This Week in Startups - OpenAI CTO Departure, DOJ AI Compliance, M&A Trends, and more! | E2014

Episode Date: September 26, 2024

This Week in Startups is brought to you by… Linear. Linear helps product teams focus on what they do best: Planning and building great products. Streamline issues, projects, and product roadmaps in a tool your team will actually enjoy using. Get 25% off at https://www.linear.app/twist Oracle - Oracle Cloud Infrastructure, or OCI, is a single platform for your infrastructure, database, application development, and AI needs. Save up to 50% on your cloud bill at ⁠https://w⁠⁠⁠⁠ww.oracle.com/twist⁠⁠ Fundrise. Fundrise provides access to diversified portfolios of private real estate to all investors with their industry leading, easy to use platform. Sign up today at https://www.fundrise.com/TWIST * Todays show: Alex Wilhelm joins Jason to discuss OpenAI CTO’s departure (2:03), DOJ AI compliance guidelines (9:11), current trends in tech M&A (19:15), and much more! * Timestamps: (0:00) Jason and Alex kick off the show (2:03) Breaking news: OpenAI CTO departure and speculation (8:17) Linear - Streamline issues, projects, and product roadmaps in a tool your team will actually enjoy using. Get 25% off at https://www.linear.app/twist (9:11) DOJ AI compliance guidelines (17:52) Oracle - Try OCI and save up to 50% on your cloud bill at ⁠⁠https://w⁠⁠⁠⁠ww.oracle.com/twist⁠⁠⁠ (19:15) Current state and trends in tech M&A (29:13) Liquidity, market trust, and the move towards a cashless society (36:05) Fundrise - Sign up today at https://www.fundrise.com/TWIST (37:21) Startup funding, valuations, and disciplined fundraising (50:09) Instacart's valuation journey and venture capital challenges (53:25) Optimism for the AI-driven business super cycle (55:36) The future of labor: Skilled trades vs. knowledge workers (1:02:03) Trends in apprenticeships, college enrollment, and geographic arbitrage (1:08:24) Startup opportunities in vocational training and alternative education models (1:11:09) Google's career certificates initiative (1:14:16) Job expectations and the reality for young professionals (1:15:42) Tenet Media controversy * 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 * Mentioned on the show: https://www.cnbc.com/2024/09/16/the-toolbelt-generation-why-teens-are-losing-faith-in-college.html https://globalventuring.com/corporate/exit/exits-corporate-backed-startups-august-2024 https://www.wsj.com/articles/justice-department-pushes-companies-to-consider-ai-risks-116cfcf7?mod=hp_minor_pos11 https://www.ft.com/content/78b7e7a7-7428-4c5e-bfa2-0921c9d6cd25 * Follow Alex: X: https://x.com/alex LinkedIn: ⁠https://www.linkedin.com/in/alexwilhelm * Follow Jason: X: https://twitter.com/Jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis * Thank you to our partners: (8:17) Linear - Streamline issues, projects, and product roadmaps in a tool your team will actually enjoy using. Get 25% off at https://www.linear.app/twist (17:52) Oracle - Try OCI and save up to 50% on your cloud bill at ⁠⁠https://w⁠⁠⁠⁠ww.oracle.com/twist⁠⁠⁠ (36:05) Fundrise - Sign up today at https://www.fundrise.com/TWIST * 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 * Subscribe to the Founder University Podcast: https://www.youtube.com/@founderuniversity1916

So there's two individuals who are digging a tunnel. On the other side of the tunnel are a bunch of diamonds. The one guy is walking away when he has but one or two strikes left with his pickaxe to get to the diamonds. The other person is feverishly trying to get there. I'm not giving up, folks. I am not giving up. Other VCs might be given up. I believe we are on the precipice of the greatest super cycle in the history of business.

because what AI is capable of doing, if you can own, you know, these companies and help grow them now, and they are as efficient as they appear to be trending towards, the amount of earnings that these companies could have per individual is going to start looking more like, I don't know, Google's earnings, Apple's earnings, or Onlyfans, which is to say tens of millions of dollars per employee, not hundreds of thousands, right? This week in startups is brought to you by Linear. Linear helps product teams focus on what they do best, planning and building great products. Streamline issues, projects, and product roadmaps in a tool your team will actually enjoy using. Get 25% off at linear.app slash twist. Oracle.

Oracle Cloud Infrastructure or OCI is a single platform for your infrastructure, database, application development, and AI needs. Save up to 50% on your cloud bill at oracle.com slash twist. And Fundrise. Fundrise provides access to diversified portfolios of private real estate to all investors with their industry leading easy to use platform. Sign up today at fundrise.com slash twist. All right, everybody, welcome back to this week in startups. He's Alex Wilhelm. I'm Jason Caliqanis. And we talk about startups, technology, and we'll delve into media, politics as it relates to those other topics. And Alex, I understand, there's some breaking news. Yeah.

So we were literally just sitting down, getting our mics turned on. And the Financial Times reports, as of seven minutes ago, Jason, that Open AI's chief technology officer, Miramorati, is leaving. Oh. Yeah. Hello. Hello. That's interesting. So they have an unlimited amount of capital.

They have a massive lead. And the CTO has left the building. Yes. That's a breaking news story. So whenever we have a breaking news story, we like to speculate. What are variables? What's the context around this? We know Open AI is raising at $150 billion, like $5 or $6 billion, I think was the target of that raise.

So they have unlimited capital to pay this person. But there was also a secondary where people could cash out. And when people cash out large amounts of money, sometimes they'll have an existential crisis or they will just say, well, I'm going to call it a career. There's two variables there. There's also unlimited funding for new startups. So that person might want to be in the number one position.

That's another possibility. And then there are other startups that already have been. informed that are looking for CTOs who could make a better offer, or there could be some a thing that happened that led to them being pushed out, fired, or disagreements. Those would be the top potential category. So there you have it, folks. It's going to be somewhere in that zone in all likelihood, or it could be personal, God forbid, personal tragedy, you know, need to address something in the personal life,

you know, a sick parent or something. So, well, any indication of why they're leaving? as I run through all possibilities and you try to Q-U-S news. I hope I fell a buster enough. No, no, no, you're good. She said there's never an ideal time to step away from a place one cherishes,

yet this moment feels right. Our recent releases of speech to text and the latest models mark the beginning of a new era that's made possible by your ingenuity and craftsmanship. She wants to, quote, create the time and space to do her own exploration. I would bet you lunch,

which is my favorite wager, Jason, that I bet She and Sam Altman disagreed about stuff. My impression of watching Sam do business for a while now is that he gets his way and you're either on board with that or you end up leaving. But I mean, Ilya left and John Schulman left and now Miros out. And it's becoming increasingly at the top of the pyramid, the Sam Altman show, even more than it was before.

So that's my vibe. Is she, was she considered a co-founder or not? I didn't know if she was considered a co-founder in terms of her title or when she came in. I don't think she was considered a co-founder. She also had that terrible moment on tape where they asked her the training date. It's the same individual, yeah? Yes. And she became a meme where she gave like a grimacing face like,

they were like, did you train off of YouTube? And she said, I probably if I answer that question, I might get fired and or trigger a lawsuit. But it's an honest, good person. So I'm going to grimace. which is what an honest good person would do if they got caught with their hand in the cookie jar. This reminds me a lot of when a company does something bad and then they just cannot admit that they did it.

So did you see the Boershead meat fiasco in the U.S.? Oh no. I mean, I know Boershead because I grew up on the East Coast is a roast beef and you get your liverwurst, got all the good. No more liverwurst. They're out of that product line and they closed a factory because they were inspected by the FDA

and they found Listeria meat on the walls. just basically everything you don't want to see in. Yeah. And they responded with, we care so much about our customers. We uphold their value. I'm like, no,

you don't. Just tell me, all right, we were too cheap. We made a mistake. We're going to spend more and do better. I'll respect that much more than just being grimaced at, if you will.

