This Week in Startups - TWIST NEWS: AI Music, Circle’s IPO, TWIST500 and more! | E1972

Episode Date: June 27, 2024

This Week in Startups is brought to you by… LinkedIn Jobs. A business is only as strong as its people, and every hire matters. Go to https://www.linkedin.com/twist to post your first job for free. Terms and conditions apply. Squarespace. Turn your idea into a new website! Go to http://www.Squarespace.com/TWIST for a free trial. When you’re ready to launch, use offer code TWIST to save 10% off your first purchase of a website or domain. Northwest Registered Agent. Northwest Registered Agent will form your business quickly and easily. In just 10 clicks and 10 minutes, set up your entire business identity—name, address, mail service, phone, email, website, and domain. For just $39 plus state fees, Northwest will handle your complete business identity. Visit ⁠http://northwestregisteredagent.com/twist⁠ today. * Timestamps: (0:00) Jason and Alex kick off the show! (2:11) Ai generated memes. (7:36) The butler experiences. (9:59) LinkedIn Jobs - Post your first job for free at https://www.linkedin.com/twist (11:52) The Texan stock exchange. (21:03) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at http://www.Squarespace.com/TWIST (25:14) Circle’s pending IPO. (30:05) Northwest Registered Agent - For just $39 plus state fees, Northwest will handle your complete business identity. Visit https://www.northwestregisteredagent.com/twist today. (31:46) Alex breaks down some amazing details around stable-coins like Tether and crypto companies like CoinBase and Circle. * Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.com/ Check out the TWIST500: twist500.com * Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp * Mentioned on the show: (links) * 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: (9:59) LinkedIn Jobs - Post your first job for free at https://www.linkedin.com/twist (21:03) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at http://www.Squarespace.com/TWIST (30:05) Northwest Registered Agent - For just $39 plus state fees, Northwest will handle your complete business identity. Visit https://www.northwestregisteredagent.com/twist today. * All rights for the video shared and linked below belong to the original copyright holder, and we are using the footage under the principle of fair use. * Great TWIST interviews: Steve Huffman, Brian Chesky, 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

you know, Circle is doing it all right. There got, you know, major audits going on as opposed to attestations and that kind of stuff. And so the devil's in the details. If you have, I think Tether got up to 70, was it 70 billion, 80 billion? It was pretty large amount of money. And people were really concerned that maybe their holdings were in Chinese commercial paper because that's where you used to be able to get a return. So maybe they're getting 70% on that Chinese commercial paper loans essentially in China, but maybe it's not that stable. Then all of a sudden we have inflation, interest rates go up, tether started bragging that they've got like billions of dollars in revenue a year. So you're the sucker at the table, perhaps if you're keeping

your money in stable coins, because you're not getting that interest that you could get if you kept in a money market. So everything you're saying is dead on. A couple of small quibbles, though. I just pulled it up. There's now $112.8 billion with a tetheres out there. Wow. This weekend startups is brought to you by LinkedIn Jobs. A business is only as strong as its people, and every hire matters. Go to LinkedIn.com slash twist to post your first job for free. Terms and conditions apply. Squarespace. Turn your idea into a new website. Go to Squarespace.com slash twist for a free trial. When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. And Northwest Registered Agent. Northwest Registered Agent

will form your business quickly and easily. In just 10 clicks and 10 minutes, set up your entire business identity, name, address, mail service, phone, email, website, and domain. For just $39 plus state fees, Northwest will handle your complete business identity. Visit Northwest Registeredagent.com slash twist today. All right, everybody, welcome back to the program. He's Alex Wilhelm. I am Jason Calicanus.

He's X.com slash Alex. I'm X.com slash Jason. First Name Club. Got a big docket today. And how are you doing now? I'm doing fantastic. It is a glorious summer day where I live. I am full of caffeine.

We have time. There's news to talk about. And Jason, I made you a gift. I made you some memes to kick off the show. We can have a little fun. We have the first one up. Are you familiar with this format of me? Okay.

