a company based on AI providing services that are AI related and or powered by AI, is there anything outside of AI that? anybody is funding? I think that's an extreme statement, but it is probably at least half of the VC brain,

if not two-thirds. But, you know, let's say there's all these new sexy categories, space tech, defense tech, robotics, AI, are probably like the hot and sexy categories. I still think fintech is like a big category. And it's not, you know, overfunded, particularly if you get outside the U.S. in a lot of emerging markets,

I would say fintech and e-commerce are still big categories and are still growing. They're not sexy in the venture world, at least not in the U.S. I was an investor in a fund and I got a distribution for this new bank and new bank.

And I'm like, what's a new bank? And it was like this tiny, a little amount of stock. And I'm like, well, if this legendary venture firm found this company, and I'll just hold on to the stock and see what happens. And then all of a sudden, it became a very large amount of stock over a period of time.

Yeah, for sure, still much room to grow. What do we think, Hussein, of Stripe buying Open Router? Those are two different things, tokens and web hosting. It's more than web hosting. It's like the information layer. You kind of know exactly how the token spends kind of going through the economy. And I mean, I think these are, these, it's an. interesting strategic purchase. We all kind of scratch our heads with YouTube. Well, we all

scratch our heads when YouTube got bought. We all scratch our head on WhatsApp got bought, like maybe a little bit less so for Instagram. I think if you're if you're leaning into AI and you're the plumbing system for the payments being leaning into AI knowing where the spend is actually happening how these, like it's actually strategic. The why I think we're going to figure out probably five years from that. We're going to kick our like look at it and be like there's such an obvious big purchase. Like I think you give a lot of credit. to founder-led businesses who can kind of think one or two steps ahead of the rest of the market. I like how you're framing is like Stripes infrastructure, Open Routers infrastructure,

infrastructure respects infrastructure. That could be the big idea. I never thought of that. That makes sense to me. What do you think, Shield, when you saw that purchase? I mean, yes, Stripe routes money, payment methods, banks, et cetera, open router routes, inference, basically. And I think broadly it makes sense. I think the price is wild. What did it go for? 12 billion? Seven.

Oh, seven to eight. And it was making 100 or 200 million at the time? I think. That was rumored. I don't know. I don't know.

I think it was more than that. I thought it was a little bit more. It was still 50 times revenue, 100 times revenue. Something crazy, yeah. Because they had just raised at 1.3 billion earlier in the year. Got it.

70 times revenue. 70 times revenue. 70 times right? There is. Okay. Well, sorry. That was based on the $10 billion number. So I guess less than that.

Something in that range. Okay. So between 50 and 100 times, it's unbelievable. It's clearly a bet that neutrality ends up, like that you need to to route, which I think, I see no evidence that that isn't true, but people are building their own, ramp launched their own router.com the same day that the deal was announced, just crazy. Yeah. I mean, hey, it's been a fucking great week for Martin Casado at Andresen.

man, between Otter and Cursor. Well, I mean, a $60 billion Cursor deal. I mean, explain how unprecedented that is, Dave, in terms of the last 20 years. You've been a venture capital and 12. I've been one.

I think Cursor was the biggest M&A ever, $60 billion. And Dreson and Thrive, I think both invested roughly 60 million, 50 million. They both made, andreson got 6.6 billion back on 44 million in, 150x return in a couple years. And a big cash on cash number.

So 150 times multiple might be small compared to some angel deals, but it's on a big number. Right. Exactly. Some of the angel investors even better. Like I think Neo Ali Partovee, I think put in a million and a half and is getting, I don't know, billions back? Something like. Yeah. Nobody could ever challenge Y Combinator could ever compete with them.

And the Y Combinator people attacked him savagely. And I wondered why they did that. Because he was a legit threat, probably. He was good at what he does. But notably, Cursor didn't go through the accelerator. It was an investment outside. Right. But I agree with your point, though.

I mean, what did you think when you saw that, Sheel? There were also investors in Replit. I think they did go through the accelerator. What did you think, Shiel, about that? Like the Y Combinator trying to put him out of business. I thought that whole thing was weird. Why come out with this personal stuff and you make claims that like, oh, he's a bad person. We know the story, but we're not going to tell you. I don't like all that stuff. That's the YC playbook. They did it to me too at one point. I can tell you from experience. It's a very different thing when you are not competing with YC and are competing with YC. They did it to you too, Dave. They went after you. Yeah. I was pretty close with a lot of people before I started 500. I even emailed, you know, PG and Jessica before I started 500. and then as soon as I left 500, things got very warm again.