But anyways, Mira, she's out and, well, that's crazy. I guess. Well, um,

it does seem like that organization now has so, so many people and so much capital and so many users and so much revenue that I wonder if one person can, you know, coming or going actually will change the fate of the organization. I don't suspect it will. Yeah, that's fair. I wonder also if, you know, if I was the CTO of an org and she was there since 2018, so not a co-founder, but a very long tenured employee at the company, if I had been there for, what is enough, six years and we started off as a research group.

we got larger, increasingly commercial, and then suddenly you're in the process of raising six and a half billion more. It's probably less doing code and more doing meetings than she might want to do. And I kind of respect that. If it's worth $150 billion and she was a CTO and she had, but one percent of the company would be worth $1.5 billion, 10 basis points would be worth $150 million. Somewhere between those two numbers is probably what a CTO would get. now if you was an early stage startup

this had a very weird beginning and weird corporate structure you know the CTO if they were a co-founder would own you know if it was four co-founders they may own 10% each after dilution 20% each in the beginning as a hired gun CTO brought in later low single digits so you know if she had one 1% she's a billionaire and she might have been able to sell

you know whatever 10% of her holding, she might have taken down 10 to 150 million to 150 million and be sitting there saying, you know what? There's more to life than this. And it could also be maybe Sam feels that the organization out grew hard. We all of those reasons. And when you get a wishy-washy kind of statement like that, it sounds like she might have been pushed out.

Yeah. Well, more to come on this reporting just off. I couldn't not bring it up on the show. If you want to build beautiful software products, well, you need a beautiful development platform, but most issue trackers just aren't helpful and they feel like a chore to use. But linear is different. It's developer first, incredibly fast, beautifully designed, and it's purpose-built for how modern product teams work. With linear, you can streamline bug reporting and test tracking, plan and spec new features,

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to compliance rules in the realm of AI that might impact startups. You have me look into that. I have it for us. A possible M&A comeback, hot startup rounds that indicate a return to valuation normalcy. And then, thanks to the group text, generation tool belt, and interesting data on how the youths are changing up how they approach the labor market. All right. First up, though, Department of Justice, compliance.

Jason, these are now incorporating AI into kind of the best practices. I have a lot of thoughts about this, but I'm curious why you've, flagged it for the show today. You know, I just saw people talking about it and there was a Wall Street Journal article and I was wondering why the Department of Justice was talking about AI as a potential risk and that compliance officers and compliance programs needed to be involved in that. So compliance, as everybody knows or maybe doesn't, is typically in a finance organization, let's say, you want to make sure that you're doing things by the book. It's kind of like the legal department and making sure, you know, it's kind of legal adjacent

and it's like operations, but more serious operations. So compliance might be, I don't know, something silly like, well, when we make a trade, there's a document and it's signed and this level of person needs to approve a trade above this amount of money so that we don't have some rogue trader. You remember that story of the rogue trader who was trading well above their limits, you know, on some desk. and then they get flipped upside down because they were doing something

that they weren't supposed to be doing. The compliance office was supposed to check that. Yes. So I'm wondering why AI came up on their radar if it's preemptive or reactive and there's something happening in organizations that requires compliance.

Okay. So it turns out there's this thing called the Evaluation of Corporate Compliance Program guidance dot. And what it is is a series of best practice. And if you're a company that has to deal with compliance, which is, most of them, I'd say, then if you follow this document and you make a mistake, the government will say, well, look, you did follow the best practices, something went awry, we are not going to take you

outside and hit you with sticks. We might fine you, but probably no one's going to go to jail. And so when they expanded this document to include some stuff on emerging technologies, which really is just focused on AI, what this does is it means that companies that want to use AI products will have to then take AI compliance into essentially how they do business to prevent getting in trouble for it. Now, there's a bunch of stuff here. I'm not going to run us through this. I kind of summarize it down to three things in the realm of risk management. So the first thing is, are companies that use AI, quote, keeping tabs on potential and negative or unintended consequences and working to mitigate

the potential for deliberate and reckless misuse? So that doesn't sound onerous to me. It sounds more like, know what you're doing and don't have no guardrails. That doesn't scare me too much. And then two more things that always took out to me. One was, are companies certain that quote, the technology is used only for its intended purposes. So don't build something that can do very bad things and then just ship it out there

and then go, whoops, us? And then finally, how is accountability over the use of AI monitored and enforced? So that's kind of, I think, the key bits. Nothing here strikes me as, as you're not going to get like, Lena Con level angry about this, Jason. But I do think for startups that are selling AI, you know, mediated or predicated products

are now going to have different conversations when they do sales. And that's kind of what stood out to me here is if you're a startup, you need to answer this question. Yeah, if you're working in finance, you know, maybe HIPAA, you know, health information. Yeah, you have to be thoughtful about how AI is applied. So if you were to put a language model into a hospital or into Morgan Stanley or something or Blue Cross Blue Shield, and you did it in a non-thoughtful manner and it resulted in people's information being leaked or, I don't know, a prescription being given that shouldn't, or financial advice being given that was wrong, or if somebody not getting a mortgage because your algorithm and your language model didn't correctly assess the risk. or, you know, they gave a mortgage to somebody that was too risky. All of these applications, when they hit the real world, have consequences.

Self-driving? Pretty obvious. I was using 12.5 today and was very impressed. You know, it still needs an intervention. It's not ready to take the steering wheel out. Neither is Waymo's. But it's, you know, we're in the autonomy endgame, as we've talked about here, and it's one of our themes. Yes.

But there's a lot of compliance there, right? Hey, make sure you record things and keep track. of interventions. Then you start going down to the next one, which is healthcare, maybe people are getting a prescription or they're getting a diagnosis.

You know, way down there is grammarly or the new writing tools that we talked about inside of the iOS beta 18 for the iPhone 16. I guess the iOS is a different version than the phone.

So I think they're on iOS 18, iPhone 16, AI. That Apple intelligence, as we showed, you know, puts the comment in the wrong place, I don't think

anybody's going to get sued. No, Oxford comma or not. You could be annoyed, but you're not going to get sued. But if you put the comma in the wrong place in a financial transaction and add some zeros by mistake, you could be in a lot of trouble, for example. I think the hip-a-point's great because

the thing about unintended consequences stood out to me as, you can't claim ignorance. So, for example, if you had an LLM that's out of top hospital data and allowed, I don't know, doctors to ask your questions about patients, cool, if someone who wasn't allowed to access they did, asked it, who's the most obese patient

in the hospital today? Yes. Well, you should have some guardrails around that. And that's why these rules don't. This didn't terrify it. Yeah. It just seems like we're now got the regulators aware that AI is being implemented

in 2024 and will be implemented. And they're just saying, by the way, we're aware that you're aware, that we're aware, that we're all aware that this is happening. that this is happening. And so, since we're all aware, don't screw it up. Pretty basic stuff.

I think for founders, you know, it's very interesting when you work with the young founders, Alex, because for a period of time when this came out, I had a lot of people coming to me saying,

I'm going to do AI therapy. So I'm going to have an AI do therapy with a person. And I was like, well, you know, some of the people have therapy, you know, they might want to, I don't know,

cost harm to themselves or another person. Yeah. You know, or they, you know, there's all kinds of, like, really bad things that can happen. Like, how are you going to deal with that? They're like, oh, we're going to put a disclaimer. I'm like, you're going to need to talk to a lawyer about this first.

Probably several lawyers. I mean, if you want to do, you know, characters and it's for fun, and I'm talking to Hannibal Lecter, and, you know, it's like, or I'm talking to a Marvel superhero, that's one thing. But if you present it as, hey, this is your companion or this is therapy, that's where I think you got to be thoughtful because, maybe these things get trained on, hey, what are famous psychologists and what do they think?

Maybe it's outdated. Maybe it's not applicable. Maybe we've realized giving this type of advice to this type of person could result in this outcome that nobody wants to see. So again, just because a new technology doesn't exist, doesn't mean you can just apply it to everything. Recipes and, you know, I don't know,

writing and tier level one support are different than healthcare and finance. So just be thoughtful everybody. Yeah. And, you know, I'm just thinking about this. It actually, it's very reasonable to presume that if we're going to use a computer or an LLM to do a medical function, that it would be held to the same standards as the humans that do this.

And humans have to carry malpractice insurance. And, you know, like there's relatively rigorous credentialing there because we've learned all regulations are written in blood, as the old saying goes, that we need to have some rules here. So, in fact, maybe from that perspective, Jason, these rules are light compared to where we're seeing AI applied. So consider these a minimum, but not a sufficient amount of regulation. All right, everybody, I invest in 100 companies a year, and one of my key criteria is, do they make good business decisions?

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See if your startup qualifies for this special offer at oracle.com slash twist. That's simple. This is Oracle showing their commitment to me and the startup community. They're here at this week in startups, and they want to cut your cloud bill in half. So just go to oracle.com slash twist. Limit to new OCI customers in the U.S. Minimum financial commitment and exclusions apply. Let's go on to the good news. There was some good news. And, you know, when I hear M&A, I just think, oh, man, I miss it. I miss those days when companies got bought. Well, I am.