This is a format of meme with a bunch of statements and a line drawing. of a dude. Yes. The dude represents, there's different types of dudes. It's like a crying dude. There's somebody with a mask with crying behind the mask. There's a lot of these different Reddit style line drawings. Okay, but explain this meme to folks who aren't seeing it.

So if you're not watching us on video or YouTube live, what we have here is a meme from glyph. Dot app. They have an AI meme generator. All you do is give it someone's Twitter handle or name if they're well known enough. And then it will make a series of jokes owning you. you and essentially make you look ridiculous. So, for example, my meme, which gives me a lot of hair, which I thought was a pretty good troll from the meme.

And a bunch of water bottles. I don't know about that. I mean, I do drink a lot of water. But the meme, so my text is like, I'm leaving this hell site tweets five minutes later. I'm not owned. It's ratioed by a 14 year old. Here's why that's problematic. One of 97.

And it's actually not bad. Not bad. Yeah. Let me explain economics to you has never. held a job. You're all bots, argues with Mira for three hours. Got it. Okay.

So these are AI generated roasts in meme format. Not bad. Not bad. Now, we have one for you, of course. Oh. It took away all your hair and gave you a serial killer beard. Okay. Great.

I am an early stage investor, invests after Series B. I discovered Uber was 1,000th customer. AI will save humanity, can't figure out, Alexa. I'm a self-made millionaire started with small $10 million loan from dad, if only. I predict the next big startup invest in 500 companies hoping one succeeds. That's actually the best one so far. I'm a podcast pioneer discovered podcast in 2020. Okay, I get it. I'm friends with you. I liked one of Elon's tweets once. Web3 is a scam. Secretly bought 10 million in Bitcoin. Kind of accurate, actually. It's like, I mean, what I'll say about jokes and AI is great for

brainstorming. It's, you know, like when you're in a brainstorming session, no bad ideas, like even if these don't land, they at least get you working, right? So part of the game of writing jokes is to come up with themes and ideas. So here's some themes, right? And it got the themes right. And then if you get the themes right, yeah, maybe one out of 10 actually land. So good job. Well, one more thing about this. That's a B plus set of jokes from an AI tool that I used for free because I saw someone else post theirs on Twitter worked backwards through the watermark to make these for us. I think that just goes to show a couple of things.

One, AI is being put into things. Yeah. And not just in like the enterprise. And two, you know what? Not bad. I was, I really thought these were going to be like laughably terrible. We were going to joke about how poorly the AI did. But actually, you know, it got us pretty good.

So glyph. That app if you want to have some fun. Uh, I have to say, I was using the new Claude AI. I guess they call it Sonnet. And I've been using Chachipiti4-0. I'm noticing it understands what I'm asking for more consistently. I was looking to hire a position in a specific city. And normally you can go to like glass door,

salary.com, indeed. And you see those like, here's what a journalist in this city gets paid. High, low, average, tenure, all that data they have from job listings. And I said, give me five sources. of salaries for this position in this city, give me the high, low average, put it in a table, and then give me the average of the averages. Now, this is like something you would explain to a knowledge worker, like an Athena, wow.com, if you want to get like a month off or something. And if you were to do that, you probably spend a couple of minutes explaining it. They get it back,

and then you probably would get a decent result, maybe two hours later, an hour later. And this got it perfectly well right out of the gate. Now, previously, this would have taken five, six prompts and back and forths. And it's getting kind of nailing it on the first one. So I think their ability to, and I've been doing cite your sources. Uh-huh. And it is citing sources really well now. So I found myself, while I'm doing interviews with people over Zoom, if I don't, I was doing

this one with a space company that you wrote the notes for very well done. And I was just trying to remember some things about kinetic weapons. and hypersonics. And I just said, hey, explain hypersonics to me and what's the latest state by country and what they're working on. And boom, it brought them up. Doon, do, do, do. And I was like, ah, that would be a producer of a podcast job for one hour, which means

all of us producing podcasts or doing research, you kind of start on second base. You've kind of got the knowledge. And then I opened everything up. All the citations, looked at them and checked them and said, yeah, you know, I trust those citations. Those are pretty good. Yeah. The hallucinations going down and the ability to follow and,

instructions going up feels like a winning trend. Much like a child kind of becoming an adult. Like I feel like AI is going through that like less fantasy, more reality, better context. The question though is after you did all this research and had Fod 3.5 Sonnet do this work for you, what is the average cost of a senior butler in San Francisco? Exactly. Interesting, you bring a butler. When I was at a friend's house, when I was in Italy one time, they had a butler.