It was an interesting experience. They're circled away. I mean, they don't, it's so lame though to be, you know, swinging your elbow like that and trying to, you know,

it's like there's plenty of, if you only, if you accept less than one percent of startups, then you should be happy that the other, let's say, 9% in the top 10% have a place to go.

Because I can tell you, Dave, you and I both know the business pretty well, do we know the difference between top 1% or 2% or 3% and does YC? Obviously not. Not until seven years later? Correct.

So what are we talking about here? You can be kind to each other and supportive. I'm super happy for him. I think, you know, entrepreneurs of all kinds are competitive and, you know, you're probably very familiar with, you know, how Elon looks at people. How about before a year ago how Elon thought about Dario and this year now that Dario is a big customer? I think he re-underwrote.

his position on them after talking to him. Chamath re-under wrote his position on Trump. There's a lot of re-underwriting that occurs in our industry. All right, let me just take a pause for the cause right now. I love using AI. Obviously, we all do. And then I found out about this great product called Harmonic. What is harmonic?

It's a database of every transaction, every investment in venture capital, every profile of every company. And I've been getting into robotics because when I was in Japan, I started seeing these robots fighting each other. And I was like, tell me about these. And very quickly, as you can see on my screen here, told me which ones are the ones being used at all these different fighting competitions? But then I was like, you know what? I want to have this type of search going on, like an associate or a researcher at my firm I do. And so I've empowered my team to create scouts, just like the Sequoia Scouts program.

I was the first Sequoia Scouts. And they named it Scouts. So I said, hey, find me any robotics companies that are pre-Series A. And if they went to Carnegie Mellon, MIT, Harvard, Stanford, get me that list as well. And now it runs it every Monday for me. That's the power of harmonic AI. If you are in our business and you don't have harmonic AI, you might miss the next Uber, the next micro one, the next cursor.

Give it a shot, folks. Harmonic.AI. Lots more to get to here. But let's talk about physical AI, robotics, defense industry. Hussein, have you jumped into it yet? Are you monitoring it? Because it feels like frontier models, obviously that investment opportunity seems to have manifested itself fully. There might be less opportunities in backing a frontier model.

But it feels like we're in that moment for robotics. And still, for military tech, still seems pretty nascent to me, especially on the implementation side. These things aren't in our homes yet. It aren't really in the factories. And if they are, they're kind of cloogey. So your thoughts on physical AI and just physical real world stuff being the moat now. That's what we're hearing from a lot of investors. Hey, there's no moat, but hardware used to be hard.

So we didn't do it. Now hardware is still hard. So we do it so we have some kind of defensibility. It's amazing how this industry is. transformed from being anti-hardware five years ago to very, very, very pro-hardware across the board. I am convinced that the future is like, like, it's, everything language-related is done. Like, and every derivative of the language stuff, it's the frontier models that we all kind of know, open AI-anthropic and then, you know, people building on top of the stuff.

I think it is still up for grabs who's going to win Transformers AI for physical and Transformers AI for biology. And it's no surprise that due to spaces have kind of gotten hot. And there's a bunch of that stuff in Europe, which is kind of good news for us, because that's where we kind of invest. And we've done one stealth one that came out of Imperial College. And a bunch of people are citing their papers. I can't talk about it yet because they're going to launch in about like two or three months.

But it's super exciting. It's like a new frontier model for robotics that kind of upends the figures and the generalists, et cetera, of the world with a different technique that requires a lot. lot less training. It makes it much more efficient. So big believers in this stuff. Shil, any investments in the area so far? Are you double clicking on it? What are your thoughts? I mean, you're early stage. So it's a little bit scary to put, I'm assuming, your average check size, $250 to a million. Am I correct? Or do I have all the difference? We're probably like $2 million average to $2.5.

Okay. So that would burn through like the prototype in nine months. Yeah. It is hard. In general, the AI companies take so much money. We have not invested in anything in physical AI. I am super excited about what I've seen. I don't know if you saw the demo yesterday from skilled AI. They announced something.

They have a robot that like you show it flipping a pancake and it'll just flip it'll flip pancakes perfectly every time. They did a really cool thing where the demo had, or the, they constantly, they constantly off a dog's leg and like a robot a robot dog's leg oh sorry and this is a robotic dog it's learn no dogs have been harmed in the creation of the dogs have been hard so we're clear they cut off a robot dog's leg and show that it just learns how to walk on fewer legs or they cut off part of its leg and it shows learning how to walk it the demos are amazing and And I can't freaking wait to have a robot in my house doing my chores.