There's DPI. Yeah. So I'm almost a little perplexed at the doom and gloom about MNA, Jason. Because you and I talk about this weekend, week out, it's a big deal, venture conversation, founder conversation. But there has been a good number of deals. So this week, we saw Zuman, uh, which got sold to Salesforce for $450 million. So a half billion dollar transaction.

And, um, C-Tech reports that it sold for a price that was higher than its last round. so presumably everyone did okay. And that comes on the heels of Salesforce spending $1.9 billion to buy own. So a couple of big deals from the CRM giant. This week also, Vista Private Equity said that they're going to buy

smart sheet. IBM's buying Kubikas, Databricks bought Tabular, and then there's a bunch of other deals. So just preparing for this little rip, it didn't seem that bad. So what am I missing from these news stories compared to kind of like the experiences of VCs?

Well, you know, We happen to have a chart here. And so if we pull up the chart, small deals, we've got a lot of small deals occurring. I think that's because these companies are out of money. And the valuations got ahead of their skis and VCs no longer want to fund them. Therefore, these are shotgun M&A. Company is not going to get more funding.

The valuation is lower by, I think in the one example, you gave 75% lower maybe than a previous valuation that it got sold for. So you'll have something that was worth $2 billion, sell for $500 million or a billion, sell for a billion. And, you know, it is a sign that the venture community probably didn't want to keep funding these. And the deal structures and the overhangs were too complex to let a deal go through. So what I mean by that is company stops growing. It's growing 10% a year. They've got 500 million in revenue.

It's no longer a high-growth company. Therefore, as a venture capitalist, if you have dollars to invest, would you rather invest in a company that's proven it's growing 10% year over a year, with some hope that it could break out that has all of this weird cruft on it? And you have to have a lot of negotiations to do a down round, to cram people down, to do a pay-to-play deal. So previous investors don't participate in this round. they lose it, all for a business that is sideways or even worse, low growth.

Now you've got this like, oh my God, we've proven we can't grow. And you get some fire sales because VCs don't want to touch it. There's too much hair on the deal is I guess the term people use. So then a sales force could come in and clean up. Maybe they say, hey, that's a billion in revenue. Let's say the company has a billion in revenue. and this other company is trading for, you know, X times dollars, and the VCs just want to get their money out. You could start to see these situations where you have a clear path to get your money back as a VC and move on to the next investment.

That's a lot of what I'm seeing. A lot of VCs are saying, you know what? Yeah, I like this company. It's making $100 million. I just don't want to come to these board meetings anymore. It's too hard. It's not working. and I have other investments that are growing.

If I put 10 million into this, if I put 100 million into it, and I can get back 10 million plus or minus, you know, my original investment, I can give it back to my LPs, I can recirculate it, put it into other investments that are high growth. Yeah.

And this is the doggy dog world of venture in a market that went through something as cataclysmic as post-ZERP. And that's what you're seeing is these distortions on top of distortions. Lina Khan, you know, a chilling market with her approach. So you have like a double distortion kind of going on here and it's going to take time to work this all out. Yeah. So, okay, I got a couple questions for you.

First of all, let's talk about growth rates that are sub-venture for different sizes. Because a $500 million revenue base former startup that hasn't gone in public yet can have a lower growth rate than one that has $100 million. So let's start around there. What's the minimum growth rate needed for a, everything else held equal, normally quality SaaS company to raise more venture capital. If you look at the public markets, you'll have companies like Uber, Airbnb, Google, Apple, grow at 10 to 30 percent, 20, 30 percent. And the public market on large numbers is considered high growth.

Yes. In venture, 50, 100, 200 percent year-over-year growth is high growth. So you're at 10 million next year, you're at 20. You're at 20 million this year. next year at 32. Those would be like the high growth numbers. When you start getting down to 10 or 20% growth, people start looking at a five-year chart,

compounding. If you're growing 10% a year, it's going to take seven years to double the revenue. It means the valuations not going to change dramatically. So you don't have like crazy market pull like Airbnb and Uber did in those early days where every quarter you were growing 20% or 30% quarter over quarter. And so you want to get out of those investments.

and start focusing your limited amount of time on investments that are growing faster. And, you know, the overhang is the other big issue. People invested a lot of money at a high valuation. And now you put that growth rate on top of it. Nobody wants to put more money in. Therefore, the management team says, okay, we'll go for break-even. So they get advised, hey, you're going to run out of money. Nobody wants to invest.

So you go for break-even. You then start hitting break-even, but you're growing slow. And then everybody complains, well, you're growing slow. Why should we give you more money? And you're like, wait a second. Which is it? Are we investing in this business? Investing is another way of saying losing money going down the J curve for a brighter future.

And people got so scared during the post-ZER collapse that they actually probably steered towards break-even so much that they became low growth or no growth companies. And then the outcome is, you know, a sale at one or two times around. Yeah, I actually, I have the charts for what you just said. I'm going to screen share here. And so here we go. This is from the Bessemer Cloud Index. This is revenue growth rate for public cloud companies over time. You can see that there's been a little bit down.

And then after everyone was told to get profitable, growth rates rapidly accelerated at the same time, or at the same time horizon, trailing 12 months, free cost, low margin shot right up. So you can literally see the tradeoff between growth and profit. here. It's super vibrant. But Jason, I want to narrow down the point about growth rates because I want to know how fast they decelerate as your revenue base scales. Because of course, when you're a series A, series B company, triple digits, you want to triple for a couple years, then double for a couple of years. But if you're at 50 million a year in revenue today, it would 40% your over year revenue growth be enough to keep you in the venture game? Okay. Keeps you in the venture game. For sure. Yeah. And, you know, there's always the hope of new

products. There's always the hope of acquiring other companies and increasing margins, landing and expanding. So there's a whole series of hope. And really, if you think about building a business, building any enterprise, it is a fight against pessimism and trying to steer the car into the turn as opposed to going off the track, right? And you have to really have this blind believe that, hey, if we get to a certain amount of liquidity in the Uber or Airbnb network, we will have a great experience. So wait times will go from 15 minutes down to five and under. People will become trusting that they can get a lift or an Uber in time or that their food will

come in time. So they stop going shopping and they say, I'll just door dash it. There's never a situation where a person in a modern city in America or around the world, you know, 15 years after the creation of Uber feels like, I'm not going to be able to get a cab. Nobody has that fear anymore. 15 years ago, it was that fear

that led to the opportunity, but you needed to invest in having enough liquidity in the supply in order to have that happen. So we hoped, we hoped liquidity would arrive, and then we hoped consumers would become addicted to it. We hoped that you could raise the price of it. Once all of those hopes became reality,

Now you've got a money printing machine. And you saw the same thing with Airbnb. Will people let people stay in their apartment? Will people take their extra apartment, their second home, or they keep their home? And instead of selling it, they put it in the Airbnb inventory, and then they go buy another home because they did well for themselves. And they keep the original home. That was like a lot of the big Airbnb win was people had like some, I don't know, let's call it a one bedroom. And then they had a family, but they had paid for their one bedroom or they had a tiny mortgage on it.

And they were like, yeah, I'm going to buy this, you know, house in the suburbs, but I'll keep the apartment in Manhattan and I'll put in the Airbnb inventory or whatever. That was kind of the magic that you had to squint and really believe that somebody would do something as crazy as that. And it happened. So it's the triumph of hope over pessimism. That's really what startups and entrepreneurship is. So I want to tell you how important it is that now Ubers are, like running water. water because I was at the Uber launch party in Chicago. So this was back when there's Black Cubs only and they only had like three in the city at the time,

literally just paying Black Cab drivers to be there, you know. Right. They bought the supply. Yeah. Which is, to be clear, smart. But like, there was like three or four Uber's live in the city at this time. And it was so cool because I was the only person who had Uber at my university because no one else went to that thing.

And then I recall years went by. Uber became more pervasive and lift became big and all this. And I remember one time I was flying into, I think it was San Francisco. And I'm like, oh, I don't need to worry about transportation at all, even if I'm landing at 2 a.m. Because this is going to work. And that unlocked for me new locations too. Like the world felt much more reachable. And I think that's probably the magic moment that's so hard to get to.

But oh my gosh, is this sweet once you nail it. I mean. It just happened to me with Apple Pay. You know, I, I misplaced my wallet. And my spouse did me a favor of, like, collecting it for me and then misplacing it. I have no credit cards. I have no driver's license. And I was operating in the world without credit cards.

Yeah. And I was like, wait a second. How is this possible? I'm like, everything's Apple Pay. And I always keep a cup of Hyundai on me. This is my old, like, it's my upbringing that I got to keep, you know, a knot in my pocket. I always have a little cashy poo. And then even giving tips.