and I had, I actually had a butler for three days. And then actually there was, one time I stayed at the Ritz Carlton and I happened to be a speaking gig and they gave me a suite, very nice of them. And the suite came with a butler. And it is the most, have you ever had that experience of a butler in life? No, but I have, uh, in my in-laws house, they converted part of the old servants quarters area to an apartment. So I've lived in serving quarters. So you've got your halfway there. Remodeled servants quarters.

Anyways, yeah. They greet you in the morning with your robe. They lay out your clothes, like an outfit. They prepare your coffee to your specification. They lay out your newspapers. And then at night, after dinner, they have your port. And they get your favorite cigar. They cut it.

They char it. They light it for you and hand it to you. So literally, the pouring of your coffee, the laying of your... It's basically like, what things do I do for myself that another human could do? And like one of them is, when you get out of the pool, holding the robe up for you to put your arms in. It is the height of luxury thinking. And also packing your bag.

This is something I didn't anticipate. When are you planning to leave? I said, okay, we'll pack your bags here. I was like, what? This person packed my bags and unpacked my bags at the risk of all. I've never done in my life. The level of perfection. And when they hung my clothes, they steamed them.

It is. But they were all steamed and laid out. I was like, oh my lord, this is living. This is living. I want a butler. This is like the only regret I have from leaving my economics track at you, Chicago and not going to Wall Street is that I'm not going to end up with both a cocaine addiction and a buck.

And I think it's a loss on both counts because in the old days, in the 1800s, you could have hired help and it wasn't that expensive. Now we have a housekeeper that comes once a week and that feels very luxurious. Also, Butler's great at chopping up lines of cocaine. in preparing them for Wall Street analysts. So, no, I think that's outside the scope of work. I don't think you should ask your butler. Do not ask your butler to prepare your drugs for you.

Just coffee, cigars, keep it in that range. You'll be fine, folks. Hey, founders, hey startups. When you're hiring for your small business, you want to find quality of professionals who are right for the role. But I understand it can be tough to find the time and resources to find that perfect hire. That's why you want to check out. You guessed at LinkedIn Jobs.

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actively searching, they're going to see your role. And you know what? Those are some of the best candidates. And did you know that 70% of LinkedIn users don't visit the other leading job sites? If you're not looking on LinkedIn, you're looking in the wrong place. And the best part is when you use LinkedIn jobs, 86% of small businesses get a qualified candidate in 24 hours. So hire professionals like a professional on LinkedIn. LinkedIn jobs helps you get the right people faster. And guess what? The first one's on your boy, J-Cal. Post your first. job for free, LinkedIn.com slash TWIST. That's right, LinkedIn.com slash twist to post your job for free. Ferrams and conditions do apply. We got a pack show today on the docket. We have how a new venture could

shake up the landscape of American stock exchanges. Yes, we are going to Texas. Then the idea that I am excited about. I wrote about this this morning. Lots to share there. We have a hassle of new insurance or possible entrants for the Twist 500. And then we have AI, music and lawsuits, including a couple of clips of Jason, first taking a look at Suno and Udeo, trying to get it to play dire straits. We'll talk about how well it does. But Jason, first up, you brought this to my attention. Somehow, I admit people were considering building a stock exchange in the state of Texas.