And this is from skilled AI. Skilled AI, yeah. Cardigan melon spin out. Yeah, I mean, that's why I put that into my search. Here it is, folks. Let's take a look. Skilled AI, person has some gloves or a harness, I guess, a physical harness. Here's the pancake being made.

here's a plant being planted and they you can see here the human has devices cameras on each wrist and it's studying the human doing planting you know moving things from pots and flipping pancakes and lo and behold uh this is like the scene from planet of the apes dave you remember that famous scene where it was like do and they were like putting the forks and the knives into the proper trays and it does look like this is going to be the end of chores and human. Your daughter is never always going to have her iPad. I mean, basically she's going to be like, she's going to be doing to the optimist or the skilled robot what I do to her. She's going to be like, I'm turning off your internet access

until that dishwasher's empty. And the robot's going to be like, okay, I'll empty the dishwasher. But this feels like it's getting close, yeah. It's getting close. Yeah. It's compounding at a rate, which is like exponential. And like I think this is, I mean, I think if you're, you can take the long view and be like it's 10 years away, but I think it's a lot sooner. I mean, watching this, I think the training data is happening at such a fast rate. So, Sheila, your thoughts on the compounding nature of what we're seeing right now. And when that hits reality. As these things get better and better, it's, I just can't wait to have a robot in my house. And I would easily pay. way more than it costs to make one of these things. Like, is a robot worth $100,000 to me easily? Like, if it's cleaning and cooking, it's worth $100,000. And what are these things going to cost to make?

Not that much. 30,000 is, I think, what the first, yeah, what do they say, build of materials or bomb? Bill of materials. Bill of materials. I always say build. Bill of materials, bomb. The bomb, I think, is like probably 15, 20. you put in some extra pricing.

I think they got to be 20 to 30. So I think they're the cost of a Toyota Prius. So think about what that unlocks for humans. And it's just incredible. Like at that price point, it's incredible. Yeah. It's going to be like everyone, not, you know, unfortunately not everyone's going to be able to have one immediately.

But like, even for the average person at $20,000,000, it actually pays for itself pretty quickly. We have Rosie, the robot. Unbelievable. Unbelievable. All right, listen, while we wrap up here, Sheel is a beast on Twitter. And we're going to play a new segment.

It's a new segment. We're saying it's called Schill's hottest takes. Take number one. Let's see. You disagreed with Chimots all in that Silicon Valley has lost the idealism that made it great and that people only care about money now.

You suggest, quote, most likely a function of who Chimot surrounds him with. am I supposed to take this personal? What do you think of this take, Dave? And then what you'll end it up. We'll end it with Ushield, defending your take. All right. That is below my line.

It's below your line, okay? Is you saying your take on the... I mean, is it too much about money right now and a little less Steve Jobs and, you know, idealistic? We're going to index the web, Larry Page. You know, it did feel... Delta Valley is always about the money, but it's also always about the innovation.

Jason, you were probably around, well, you may not have been. Were you here in the Valley in the late 90s? No, I was in New York still, yeah. But I mean, I would come out two or three times a year, but I mean, it did get... I know there were a lot of people who thought in the late 90s it was just people here for the money. And a lot of them were just here for money. And then it blew up in 2001 and a lot of them left out. And then again, that happened probably two or three times.

So, like, I don't know that it's wrong. It's just not the whole story. The true believers versus the get rich quick people is, I think, a trend who are correctly identifying, Dave. And we are, I think, tipping into the get rich quick kind of like, hey, can I get in here? Go ahead or same. And I was going to say, I mean, like, in the 90s, there were a bunch of tours who came in. They were definitely there to make a buck, and they left. But, like, we did not see seed rounds and series A rounds of secondaries were found.

were taking a ton of money off the table. Like life alter, like life altering money by today's like trillion dollar company standards, but life altering money and it's like like millions of dollars. I mean, if you break 10 is life altering, yes. Five or 10, it starts. It's become much more coin operated than it used to be in the past. Like there's a, and I think there's a bit of a negative halo around some of this stuff because I think that that voice has become much more amplified,

even among the most technical of founders and the most. innovative of founders. There's like a, it's become a business in a way where it wasn't as much of a business 20 years ago, 30 years ago. I felt more clubby. That's for sure 10 or 20 years ago. So, she'll, um, you defend your take. You still defend your take? Or were you, S posting? Be honest. Were you as posting? No, no, no, no, no, absolutely not. I think, I think that. So Chumot said Silicon Valley lost the idealism that made a great and only cares about money. Are there people that only care about money? Absolutely. Has always been the case and it ebbs and flows. On the whole, the people doing the great work, like my friends at