Last night at the valet, I gave a tip using Venmo. I said to him, you got Venmo? You know, when I get my haircut now. Venmo. All tipping is occurring on Venmo now. So this cashless society, which we've been working towards, is now even a credit cardless society. And I can leave my home without my keys. Last night, talking about running water, I would.

at the same valet situation where I didn't have a credit card. I also forgot. I keep the key in the cup holder. My spouse took the key out of the cup holder. You see the theme here. Yes, you're married. Yes. I'm married.

What married people do is they create little problems for each other. You know, I do the same for her. It's true. So I get to the valet. I don't have the key to my car. I said to the guy, okay, can I park it myself? He's like, this happens all the time. Go in your app, hit start, wait here, we'll park it, we'll even charge it for you,

but just don't leave until we're parked. Got it. He parks it, just in case, for some reason, the car couldn't start, because you can remote start it. It's now parked, great, now I can leave. So no key for my car, valet worked, no cash, I was able to pay the valet. Just like a little indication that, you know, you start to trust something to the point at which you could leave home without the keys to your car house because you have codes to do that and RFID and you have Apple Pay.

There's no flaw with this plan whatsoever, apart from the fact that I keep putting my phone down and walking away from it. Like, I'm fine with everything being mediated through my phone just because it's convenient. Like, your car should be entirely just an app. Right. That's just easier than keys.

If you have a Tesla, yeah. If you have a Tesla. If you have a Super Routeback like we do, it's not. Sadly, if that... Why isn't it? What are they doing? It's so easy to do. Come on, Super Outback.

That's a great car. We bought a 2019 Super Outback. Oh, oh. because we wanted the bigger engine they stopped making. So we had to go back in time. I'm sure the new one has keyless entry on your phone. I mean, how could it not? I would hope so.

I would think so. But in the future, though, everything's going to be on my phone. I just wish that I would stop putting it down and it would go between the seat cushions and then my children would sit on it and then I don't find it and then I'm running around the house with a moron. Okay. To conclude this section, though. There's some good news here. This is a quarter by quarter breakdown of the same dataset we looked at before.

But look at the last two quarters compared to you to see the average. of the preceding seven. That's better. That's actual money. And I think we're starting to have a little change in the win. If you look at Q1 and Q2 of 20203, Q1 and Q2 of 2024 looks like it's triple. So now it's going from a base of almost nothing.

And, but, you know, the exit value and the number, and the raw number of transactions is going up. So this is great. Some of these are aqua hires. Some of these are inconsequential. but any sign of life is good and you know,

we'll definitely Lena Khan's going to go. That's for sure. No matter who wins the election, she's done. And so, yeah, as we talked about on the last episode. I do think you're right.

We didn't get to talk about it last time, but the Kamala campaign, Kamala Harris campaign, is trending towards crypto and the Biden administration just pushed back some other own party to approve some chip plant stuff.

So it feels like after much hand-wringing, the Democratic Party is gently scooting towards a direction that I think you'll like better, Jason. I'm just curious if it's going to have any impact on the election, but it does seem that the complaints have been heard. So I agree with you on Lena Con being out because what's her constituency?

I mean, I think you can only hate capitalism so much in America before it works against you and you don't win the election. So I think what they're probably looking at is people liked Obama and Clinton who were moderate Democrats people like moderate

Republicans as well you know for whatever problems I have with Trump I don't know if you have some problems with him I suspect you might have some character issues with him be kind of weird if you didn't just a couple putting all that's aside

he's a moderate Democrat as well I mean Trump's behavior is as a moderate Democrat it's just he pretends to be a MAGA lunatic conservative conservative because that's how he wins. He got a base. He's been a Democrat his whole life.

He's pro-abortion. He's pro-business. He just panders to get a base, which I think is what happened on the left, too. I think they pandered to activate a base for a period of time. But now when it comes to those swing states, what are people in Pennsylvania and Arizona and Nevada? Are they extremists, these moderates and women who are the swing voters now? They're not. They want normalcy.

normal border, normal abortion, healthcare rights, you know, normal taxation. They want normal. And so I think what you're seeing is both of them are just acting a little more normal and M&A is normal. I really appreciate that. You took that and you tied it all the way back into the M&A point. That is what 2,000 of your own shows will do. Press.

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now, you have phrased in a lot of companies ran out of cash, dealing with some overhangs, etc. But not everything is cleaning up the trash from the last party. it seems that a lot of startups right now that are hot today are raising lots of money at prices that seem to be much more reasonable. So I'm going to give you two examples really briefly, and I want you to tell me if I'm totally out to space or if I'm on to something here. So first of all, what fix? They just raised 125 million Series E. Warburg-Pinkus. Now, the valuation jumped up by 50% compared to their 2,021 round. TC had that number at 600 million, so they're probably worth 950.

million now give or take and this company grew its ARR four and a half X year over year. So to me, that's a lot of growth. That's not a huge evaluation jump in a company at this age and maturity, not being a unicorn shows price and discipline. Your thoughts. Yes. Love it. If the ARR is growing four times, that's a very high growth company.

And yeah, it was probably not that the valuation is low right now. It's that it was high back then. And so it has been digested. You ever, um, you ever celebrate the Thanksgiving? You've been to a Thanksgiving and you get a second plate? Oh, yes. Yes. I, I do.

And then the pie comes out and you get the, you get the pecan pie, you get the apple pie, maybe go a little alimode, and then you watch the game and then you go back and maybe you have second and thirds. You know, and then the next day, Friday, Saturday, you're just, You're still trying to burn through those galleries. Maybe you have a turkey sandwich later in the day on Friday, but that's this indigestion is what I'm trying to get at here. We just gorge.

And so I think that's good discipline. It's probably good value. And what we really have to start thinking about is, can you make money? And so you could look at this in chat GPT. And in fact, I did that earlier. and I've been using the, is it 04? Is the new one?

No, it's 01. Oh, 1. Okay, so the 01 preview is what I'm about to show you. Here, I just, I typed this in earlier. A startup just raised $125 million out a $900 million valuation. We're trying to figure out how much money these folks made. Friends and family invested $100K at $2 million, accelerator like mine, or YC or TechSarous, 125 for 7%.

Seat investors put $1.5 million at 10. Series A, $30 million, $150 million cap, series B at $100 million, $1.5 billion a cap. Latest round was a down around $125 million at $900 million valuation. Make the cap table. This is really complex. It thought for 77 seconds. Wow. Yeah, that's a lot of thinking, because I just gave it something like, that's many steps.

You hit the down arrow key here. So it's listing disparities, building the cap table, assessing share evaluations, breaking down ownership, breaking down ownership, determining share dynamics, evaluating the terms, evaluating improvement. I mean, it starts telling you all the things it's doing, converting the notes. Initial founder ownership, founder shares assume the founder started with 10 million shares representing 100% ownership. Friends and family put 100,000 at $2 million cap. Ownership percentage, $100,000 divided by $2 million equals 5%. Correct. Shares received 5% of total shares before Series A. Accelerator. $125% of ownership. Okay, they have 7% before Series A.

Seed round, $1.5 million. They own 15%. Sure enough, that makes sense. calculating shares before the series A, founders ownership, 73%, because 100% minus 5, minus 7, minus 15 equals 73%. It's not exactly correct, but anyway, it starts doing this all. Oh my gosh. Yeah. And then here, the founders, after all this owned 50%,

friends and family, own 3%, 3.4%. And then I said, hey, well, how much did they, how much is it all worth? So the founders have 50% of essentially a billion dollar company for 513 million. Friends and family stake 35 million. Accelerator stake 50 million. And then you start seeing, you know, series B, whatever.

A long way to say, and then it tells you the multiplier. Wow. Wow. For the friends and family. 400x for the heat accelerator. It's not counting dilution perfectly here. Long and short way of saying, you know, it's very hard to make money in these later stages. And this is.

is one of the big challenges with, let's say, um, the series A and seed rounds today. Can you return your fund? Can you return your fund? Let's say you have a 50 million dollar fund, it's approximate size of our fourth fund. Okay, you own 7% of a company. You get diluted 50% by the exit. Let's say even a little more like 60%. So you earn 3% at sale. Three percent at sale for a billion dollar company. You hit unicorn status. This is 30 million. Okay. And let's say it hits 1.5 billion sale.