So how long have you known about this and why do you care? This is something that was in the news about two weeks ago. And there have been attempts to do the long-term stock exchange by Eric Reese of the lean startup movement. I think maybe two people are listed there and the concept there was like maybe hold shares for a longer period of time. And now Texas has got some investors committed to creating a new exchange there. Why would you create a new exchange, I guess is the question I had. And jurisdiction matters. Competition matters and how IPOs are done. Listen, it's been a bit of a racket, right? There are specific jurisdictions. There are specific places it works really well, the NASDAQ, the New York Stock

exchange, but maybe those places, because they don't have a ton of competition, maybe they get to dictate a little bit too much for people's liking. And if you start thinking about jurisdictions, like we start in Delaware where somebody with nine shares of a company can sue and the lawyers can make $5 billion in commissions suing over a pay package, that, you know, all shareholders did pretty well in getting. And people like Bill Gurley say should be the standard in compensations. practices. So people are getting a little concerned about jurisdiction, specifically Delaware, and maybe they don't like the way the NASDAQ or the New York Stock Exchange is doing business and they want something a little more fluid and a little more competition. And so the great

state of Texas, which allows you a lot more sovereignty to build homes, real estate, companies, etc. is maybe going to become a new jurisdiction where people will incorporate more often and trade shares more often because they don't want to deal with California's red tape and regulations or New York cities or Delaware. Okay. So there's a couple different things going on. First of all, the company that's doing this is trying to create a new exchange, it costs a lot of money.

So they've raised about $120 million. They announced that. The latest news item is that Black Rock is going to invest. And there's a little bit of context here. Just to be clear, the Texas Stock Exchange is not live. It is not past regulatory hurdles yet. It's early, has a lot of capital, has momentum. It's probably going to get there.

But right now, you can't go trade on it. So don't go look for it. It is their website has an image and a press release. We tried to find some cool graphics for everybody. There wasn't much actually to go on. Now, on the point of concentration, you're dead on, Jason. Because if you go back in time, we know, for example, that the NASDAQ and the holding company for the Nice have bought up the Cincinnati Stock Exchange, the Chicago Stock Exchange,

the Boston Stock Exchange, the Philadelphia Stock Exchange, and it goes on. I stopped counting at that point. There has been historically more smaller regional exchanges that have been rolled up into the big two. And, you know, two competitors is not the number we always want to see. And that's not taking into account the Chicago Board of Exchange, which is a little bit different, etc. I like that. The thing that I dislike here is, is that it feels all very virtue signally to me. The public is a virtue signaling. Oh, yeah.

Like anti-woke signaling, anti-ESG, anti-D-I. Anti-E-I doesn't come into it as much as I can tell, reading all the articles of coverage and digging into why people are excited about this. And so it may be sit back and go, okay, one, why is Black Rock investing in this? Well, it turns out that they were proponents of ESG, which is environmental social governance. It's a framework for investing. Texas got really mad about that because you may have heard. There's some oil down there, at least historically.

So they're not as much into the environmental stuff, pretty far right, not as much into social. And governance, you have your take on that. We can get into what the G officially stands for in the ESG framework, but whatever. The point is this all feels very much like we don't like lefty states on the coast. We're going to do our own thing. And so are the companies that are going to list on this essentially just trying to waive their Republican flag? Because if that's the case, I care less. If it's going to bring competition, I care a lot. Yeah, it's definitely going to bring competition. And I think the environmental,

social and governance scoring system and the criteria, I think most people feel is a little bit corrupt or easy to game. So maybe it started with good intentions. But, you know, there's a group of people who are capitalists and who don't want to have this ESG rating over their head or have to deal with, you know, those kind of regulations. And so if it could be more fluid and have less ESG score based. So, so that, but that, that's the thing. Much like DEI or woke, it's, people just say, oh, ESG. Well, what does it mean? I went to, I went to some definitions. I pulled them up and I looked at them. Deloitte's definition, pretty good. In the E category, things like water and ground pollution. Are you using recycled materials? Water usage, critical in

Texas where there's not as much water and there's a lot of data centers, deforestation. On the societal site, on the S, it's essentially like employee development, labor practices, supply chain labor, so you don't have forced labor, safety standards. Like, I mean, this is not, this is not like you must not have a all white man board. This is pretty basic stuff. And on the G, shareholder rights, executive comp, to your point. And then also like, are they using anti-competitive practices? So to me, this list is not that crazy.