Anthropic and Open AI could give two shits about the money. Like, they're doing it for the mission. I think like this easy to say when you pass a hundred billion valuation. Yeah, that's right. But also like their lives haven't changed. Like they haven't changed the way they live their lives. And what are they? They could. They could easily just say, hey, I'm done. I'm retiring. But if you look at the number of people that continue to do stuff, it's not strictly money motivated. It's because they're excited about the mission. And I think I've actually, I didn't see that idealism five years ago that I do see now. It is a peculiar group of people. I will say, Anthropic, because of the leadership, having all self-selected out of the Sam Altman

experience, which is the cutthroat experience in their minds and the like the money people are going to make the decisions, you know, code monkeys, code monkey, but leave it to Sam to, you know, take the credit. This is not my interpretation. This is what people say. Like, Sam's taking the credit. Sam's doing the deal. Sam's the front man.

That got a little tired, I think, for that group of people. Anthropic is like, oh, we're a bunch of monks. We're a bunch of pious, like, we're doing this and we're giving all our money to the Anthropic Foundation and we're going to cure cancer and, but you're going to lose your job. They seem like headcases to me a bit. on the margins, like really delusionally committed to being the last company on earth. It is a little weird. All right.

What about Sam not having any equity in opening eye? I don't know if it's true. I mean, I think we're missing the point. He's got a lot of money probably in nonprofits and philanthropic entities that he controls. And like, who's to say whether that's, you know, money in his personal pocket versus money in his philanthropic pocket? It's fuzzy. People need liquidity.

And obviously talk in my own book here, but I just wanted to share a few interesting charts. Oh, sure. That might be relevant. I've been doing this presentation for another talk. This is like comparing $100 million private rounds versus $100 million IPOs. That crossed over around 2017 when SoftBank Vigit Fund came out. Got a little nuts in 21. In 2016 is when the flip happened.

The blue line is $100 million private rounds. The red line is $100 million IPOs, and we see them bifurcate in 2016, just so people listening understand. And now it's 10 to 1. The last couple of years, the number of private $100 million rounds, 400 per year, looks like we're going to continue on that track. Number of IPOs of $100 million, only like 40 or 50, right? And I think that's what we've seen is the IPO market now is requiring half a billion to a

billion dollars to go public. It's not that it's closed. You just have to be a lot bigger. That results in companies being private a lot longer. The other graph I will show is this one, which is the tender offer. And this is corporate tenders or internal secondary offers for their employees. That is a booming business. Somewhere between $30 to $40 billion a year now and, you know, growing probably north of 50%, at least north of 30, 40, 50% per year. And here we're seeing, 2023, there were 6.5, 2024, 12, major jump from 24 to 25, 12 to 27 billion, so just over 2x, and then 27 billion to 37 billion into the estimated 2026. Tender offers, which for people who don't know, that's some investors coming in and buying

common shares from employees. It's corporate organized secondaries, primarily for the employees. primarily for the employees, sometimes also for their investors. Early investors who have been patiently. For a lot of companies, for a lot of companies like Databricks and Stripe and Canada and others, these are happening on almost an annual basis now. Those numbers are probably distorted a little bit. Open-A-Dade did their own $7 billion secondary earlier this year.

But still, the majority of those. Who was the by-side on that $7 billion? Was that Kushner? It's secondary firms. It's the primary round VCs who, you know, want more. when they're oversubscribed rounds. It's retail market and family offices, at least for the popular names.

But it's kind of interesting because outside the top 50 companies, there's not as much awareness of those companies. And I think this is what's going to start to happen. These companies are staying private for five years longer than they used to. Employees there want to buy a house, want to put their kids to college. They want liquidity. And they're sitting on a ton of, you know, unrealized equity, but they can't buy a house in Silicon Valley. They can't, you know, pay for

schools and everything. Well, and their concentration, Dave, is the real issue, right? Like, you're basically 99.99% of Schill's friends at Anthropic. Their wealth is in one stock. Well, okay, one more, one more graph and I'll quit here. But we love your graphs. Keep them coming. Here's my segmentation of that market. In that top category, used to be SpaceX, still is Anthropic Open AI. Now it's like a trillion. Stripe. Well, but as soon as Open Ayanthropic go out, then the remaining ones will be like

Stripe, Databricks, maybe Revolut, Anderol, a few others, like Bite Dance, if you consider. Right around 100. Yeah, some of them just below, some are just above. So that will... Huge amount of dollars there. But like, look at the rhinos and stallions and maybe the donkeys. These are like

where the majority of the number of tenders are. They're not like huge numbers. These are like 10 to $50 million tenders. Amount of market cap that's being sold here is probably somewhere between two to five percent for most of these companies. Got it. So they're trimming very little of their cap table for very large numbers. Right.