It's another 15 million. So right around 1.6 billion, you know, you return your fund. Kind of hard to get a $1.6 billion company, but it does happen. How often does it happen? It might happen one every 200 investments for an accelerator, maybe every 300 investments. So you start to realize, like even for an accelerator, it's hard. Now you imagine you invested, you know, and owned 7% for $7 million, just how far you have to get for that fund and how many names you need to have. The elevation of prices at Series A and Seed has made it very hard for venture funds to get a return.

It's great for founders, but it's kind of breaking economics for fund managers and LPs. and so we have to return to some normalcy, and that's, I think, the healthy part to the story that you're describing today. Yeah, I think normalcy is good. I'm going to bring up one more example of a company that I think is doing pricing pretty reasonably well. Torque, TORQ,

is raised a $70 million series C, evolution equity partners. We don't know the valuation this time, but my read here is that's less than a billion because they would have said more than a billion if it was. And that matters, the company has crossed the 24 million ARO threshold and has been tripling for a couple years and thinks it'll hit 100 million AR by its fiscal 2006. So here's a company on its wage and nine figures in revenue with a sight line to it,

and it raised 70 million, and it's not a unicorn. And I think what that does say, Jason, is investors are now saying at the series C and beyond level, we are going to start thinking about what your possible, like market comp exit is. And we're not going to get too far ahead of that because we don't be stuck holding the bag, like we are with so many companies that are overvalued from 2021. So it just feels like discipline is not back, but returning, maybe. It's returning, yeah. I would say that, yeah.

So, I mean, 24 million times 30 multiplier, you know, it's pretty obviously $720 million. That's pretty juicy valuation, 30 times top line revenue. It's a high growth company. You know, in another lifetime, maybe they would have gotten 50 or 100 times, right? So it would be double that, $1.5 billion, maybe it would be $2 billion. And people were just assuming that they would give the value next year's revenue or the 26 revenue. So we give credit for work not yet accomplished.

And I think that's where people got themselves in trouble. The tigers, those kind of cohorts came down and said, some number of these companies are going to be worth a hundred times what they're worth today. So let's just give them credit on average for, you know, a year or two of work, maybe two years of work. And they'll fill in the valuation. Then we start making money in 2027, 2028. This company's being valued on their revenue now.

So while they may say they have a line of sight to 100 million, they're not getting valued at 100 million in revenue times 33 billion. They're getting valued probably at 30 times revenue, 700 million, 800 million. Sure. And I think that's reasonable because you don't get a 30x multiple in the public markets. It's more like eight. But as the company grows, its growth rate will come down, blah, blah, blah. But from this point from the series C, it makes sense that later on it'll be valued like a public company. And that's the important thing. And that's the important. If you can't exit, you can have an IPO, you can have a sale to private equity or to a tech company. And then Jason gets paid. And that's very important for the venture capital scene. I mean, if I joke, if you if you don't return DPI, if there's no distributions, to pay it in capital, the industry's over. I don't know how to say it more clearly. Now,

because there are other places to put money. We've talked about this so many times. If the LPs can put their money somewhere else, they will. So the founders, you know, they need to do the best job to get the best valuation they can. But one thing they could do in terms of having empathy,

if they do, get to the point where they have this crazy marketplace, is understand that, you know, if people are overpaying you for your shares, then it's going to come back at some point. They probably have downside protective provisions, and if they're underwater, then they are going to sell your company,

as we saw on the previous story, and it might not, you know, be so good for you. So there's something here about not gorging and not getting ahead of your skis. If you, and, you know, the way I would explain it, you know, to somebody who is buying a car, you know, like, if you can afford, you know, whatever Model Y, and you're thinking about getting the Model X and it's twice as much money

and you're somewhere between the two, get the Model Y. You know, live under your means and be comfortable. You don't want to stretch too much and then feel pressure. And I think that was a big part of the excess. And everybody said it, anybody who'd been in the industry through multiple cycles, warn, if you raise too high evaluation and you don't hit it, you may not be able to raise capital again. You may have venture capitalists who behave oddly on your cap table.

Yes. Your board meetings, and that's what we're experiencing now. So there was a reason those warnings came. You know, there's a book called Devil, the Devil takes the hindmost, I think, and it's a history of various financial booms and panics throughout time. And the really nice thing to know reading that book is humans haven't gotten any smarter, but we haven't gotten any dumber either.

We're just kind of doing the same things. And through bubbles and through business cycles, we end up progressing. But if you do get caught in the downsping of a bubble, it's going to be absolutely brutal. Jason, in venture capital terms, though, if valuations are more reasonable, VCs will have less aggressive TVPI growth. But if those lower valuations allow for more exits, they'll have faster, deep, P.I. Am I doing that correctly? Yes. That is so great that you have nailed this. I mean, you're, you're, you're, you're, you're moving from like superficial journalist trying to figure out

what's going on the inside to being on the inside and understanding it innately, right? And, and I went through this same journey. I'm just like, your big brother, a little bit ahead of you on it. The dynamic is, do you want paper? Do you want to feel good on paper? Or do you want to feel good in reality? And, you know, there's this expression that, Bill Gurley told me at some point that somebody told him, which is, you can't eat TVPI. You can't put that on the table. And so, you know, it might have felt good for example, Instacart shareholders had a very high valuation. And then that company, which I think is called Maple Bear on the public markets.

The corporate name, yes. Yes. Which, I mean, what are you doing? Just, yeah, anyway, Instacart today is worth $10 billion. Yeah. And it's doing really well recently. It went down. It was trading at $22 a share in 2024.

And remember, they kind of got pushed out of the nest to, they forced them to the IPO because they had been trading. I think their private round was the highest was like almost 40 billion. They were very aggressive during COVID. I think Apuvra, the former CEO, was brilliant at pitching the company and raising capital. but I would say from where I sit, the valuation that he did raise that in the end wasn't the right one. Well, and now it's worth $10 billion

in the public markets as opposed to $40 billion in the privates. That's one of the major ones I can remember here. And so that is probably the best example we have of what will eventually happen to your company. Is there is a voting mechanism and then there's a weighing mechanism

is I think the way Warren Buffett's, said it or Charlie Munger said it. It was Graham, right? Oh, okay. So maybe Munger kept saying it. But the concept here is, you know, in the private markets, we're all voting. Yeah, Instacart's a great idea. Airbnb is a great idea. Coinbase, that's killer.

This is great. That's great. Okay. Robin Hood, killer idea. Okay. How much is it worth? Okay, we're not voting if this should exist in the world anymore. We're not voting if we wanted as consumers and are not voting if we wanted to place a bet.

We're weighing it. What is the actual value of it in reality? Well, the value is, what's its growth? What's its earnings? Is it losing money or breaking up? And we saw this with Uber and Airbnb. When these things in Lyft were losing money, people didn't want to own them.

Once they started restructuring, people wanted to own them. And so I feel like I was talking to a couple of people who were in the venture business this past week. A number of them have left the venture business. Oh. And we had a real heart-to-heart discussion. And the heart-to-heart discussion was,

I don't know if I can do this cycle again. I don't know. It's just too hard. And I said to one of them, you realize that you fought up until this point and you might be leaving right as the party is starting up again. And we're on the greatest cycle of our career.

It would literally like, I'm going to stop watching, the NBA, you know, when Michael Jordan retired. You would have missed LeBron. You would have missed all these incredible players. You know, I'm going to stop watching television, you know, after Hill Street Blues and saying elsewhere is off, you would have missed Sopranos, right? And so you've got to be careful when you quit.

And right now, I think the people who fought through and have not given up, we are on the precipice of working. Who? Exactly. It's this meme. You're literally describing this meme. I had to pull it up. This is,

if you're listening, it's on audio, it's the, uh, the mining meme when the person that you've got really lost to diamonds turns away. Oh, people love to put text on this to make it into kind of whatever they need,

but this is what you're describing. So there's two individuals, um, who are digging a tunnel. On the other side of the tunnel is, are a bunch of diamonds. The one guy is walking away when he has, but one or two strikes left with his pickaxe to get to the diamonds.

the other person is feverishly, feversially trying to get there. I'm not giving up, folks. I am not giving up. Other VCs might be given up. I believe we are on the precipice of the greatest super cycle in the history of business.

Because what AI is capable of doing, if you can own, you know, these companies and help grow them now, and they are as efficient as they appear to be trending towards. Yeah. The amount of earnings that these companies could have

per individual is going to start looking more like, you know, I don't know, Google's earnings, apples earnings, or only fans, which is to say tens of millions of dollars per employee, not hundreds of thousands, right? And that's the, I don't know if you've seen that,

you might be able to pull it up as we talked here, one of our great producers can, but there's an incredible image, now of revenue per employee. Now, nobody ever included OnlyFans because it's a privately owned company, but for whatever reason, the information about OnlyFans is public.