And let's assume these companies are probably growing north of 20, 30, 40 percent per year. It's not at all unreasonable to say you would do 5 percent every year in sort of secondaries back to employees. This is really the new IPO market. This is like where liquidity is coming from for employees. It's why real estate agents in San Francisco make a ton of money and car dealerships and, you know, private schools. But the challenge here is it's still a pretty concentrated story.

And I think we're just going to see more and more of these corporate tenders happening on a regular basis. If nothing else just to be competitive, you know, if you have the choice to go work for a company that has an annual tender offer and one that doesn't, which one you're going to choose? Yeah. And who's the loser here, Hussein? Who loses in this new private market? tender offer in your mind.

And retail. Retail investors, right? Retail investors have to wait until these things are super expensive. And in the old days, Dave, like in like the 90s, like you take these companies out, like really, really early. Like at market caps of 100, and employees would have liquidity immediately, like after the lockup. And retail could buy those shares. More importantly, a civilian could own Microsoft at 100, 200, 300, 300 million.

Well, they can still do that, but the difference is now it's a fuzzy story. when those companies go public, they report their numbers, there's quarterly transparency of what's going on. You have a two, three, four trillion dollar, you know, middle ground market where these companies, you know, exist before they go public, but their financials are not disclosed to anybody that's not an insider or a primary investor. And so all this secondary trades that are happening on markets, you know, hive, forge, Equigen, augment, all these other brokers, there's no underlying corporate financial

data on most of them. Everybody's flying blind and buying that on vibes. Yeah. It's vibes. Yeah. Totally vibes. And the buyers who are buying it are hearing people talk about these names. And when something gets a certain amount of PR, then...

It looks great while SpaceX and Anthropic are going through the roof. But I guarantee you, as soon as that market turns around... It could be like the Saspocalypse, right? Like late stage VCs, they suspended disbelief. They bought Air Table, no Dict of Air Table at $10 billion. and it didn't get there. They got their money back. We could have a lot of those.

We could have a lot of those. I mean, I don't know how many unicorns they were back in 21, like, you know, 600 plus. Like, how many of them are real, right? We were just talking about Headspace just got bought for $200, $300,000, but the last private mark was $3 billion. Headspace got bought. 90%.

Who bought them? I'm still a large shareholder in Com. I did take advantage of secondary twice during that opportunity on the way up for my LPs, but who bought sort health, plans to acquire, headspace and cash transaction. Wow. And by the way, this same issue exists for a lot of seed funds.

I think this is the big challenge for a whole bunch of fund managers is they're sitting on unrealized marks. They may have a fund that's at 3,4, 5x, you know, TVPI, but DPI is zero or, you know, barely, you know, 0.5. These funds are getting to 10 years and there hasn't been, you know, 1X returned back to investors yet.

And I think we need to start figuring out how we're going to get liquidity for these funds. I really, if I wasn't doing what I'm doing right now and so busy, I would do a roll-up vehicle. I would raise $500 million and then just go straight down, like Bending Spoons is doing. Bending Spoons. But I would do a private bending spoons and then just hire a bunch of AI kids, developers, give them like really crazy bonuses for hitting crazy profitability and just buy every headspace

slash whatever is out there with maybe Headspace has 50 million in revenue and they get sold for 100 or 200 million and then you can get rid of 80% of the staff. You can do what Yelan did at Twitter, you know, get rid of 80, 90% of the cost and now you've got a wonderful business. I remember meetup.com. My friend Scott Hiferman. I started that company, Kevin Ryan wound up buying it and then it went to bending spoons. And I had heard a whisper that it was making 15 million a year. And then it got bought for 20 million. And I was like, well, how's that possible? It doesn't make any sense to me. And I don't know if that's true or not.

That was just a whisper I heard. But I think if it's not growing, VCs just don't want to waste our time. But what an incredible opportunity. Well, there's some stuff that's growing just not fast enough for venture returns. Yeah, that was Airtable, right? Air table was still growing 20%. And people were like, well, this is a waste of my time. It's like, really?

But okay, I guess we'll see. It all depends on price, right? And at the end of the day. Well, it's price. But I think more importantly, see, this is, What I thought that to Hussein. Then I realized it's not price. It's, it's opportunity plus price. You have a certain number of things mentally. You can keep in your brain as an investor, probably 10, you know, like as in board seats. And you're like, well, if I have. I would say three. Okay. But, you know, I'm being generous here. Let's say it's eight. Let's say seven. So you got seven and you're like, hey, these three are filling my space with a 20% growth company. And it's hard. And every conversation is hard and a bummer. and we can't get out of the mud for four years. And I could give those three seats to, I don't know,

this robotic company making pancakes. You know, it's just you only have so many spots on your dance card. I think that's, Shiel, you're nodding, I think, yeah. No, I agree. I think there's a, there's a question of, like, are these companies ever going to go public? Like, why would Stripe go public ever? Like, they have unlimited capital, they want to grow.

And they can sell their capital. You know, why not? They don't have to. They have liquidity. If they want to acquire PayPal, it seems like they can because somebody else will give them money to do it. So why would they ever go public? Mike Bloomberg never took Bloomberg public.

Different. He owned it almost entirely. Sure. 80, 90%. Like, because he didn't have to solve for, like, Stripe gets this tender thing that Dave's talking about, solves for the liquidity question. And the private markets have grown so much that they don't need to go public to grow. But Bloomberg was a technology company.

You know what he did in New York? he was famous for just paying 50% more than everybody else. If you worked at the New York Times, you made 100, you were making 200 working for him. If you worked at the Washington Post and you went to Bloomberg, you got a 50K, 75K raise. And you didn't get any equity, but right now... I think there's an arbitrage opportunity here where these companies have been priced on sort of venture scale projections. And now some of them are profitable, but not growing that fast.

And they're going to be priced on free cash flow projections. you know, not just multiples of revenue were growth. And that's going to be a different number. Very different. I mean, if you have a currency like Elon did, I think Cursor might wind up being, you know, this generation's YouTube acquisition,

you've got a... That's a great buy. $2 trillion, and they brought in $3 billion. And what was their runway? $3 billion, $4 billion at the time? It's at $4 billion now, and it's on its way to $10 by the end of the year. But like, that's not even like the total value.

It's like, you know, to be... To be kind, I would say XAI was a shell of a company that was mostly valuable because of the infrastructure and cabbacks that Elon bought. It wasn't because of the tech or even the people who largely walked out the door after that acquisition. But, you know, turns out that all that infrastructure was very useful to rent out to, you know, Anthropic and Google. And then Cursor was really the value that came in. And I think that combination, like you got to give Elon Cree.

The massive pivot that he's done in the last six, nine months with that company. Incredible. He's going to have a line of business that is the majority of their revenue that did not exist. You on web services. Yes. That is just mind-bodies. All right. Let's end on agents.

I have been obsessed with Grock Bot. Just does what you tell it to do. Sheel, you have been obsessed with another agent, which has a landing page that looks like it was built in seven minutes by a Python. developer and I signed up for it and people are losing their minds over it and the terms of service. Tell us about this new open claw abstracted into just I message that people are losing their minds over. Tell us everything. Yeah. So I've been using Grockbot too. This company is called Instinct. It was funded at Seed by Conviction. A, I believe, by Kleiner Perkins, not announced, but that's what I've heard. Also, I've also heard.

crazy valuation numbers like seed at 100 a at 500 and I heard they have offers at the billion plus range. What it does is it's basically like your assistant. You can, that's the website. Yeah, this is worth a billion dollars, folks. Here's your. I mean, could we even just put it in a no background? No, okay.

Sounds good. You can text it and it just does stuff for you. What's cool and I think valuable about it is it actually like goes the next step beyond what you would think to do. You would think a bot would do. So if you ask chat DPT work to book a flight for you, it will take you to the landing page. Google flights. Here's the flight to take. Instinct will actually go through and book it for you.

And they're able to do that because they have a vault where they store your credit card of card information. and they're probably violating all sorts of terms of service. But hey, the thing works. I signed up for it. I saw the terms of service debate. I paused. I was like, I'm not sending anything until I find out what's going on here. Grockbot has been amazing for me.

A bunch of the things I wanted to do with OpenClaw and Hermes. I call it Hermes because I think it's funny. That is a harness and they make bags. But anyway, a lot of those. those agents in Clawcode, just they had too many restrictions on what they would do and not do. I took a clip of a YouTube file and I said, analyze this into the five most important clips and make me five clips. And it took this Mearsheimer, John Mearsheimer video about tactical nukes, whatever, he's been on the Olin Pod. It made me five clips. I was like, whoa.