I guess they're releasing it because maybe they're releasing it like some private companies do ahead of an potential IPO, but the revenue per employee here, as you see for Apple, and, you know, this is, uh, I'm not sure when this is dated, but it shows, you know, Facebook at 1.6 million and,

you know, Apple almost two million per employee. Now you cut 20% of your employees. That means those numbers go up 20% and you grow 30% for three years in a row. As we talked about with the recurring team, static team size, age of efficiency. I think we're going to start to see these companies start going on an earnings hair like we've never seen. Okay. Now, that is great. And because I have the vast majority of my net worth in the stock market, which means that I'm going to do great. If that business super cycle happens, happens, my net worth goes up, my feet go up, I turn off the webcam, goodbye, Jason, I'm out. Huzzah. Great working with you, pal. Great working with you. Three full months and we're done.

No, but, but a lot of people don't have wealth and a lot of people might have had jobs that do get efficiencyized by this thing. And, you know, retire. Yeah. But we're talking a lot about different generations here on the show. We talked about Gen Bet. And one thing that you and I have been kicking back and forth is generation tool belt. And it's going, um, more into the trades than into the post four-year education sector. And I wonder if there's a dovetail between the hyper-efficient technology company world you're describing, or just companies using technology to become more efficient, and folks going back to

the world and hitting things with hammers. And if those will nest neatly, or if they're going to be a little bit more at odds with one another. I'm not sure, but I'm very curious to see what happens to the labor market. I think you hit on something here. It is very true that an entire class of knowledge workers with 100,000, $200,000 degrees can only make $50,000. And then you look at plumbers as but one example. We have a serious shortage of plumbers.

I know this because we invested in a company called Blockable and getting plumbers was like a blocker. I'm like, how is that a blocker? You know, and it's like, how many people want to work in a industry? Like, blumbing, quite literally. Yes. You know, people would rather be wordsmiths or math wizards and push Excel documents around and write words for a living. Guess what? Too many people wanted to do that.

Too many people got graduate degrees. Too many people got undergraduate degrees in, you know, English lit, whatever. Those were very expensive. Now you compare that to being a plumber. You compare that to being but a handyman. What is a handyman cost in your region? If you were to hire, and I'm sorry for using a gender-specific term, a handy person sounds absolutely stupid.

Well, it's... A handyman, a laborer who fixes things like door handles and windows and that are misaligned and annoying stuff. What is a handyman cost in your region? Our flood store recently broke. And so our handy woman, actually, Cynthia, had to come out and fix it for us. She's,

she fixes everything for us with me break it because let's be honest, my spouse and I are the highly educated, useless people that we're discussing here. Sure. And I think she costs us, she's like semi-retired now, a little bit older, love Cynthia. If you see the Cynthia,

you're the best. I think we pay her 30 or 35 an hour for what she does. But it's probably a little bit more task-based because she's a key to our house and she comes over and does things. But it's about what our name is. Any cost per hour, I think? Yeah. And I'd say most place, most major cities, if you would do this in New York City, L.A.

or in, you know, a larger city than where you are. It's 75 an hour. Whoa. For a handy person? For a handy person. That's straight up. If you found one for 50, you would be thrilled. Now, I hate to do math.

But the math, people work 2,000 hours a year. Yep. Right? For 40 hours a week, 50 weeks a year, give or take, about 2,000. So you can always do back of the envelope math with $2,000. 2,000 times 75 is a lot of money. It's $150,000. Yeah.

Yeah. At times 50 is 100. And in your case, the $35 is even $70,000. Now, you look at the business insider. You just pulled up their chart. They have a union. You pull up the union salaries, entry level. It was $46,000 a year.

And I think they fought. And the union got it to like entry level was 48 or $52,000. So congratulations on your English lit degree. You're going to be a wordsmith. And just like you and I started our careers, you're going to get $52,000 a year. You're going to get $25 an hour. And so I think with chat GPT, what is it good at?

What did we use it for today? Words and thinking. And math, right? We did the cat table. Exactly what we just talked about. So would you rather, Is Chad GPT going to fix that door hinge? Is he going to fix my, you know, my, my,

my toilet that won't stop running? It's not. No. It's not. Jason, one thing I, when we were out in, in Napa, I was talking to your brother, actually, and we were talking about our, I think, I'm growing up and slightly blue-collarish roots, if you will.

You've been around restaurants. I grew up with a welding machine, you know, that sort of thing. I've done construction. You know, I've done some concrete work, done some rebroad tying, done some bricks, done a lot of shoveling. Oh, man. I just don't want us to overly romanticize skilled trades, which are critical to the economy and should be respected and well compensated. But I don't want to overly romanticize them because it's really hard on you. A lot of this stuff is still really, really hard on you and dangerous.

But I do think you're on to somebody. So I pulled some data to talk about this. just to put all this into perspective, according to an Angie study, 70% of skilled tradespeople are worried about the trade shortage, the trade staff shortage. Yes. And there was a recent study.

They have no apprentices. Ah, well, Jason, did I find the data point for you on apprentices? John, can we get the annual new apprentices chart up, please? I said no idea you were going to go there. That's uncanny. There you go. According to the Department of Labor, in fiscal year 2021, there were more than 241,000 new apprentices,

and there are 22% more active today than the previous 10-year average. And this chart shows you that there has been some COVID-y ups and downs through the data that we have, but it shows an upward swing. Now, contrast this with our historical college enrollment chart. Yeah, I'm going to guess college enrollment is flat, maybe.

I mean... Very close, very close. So historical college, undergrad, is the black line, peaked in 2010 at 18.1 million up from, yeah, and listen, we've had population growth, so there's a little bit of that in there, but it's not as dramatic as a start. It's been trending down.

It has picked up, according to early dinner for 2023 and four, but it's still a couple million below. So what I'm seeing is apprenticeships slowly growing, college slowly coming down, and just to put a capstone on this, can we get the first Fred chart, please, of construction jobs in the U.S.?

Thank you. And so this is at an all-time high. And I think this is the series of things that are leading people to discussing what will the youth do? My thought is this, Jason. It's good to have intelligent allocation of labor in an economy. That's not controversial. But one thing we haven't done, I think, as well as we could is having slightly more reasonably balanced compensation for different roles, which is why people who are blue-collar often want their kids to go to college to have a shot at a higher income ceiling.

That didn't work out as well as we thought, but if we're going to have people go into the traits, I just hope we as a society treat them well and don't treat them as second-class economic citizens. I mean, the truth is, if you are a journalist, if you are, you know, a bookkeeper, let's take CPAs out of it, just go like the rundown, like the person who does accounts receivable. those jobs are not as future proof. They're not as well compensated. They're not as desired. And they're not as high growth as manual labor and trades persons. And, you know, I think there's no shame in a trade.

A trade is amazing. And if carpenters, and I don't think you do either. And this could be a great life for people. And then also being entrepreneurial in this regard, you know, in your town, which you're in Rhode Island. Yes, sir. Right. $35 an hour. You got a nice rate with a friendly, you know, handy woman.

You know, in New York, it might be 75. Here's my best piece of advice, arbitrage. And so geographic arbitrage is another theme that we've talked about here on the show. And when we talk about geographic arbitrage, I'm typically talking about. about Athenawow.com, go there and get an assistant and pay $36,000 a year and they'll train them. And it's kind of like the Amazon Web Services of that. They'll give you a free month or something since you're my pal. Putting that aside, you don't have to go halfway around the globe here. That same tradesperson who was but a handy woman, handyman, would double their rate in Manhattan.

So, interesting arbitrage. You go get a bunch of clients in Manhattan. You charge 75 an hour. You go to Manhattan for, do a 12 hour a day, do three jobs a day, work three days a week, put in your 40 hours in three or four days and work three or four days off. That kind of approach, I think, is a winning approach because cities too expensive. Rural areas are, you know, sometimes at literally 75% less than living, the cost of living in a city. $5,000 apartment, $500. apartment. You know, like, it's not, I mean, it literally is like that. To rent a room in Manhattan,

have a one-bedroom apartment is $5,000. To rent a room an hour and a half outside of the city would be $1,000. So that's 80% less. For the equivalent. And so you start thinking about that arbitrage, 80% loss costs and double the, uh, what you can charge or triple. There's something really cool there. And you know what's going to enable it? The autonomy end gain. You're going to be able to take your, uh, what you're going to be able to take your, Tesla, I just, like I said, I was using 12.5.1.2 or point two point two point one or whatever today. We're getting there. We're getting there. If you could just jump in a Waymo or a Tesla or an Uber and it drives you and you could sleep or watch a TV show, it's not as exhausting. That's not as exhausting. And, you know, I think there's like something very interesting going on in the economy. And if college degrees at four years, I think they're worth

5 to 10,000 a year. That's what I think a college degree is worth. I think a college degree should be 25 to 50K. That's what I think the value it provides in most cases. I think it provides, it should provide, it should be, the cost of it should be 50% or 100% of your starting salary. I like that model a lot

because it shows how far things have gotten out of whack there because the college that I went to University of Chicago, I'm just going to guess probably cost $65,000 a year now. Just spitballing out. I don't think that's going to be wrong by more than 5K either way. And that's an insane amount of money. Quarter million dollars. Quarter million dollars post tax.