And it's like, would you like one of these vertical with captions? And I said, sure. And then I shared it on my Twitter. And I was like, well, that's a $50 an hour video editor, you know, freelancer that I would have done that back and forth with. Instead of taking three hours, it took three minutes and was essentially close to free. And then I asked it to do some things on LinkedIn and it just did it because it has a computer window that abstracts into cursor and it kind of works all the time. I think that product, if it goes multiplayer mode, will go parabolic. And by multiplayer mode, I mean, can I just add three team members to it as comment only? Can I add five team members to it as read only? You know, like the Google Doc suite. If they add multiplayer mode to that,

I would have taken the docket creator for today and shared it with you guys. And we would have all been there talking with the docket. Really interesting product. Have you used, anybody used Grock bought yet? And any impressions? I'm using it too. I use them all. Like, I mean, I mean, which one Which one is sticking most? Which one do you go to first? Open club is the least durable. Like I switched over termies. And then then Grop Bot became the next one.

Then instinct, I just got, I was, it has a sign up list and I'm not cool enough like you guys to get access. Dude, I put my name in. It was instantly. It was like, okay, you're on the list. Look, you're in. I was like, okay. Okay. So, I know is where the bread is buttered.

So I'm not working on that one. But it's also amazing, like a year ago, none of these things existed. Like, OpenClaught was like a year ago. It was like notorious. Like, yeah, yeah, like the pace is like super fast again. These things are compounding. I got to say what Sam Waltman, I mean, I don't want to beat up on Sam here, but what he did to OpenClaw was so sinister and cynical in my mind.

He like buys the guy, brings him internal. And then, you know, Dave Morin, like, is trying to keep this foundation going. And literally the second, his name is Peter, I believe, I've never met him. The second Peter, to Open A, I just lost its voice, lost its momentum. Everybody was like, well, this is over, whether it's true or not. I've never seen a project go from everybody embracing it talking about it to completely toxic and people being like, yeah, you know, I got to go find something else. I got to find something else.

And I don't know if that's because they thought it was part of Open AI and they didn't want to, you know, they were open source people or better options came out. I don't know. What do you think, she'll? Yeah, I'm not sure what happened there. I think to your point about Grockpot being like a, we talked about this, having 100 million users. I think that relies on the other guys not catching up. And they actually already have. Like chat GPT work already yesterday announced new stuff that's doing a closer version of this.

Show you guys one more graph. By the way, shield is open AI. I work basically what Peter is probably working on there. And it's basically open claw inside of open AI. Totally. Yeah. I mean, what did he get? You think he got $300 million?

Yeah, I think it was... What is he worth? You heard that? I don't... That was somewhere between two to $300. That sounds right. Oh, man. But maybe we had a $300 million valuation or $400 million.

That might be triple. It might be a billion dollars right now. What do you think was saying? It was just one guy. It was never disclosed. I mean, the rumors were like a crazy number. Sorry, you know what? That wasn't...

That was the other company that was acquired. The podcasting bros was two experiments. No. Remember the? Oh, there was a social media experiment that they bought. Oh, yeah. What was that? No, no.

But I think Peter got the whisper number on Peter was two or three hundred million in equity. Yeah. And that was when it was a $300 million dollar company. If it goes out at $2 trillion, that could be $5.6. Anyway, I just want to point this out. Remember how crazy it was? Go ahead. The open claw hype.

The open claw hype was so crazy that there was a, there was this mult, book a Facebook. That was the one that I was talking about. Moopbook got acquired. I think that got acquired for like 200 million by meta. By meta. Right. Yeah. And there was like the open claw religion like as someone planted that seed. Like it was like there was a euphoria around this thing. And then it just like died. It was about one month the whole thing. Yeah. Start to finish. Well, I think the the hype was maybe overplayed, but the story was sort of for real. I think that was like original agentic sort of adoption.

Wow. I just want to point out this graph. This is kind of like crazy. Explain the chart. You got to explain the chart, Dave. So there's a little story here in that CFO, Sarah Fryer at OpenAI. Four months ago, she was like, Sam was like, we're going to IPO. And she's like, we're not ready to IPO.

And then just recently, this was leaked from their internal conversation. She's like, we're definitely going to IPO in 2027 and maybe sooner if our growth keeps inflecting. And I was like, what's she talking about inflecting? And I was like, this graph is what she was talking about. Look at those numbers sort of like go through the goddamn roof. Yeah. And what we're seeing here is OpenAA active agent users in back in January, 200,000 breaks a million. Just a month ago.

Like that growth went through. But it hits five million in May. And then six million in July, 10 million later in July, 15 million in the beginning of August, 20 million towards the end of August. So you're talking about four hours. in two months. Right. Unbelievable.

And I don't have the grass in front of me, but I know that it was reported that opening eye revenue was growing faster than Anthropic this month. This is after they had quarter over quarter, slow down. Hmm. Interesting. All right, listen. Another amazing episode, this week in venture capital, a special edition of this week in startups, an offshoot, whatever. Hey, guys.