So someone has to make $500,000 to pay 50% tax on it. As this is the math I do with it with our child care costs. I'm like, wait a minute. This is actually cost twice as much. Yeah, I mean, I've been there. Cry in the car. Yes, but I have a new baby. I just restarted, Jason. Oh, God. Okay. You're sharp today. You must have gotten some good sleeve last night because you're on the, you're on your game today. So we're actually crisp back and forth here with the pick and roll for us today. I feel like we're really uncovering some very interesting friends. And when you listen to this week and start, if you're not just going to get the news, you get some insight on these trends here. And this is a very interesting trend. There's another data point, though. So a listener, Bassem, Barakot, he said that plumbers and electricians operate in a very regular. regulated industry, you have to be licensed and it can take time to attain that status. Absolutely true.

There are qualifications for many things. The fastest growing job in the U.S., according to the, I think this is the Bureau of Labor Statistics, is wind turbine service technicians. The second fastest growing jobs is solar photovoltaic installers. And so if you look at just this list right now that I pulled up of the fastest growing jobs, many of these do require a degree, a certification, but they don't always need a four-year degree followed by a two-year master's.

And so one thing I think we could as a society get a lot smarter at is tying reasonable qualifications at the education level to jobs. Two-year degrees, great. You don't need a four-year degree for everything. And I think we've gotten too into that so people now feel like they have to take on the debt. So there's a lot of inefficiencies in our economy, Jason,

that I think we can improve on. And that's an opportunity. When I see these problems or you see inefficiencies, I always just think what's the solution, what's the startup version of this? The startup version of this is somebody creating an online course on how to start a handy woman business or how to start a painting or a carpenter business.

All the, that could be taught over YouTube. That could be done in, you know, a two-week or a three-week course in person. And you could charge, I don't know, $5,000 for that. Now, imagine for $5,000, you go to a 10-day course on being a carpenter and a handy person, you learn all the basics, all the basic tools. It's 200 hours, right?

Do it a month, maybe. And it costs 10,000. If you're charging 75 an hour, you're going to pay that back in a month of work. And that's like where you start actually should be making a calculation about your degree.

When we looked at that list you brought up, you know, some of those jobs paid 150, some of them paid 60. And that's a, you know, it's like a two to three X range. The degrees cost the same. Yeah.

The degrees cost the same. How is it that a degree will cost a quarter million that gets you $60,000 a year? Same school offers the same degree for $250,000, and it makes you $170,000 a year as a data scientist. That's the mismatch. And when there's a mismatch in the economy, if you could train a data scientist without a degree and the data scientists there were 160K, I think that data is a little old, by the way, because I'm not sure how valuable data scientists are right now. But anyway, a data scientist, let's just say data science is worth 160. Sure. Can you teach somebody to be a data scientist in six months, a year?

Like, what's the minimum time and the minimum cost? Because colleges are thinking the opposite. They're thinking, it has to take four years. Why does it have to take four years? Why can't it be done in four months? Why can it be done in 40 weeks? Why can't it be done with an apprenticeship? I can answer that.

I can answer that. I think parents want their kids to have this college, experience thing. And I've never liked that phrasing. I graduated early because I wanted to stop collecting student debt and go work full time sooner because I was tired of going the wrong way net worth wise. But I think a lot of parents want their children to have the full four years or five in that case. There's a failure to launch societal question there that's a little bit distinct.

But the idea of faster education, faster time to value do you start up language, I think is great. And I think there's probably going to be a lot of opportunities here for startups to build cool things. because there's education, there's licensing, there is platforms that are being built for the construction industry. ProCore is a public company now. Construction tech is popping off. There's a lot of really cool things here. I'm optimistic that things work out well. I just hope that we pay people reasonably because people respond to incentives and you can end up, back to your point about the same degree, less income with doctors not wanting to go into primary care, for example. And we have primary

care deserts in this country because it's not a very well compensated medical part. But professional so everyone wants to go be a Derm, et cetera. So we're going to have to probably pay a little more

for these to get people into them. But people are aging out of the trades and we need to have infrastructure. I mean, Google started

offering these career certificates. I don't know if you're aware of this, but I remember when our friends at Coursera, I think,

are the partner with this. And I think Coursera, yeah, it is Corsar. It says right there. I started on Coursera. So Google was looking, looked at the roles they can't fill. And this is a Google career certificate. You can Google it. And here, choose a

certificate. Cybersecurity, data analytics, IT, support, digital marketing, e-commerce, project management, UX design. Learn the skills you need to unlock reward outcomes, $93,000 plus median entry level salary across the certified fields, 1.8 million job postings. And look, they have even shorter course offerings, AI essentials and agile essentials. Agi project management. So they just said, screw it. Come to Google,

take a course here, and then apply for a job with us or somebody else. How brilliant is this? It's amazing. Somebody make a startup. I'm telling you right now, I'll fund this. I'll give you the first 125K.

Come to the accelerator. We'll brainstorm it. Teach people how to be handymen and handy women and carpenters and come with a course. course for whatever number of thousands of dollars that teaches them not only how to do with the trade, what the most common problems have, hey, the dishwasher's broke, this is broke, but also how to market yourself, find customers, bill them, price out the jobs and stuff like that. If you could figure out how to not only provide the supply of handymen, handy people,

handy women. Handy folks, Jason. Handy folks, thank you. You know, not only your thumb providing a supply of them that you have to go aggregate, you're actually making them. Yes. Ooh. Yum. This is an incredible business. If you could go to a website of handy people and it was like, these are people, we trained. And you can order one right now for this price.

And you know that we certified them in dishwashers, oh, you know, light electrical work. that doesn't require an electrician. There are things like changing lamps or whatever your ceiling fan that doesn't require. Mounting a television. Man, somebody make that website and train those people

and then these people are going to go out and make 50, 100 bucks an hour. Sometimes they'll do projects. And so this is the kind of innovation we need in the world. And it's, I think, for young people, don't expect you're getting a job at Google. You know, don't, don't,

that's not, it's not Goldman Sachs and Google and IBM, those jobs, Microsoft, they're going to go to a smaller and smaller number of incredibly elite performers. And you saw my message to our company yesterday, where I said, I'm dealing with this personally. I said, if you want to be remote here,

you have to be, what was the extremely high-performer? I said, I am totally fine with you being remote if you're an E-HP, extremely high performer, and you manage yourself. Everybody else, we're returning to an office. I got a little office here. We're going to have four people in it, me plus three in Austin. And my new approach to training people is people who are not yet EHPs, like yourself or

myself or some of the great people we work with. They'll just sit next to me. And they'll sit in the room and be mentored. So I am bifurcating it in real time based on our discussions here and what I'm learning in the world. EHPs, extremely high performers, you know, by all means, remote, hybrid, you pick. everybody else, the other 80% of the world, is how I would define it. And we saw that with the Amazon story.

You know, you're going to have to either come to an office and be mentored, or you're going to have to find your own way in the world, as we've discussed right now. Just really great trend. And we got to stick on top of if you have any other questions for us. We take one or two questions from the audience and we'll wrap. The tenant media fiasco is very damning. Do you have any thoughts? Well, CCCC on YouTube,

Jason assigned me to research that the other day. And it ended up at the bottom of the, show notes in the section that I call Cut for Time. So, Jason, I have a lot of feelings on the tenant media thing.

Give me your TLDR. Yeah, TLDR. There were a bunch of dopey bloggers. That's the technical term. Who were offered apparently, allegedly, very large sums of money.

And when I say large sums of money, they were offered $100,000 per episode to license their, what I would call you know, what would you say, C tier, D tier, the epitome of mid. Okay.