Best investment. What's your, what's your biggest portfolio win these days? Tell us when did you get in, what is it? Which one is just going to sprinkle all that beautiful DPI on your LPs? Tell us that with you. Tell us where hope, where is your hope tied to? It's a hard job being a real DPI or hope? Those are two different things.

Selling hope, baby. Hopeium. Tell us about your Lepium. I would say recently one is called Basis. It's a AI for accounting. really automates the work of a junior accountant. If you think about Harvey or Ligora for law, and you've seen the growth in those companies,

this is that for accounting. We let a seed, Keith at Kosoal led the A and Excel led a B recently. And the growth that I've seen is amazing. And companies, these accounting firms are really using the product. And it's been amazing. And you got in at seed. I think we are investors in the, the Uber to your lift or your DoorDash,

whatever the analogy is, a tax GPT that we incubate. So, yeah, I agree. This is going to be a fantastic space for both companies. What do you got,

Dave? What's making you... We talk about what we're going to get DPI and what we hope to get DPR. Yes, yes. Which one do you, when you talk about it, put an eggplant emoji

at the end of the sentence. Which one? Well, I guess because I worked in Founders Fund 16 years ago, I have Kerry in Founders Fund, too. And when we started our second secondary fund, I rolled in about a million dollars of GP commit in that fund thinking, oh, this will perform pretty well.

Yum. Turns out that was all SpaceX. Fantastic. Well done. It was our best investment. So that was a career maker. But the things I'm actually excited about probably are not generally on people's radar. We spend about 10% of our capital in Latin America.

And one of our best performing investments, I may have mentioned this on the show before, was a company called Motu. And they are a motorcycle manufacturing and small business lending company for delivery drivers in Sao Paulo Brazil. And that business is on fire. It's doing over 300 million in revenue, profitable, growing 60, 70% per year. And it's very, very reasonably priced. A lot of Latam is actually on sale. Like to meet them. And as Sheel knows, we used to do a lot of investments all over the world in 500 startups.

Now that I'm doing secondary, is most of it in the U.S. but at least some of it we're doing emerging markets. A different deal that's not a typical secondary for us is in a company called Equity B. And we recently put money into that because they are a platform sort of similar to secondary marketplaces like Ford equities done, but they do employee stock option forward contracts. And so again, getting back to those employees who are sort of locked up and want or need liquidity before the shares are actually available to them, they can finance, and exercise and hold those shares and get some liquidity.

And really helpful for people who are leaving companies who might otherwise lose those options. EquityB.com, BEEE. Amazing. Well done. Hussein, who do you got? Who's making you feel optimistic these days? This year, this month, we did one in the AI space for material science called Cusp AI. We were the Inception Check. We wrote them a $10 million check at a great.

At the time felt like a crazy number. It's not a crazy number in hindsight. But we're 2.6 billion. Kleiner just marked it up. Two years in, like, almost a fun returner for our fun three, like, in two years. Absolutely. Feels pretty good. Congratulations.

Not our most interesting, though. Like, our sister company to that in many ways is, like the same type of thing, but a drug discovery company. So AI, AI for biology called peptone.com, which, like, the AI, this stuff really works. And, like, we have a drug against prostate cancer that might actually stop prostate cancer, almost entirely generated by the computer, and we're going into clinical trials. That, to me, is the one that's where I can generate

a ton of DPI for us, but both both are great. Absolutely fantastic. Congratulations. I'll just give you two quick ones myself. We love all of our startups equally, but sometimes we see things get marked up, and this is this week in VC. So just on the markup trail, on-prem, and Sovereign AI became like a big deal,

but we had incubated this company, Apicus, 18 months ago. And so for banking and health care, etc., they take this go-one server, put it into your facility, and they help you build your own large language models, harnesses, et cetera, and keep you from having to give all that data to a frontier or risk leaking it, and they have a wait list for their product. And that is always a great sign. Second one, Micro I met this crazy founder, just high-end. energy, you know, reminded me a bit of Travis. And he was using AI to figure out who the top developer was, top developers were. It's a pretty interesting product. I think we invested when it

was $10 or $15 million. And then he pivoted into AI training. This week, he announced he had $500 million in training revenue, everything from legal, et cetera, and that they also hit a $4 billion dollar valuation. So that is a fund returner times four, three or four, I guess. But of course, long way to go. Still more work to be done. Dave, Sheel,

Hussein, great job on the show, and we'll see you all next time. Bye, bye.