So mid podcasters get offered Joe Rogan level deals. They're so dumb. They're so mid that they never question where does this money come from. They just take the money. They happen to be the same bloggers

who believe that the you, that you, is responsible for Putin invading their country. As if Ukraine and Biden went to Putin, put a gun to his head and said, if you don't invade that country and start murdering people, we're going to attack your country. These idiots, these useful idiots, I think is the technical term, sorry,

allegedly took all this money and the money was given to another, I mean, it's no other way to say it. I would say they're allegedly, I'm going to use allegedly. here because they wish they get their day on a court but the people who were at the center of this um and was uh lauren chen another conservative she knew that she was getting russian money from r t and they were trying to get these useful idiots to amplify pro-russian anti-ukrain sentiment these people have all come out and claim they did not know yes i would claim they should have known because you were just given massive amounts of free money.

If somebody comes to me and says, I'll give you $100,000. And I've gotten a lot of very big speaking offers that I've turned down where they're like, hey, we've got a hundred K speaking offer. Now that's like, you know, listen, I've made a lot of money. I don't need the $100K. But if somebody offered me 100K speaking, I'm going to be like, okay, well, where is it? Maybe I'll go, you know, it's free money. I'll take it.

It might be interesting. I've gotten these offers from like those charlatan course people, you know, who I'm talking about. Like they sell courses and then they try to prey on people. And so I know what they're doing. They're reputation washing. They want me to come to give a talk with them. They take a picture with me. Then they tell people, hey, J-Cal's legit.

And therefore, buy my course in real estate. No bueno for me. So every time a speaking agency brings me these, Alex, like, we have a wonderful opportunity for you, J-Cal, $100,000. You go to Florida and you speak about your syndicate and investing in startups, and it's wonderful. Do you want to do it?

I'm like, what's the name of the conference? Who's the host? And then I do a Google search. And I look at the names and it says, blank, blank, scan. Right? Blank, blank scan.

And then I go to Reddit and I type the person's name and they're like, I gave $10,000 to this person to come to their 10x this conference, 100x this conference. Yeah. And I got scanned. And then other people say, it changed my life. It's not for me to decide,

but in other words, you should know who's paying you. Yes. These people are pretending they don't. The woman in the middle of it, if it's true that she took Russian money to do this, I think she, that would make her a traitor. At least, if she's an American citizen, which I did not check, actually, that would make her, I think, an unregistered foreign agent, which I think gets you in a lot of trouble. I don't think we mess around there. I think we still have our Cold War muscle wrapped around that bit of the law. Yeah. She is a Canadian living in America. I don't know if she is a U.S. citizenship.

but Wikipedia says she's Canadian and I guess the people who got caught up in this were Benny Johnson, I've seen him on Twitter, Tim Pool, Dave Rubin, Lawrence Southern. Dave Rubin seems like a pretty smart guy so they're all conservative. I'm nothing against them for being conservative, but there were other people who were offered this money

and they didn't take it. And the one person who was offered the money who didn't take it, I saw them talking about it on Twitter, they were like, well, obviously this was a scam And it, yeah. And so the most sinister part about this whole thing, I think Alex is they picked people who were amplifying this message and then gave them mountains of cash. They didn't even have to pay them to say certain things. They just found the useful idiots who were saying it anyway.

Yeah. And they gave them more money to run their operations, which means they can hire more people, have better equipment. So very sinister on the Russians part, very clever. What do you think? Yeah. only thing I'm going to really add here to answer our dear friend CCCC from YouTube is that there is a lot more free-floating money in conservative media than there is in liberal media. This is why Talking Points Memo has a couple of staffers. They have to earn their keep. They don't have the same collection of people who are willing to put money behind their ideological background. And why is that? Well, I was reading the Brown Indy,

Brown Independent or something the other day. And I read the intro bit. It's an anti-capitalist publication from Brown students on the radical side of things, which I read because I like to read everybody. But that's why people who have money don't tend to fund super lefty things. But I think there's enough money in and around conservative commentary, if you will, that checks of that size were probably large, but not as shocking as they seem to me.

So they have benefactors and they're used to benefactors, whereas on the left you have advertisers. And the left advertisers in the media business tend to be very left-leaning, the advertising business, you know, just generally left more left-leaning. So yeah, it all adds up. I do think there are benefactors who have agendas who really like to back conservative media and they do it quietly. like in the same way George Soros might back some things on the left there are the George Soros equivalent you know right wing people who like to fund them so yeah maybe that's the case maybe they're used to getting you know people dropping money on their heads to say right wing things anyway yeah there's that's a much longer conversation but I mean essentially I don't believe you didn't think that it

might have been the Russians is my is my underlying vibe because if someone told me that was going to get paid 100K to blame things on Ukraine, I'd be like, huh, who would, who would want me to say that apart from some people that you want to know? There was a, there was a, in the indictment again, allegedly, so everybody gets their day in court, they said like one commentator, they said to them, hey, we're not hitting our numbers. Could you amplify this tweet? And then there was some like amplifying of Tucker going to the Russian, supermarket and being amazed

that the supermarket had had coin operated shopping cars. By the way, we haven't had since the 80s. I don't think you need to pay here, but okay, whatever. He's an entertainer. Let's leave it at that. But they were trying to amplify that. And then literally, the thing

alleges that they were like, isn't this a little too on the nose and obvious? Yes. Shilling, I think, was the phrase. Yeah, they're like, are we shilling? So it's kind of like, huh? I mean, these people are, I think it's like, these people are, are traitors, the people who knew. If they didn't know, Useful Idiot

or naive, if they did know traitors. But I don't have strong feelings. Only so strong defense. I do want to close. Well, one more thing. My audience question is, I saw that your friend, your bestie, went on Joe Rogan. And so

three hour episode. I literally, I didn't listen to it. Well, funny story. I was having lunch with Chumath before I came on air here. We went to Terry blocks. We got a beef rib. We got some brisket. And I drove him to the airport. Literally as I was taking his bag out of my car,

the episode dropped. He's like, oh my God, the episode dropped. He recorded it on Monday. So turn around there for Joe Rogan. I haven't listened to it, but Chamoth has been on Rogan. Yes. And so good for him. And it was a three-hour discussion. And, you know, I like Joe Rogan, you know, a comedian who does really great long-form stuff. And, you enjoy. I just want to know. When are you going on on the rogues? Well, that's interesting. You say that. Seven years ago, Kevin Rose introduced me to him and that was when he was only in person. I had just come out with my book. And we were in a DM exchange. And just the timing didn't work. I wasn't able to get out to Texas because he was only doing it in person. And like an idiot, I didn't follow up. But this is when he was just starting his program, his very early days. And so I don't ask anybody to be on their podcast. So I haven't pitched him on coming on, but I'm in Texas. He's in Texas. We have like 20 mutual friends, Lex Friedman, Elon, Chimov now. So I'm sure I'll meet him at some point. And if he

wants me to be on, I'm sure I will be. It's the same thing with Tim Ferriss. Like, friends with Tim Ferriss forever. And then, you know, I never ask people to be on their pods or anything like that. I just don't like asking. I don't know, maybe this is my Irish upbringing, Catholic. No, I feel you. And then just one day, you know, Tim Ferriss, like, hey, it would be an honor to have you on the pot. I was like, sure, I'll come on the problem. We had a great discussion. So I just wait.

When people think it's a good time for me to come on, I come on, but I never ask. Yeah. So congratulations to Chmoth, go look at it. Hey, yeah, I just, I think you should do it because then I get sit down and, uh, I'll actually listen to my first three hour podcast because I've never, I'm an audio book guy. So it is like Joe Rogan is doing an audio book. Um, and, you know, he, he was very influenced like I was by Howard Stern, uh, in the 80s and 90s and when you have a morning drive time show like Howard did, that is four hours to fill,

three, four hours to fill. So, you know, he was like the original podcast from anyways, Howard Stern. So he would let somebody come in and he'd interview them. Then he'd have them hang around for the news on the early episodes of this week in startups. I would do an interview. And then I would have Lon Harris and Tyler and the guests sit in for the news. We talk about the news. So I kind of copied that format. Uh, and, uh, And I enjoyed it. And so, yeah, we talked about the departure. Somebody just asked on LinkedIn about the departure.

We talked about that in the top of the show. So when you get the episode, you can do that. You can rewind the YouTube video and listen to it again. He's Alex Wilhelm. We're working on the Quest 500. Go to twist 500.com. If you have suggestions, let us know. He's Alex on Twitter slash X.

I'm Jason. This is this week in startups. Do us a favor. Write a comment. Tell us what you want us to talk about. Just say hi. Subscribe to the YouTube, all that great stuff. And we'll see you next.

time, bye-bye.