Because if you're not caring about water and you're using a ton of it, you suck. There's not enough. The Colorado River is not doing great. The thing I think probably that this group is most tweaked by is the board diversity and structure. That's part of the governance and the G and then the diversity efforts and the DEI stuff, which is kind of contained in the S. The E is actually, I think, I agree with you, the least controversial.

Like, these companies are opting in generally to reducing carbon footprint. being aware of it, energy efficiency. I mean, we can debate it all day long. It's going to be more competition. And people are going to go to the region that is the most fluid and pro-business. And if you look at the trend in the Northeast, a lot of people leaving New York and New Jersey for Florida, a lot of California's decamping for Florida and Texas. Why?

People want to build factories faster. People want to be able to build housing fast. And, you know, this is the great competition that we have in America between states. And this is actually high functioning. The taxation in some states got so high and overbearing that they basically pushed the headquarters of some great companies out of California, New York, New Jersey. They lost one of the great hedge funds in New Jersey. I heard that put like a massive hole in the budget because one of those hedge fund billionaires,

like, you know what, this is getting ridiculous. I don't want to pay 50, 60% taxes. I'd rather pay 40. There's some reasonable number here and 50, 60% isn't it? Screw it. I'm just going to live in Florida. I can always come to New York and see a Broadway show or watch a Knicks game on my private jet and then come back.

And so if you overplay your hand as a jurisdiction like China has, we talked about that on the show, I think, on Monday. Yeah. If you overplay your hand like California has in terms of the DEI stuff or like even weird stuff, like you want to know one that's really tweaking people, Do you know about this like a mansion tax? In California, homes over a certain amount have to pay a couple of percentage points to sell their home. So, you know, listen, it sounds crazy.

Like, who cares about people who own homes over $5 or $10 million? Yeah. But it's actually the extra 2 or 3% that people are having to pay to exit and selling a home is making people just annoyed. And they're just like, you know what? I'm just not going to buy an expensive home in that state. I'm going to buy an expensive home in another state. exit fees? It sounds like the entire Oracle business model. Yeah, if you want to break up, I mean, breakup fees are kind of putting aside all the tickey-tacky issues. I happen to agree with

trying to have a diverse set of employees. There's nothing wrong with that. I do think you want to have a meritocracy, but I don't think trying to recruit a more diverse set of individuals to work your company is anything wrong with that. I do think like, should it be mandated? I'm not sure it needs to be mandated. I think the free market will sort it out. And here it is. The free market is sorting all this stuff out in real time. Maybe. I mean, we'll have to see how deep the liquidity is on the Texas stock exchange and who lists there and so forth.

But it wouldn't shock me if Texas companies listed there, for example. But I don't really anticipate a stampede of like 30% of the NASDAQ to camping because the reason why people list in the U.S. We actually had some data in our last show docket. It's because when you look at the relative price earnings ratio for companies in certain sectors on different exchanges. The U.S. exchanges have the best one. And so that's how people will come here because it works really well.

But if the Texas one can do better, we'll see. Okay, the internet has never been busier. Everybody's creating new websites, new products, new services. And search is changing. Search engines want to keep visitors captive. And AI generate content is creating so much noise that you're going to have to beat. So you need to get your search engine optimization correct. and you can spend a ton of money on SEO consultants,

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Go to Squarespace.com slash twist for a free trial. And when you're ready to launch, go to Squarespace.com slash twist to get 10% off your first website or domain purchase at swarespace.com slash twist. The reason why I'm not jumping out of my seat with exciting about this is because I was looking at the long-term stock exchange, a project that I've tracked for a long time. And I think it had three companies. I think Twilio was on there, too. Fulio, of course, has had some changes in its structure. And so now there's just two.

It's a sauna and thread up. I think we have a picture of their entire portfolio. There it is, two. And people were raving about this because the idea was longer-term holdings, get away from quarterly reports, get away from the hurly burly of your stock price going up and down so much. align the company with investors, and then no one really picked it up. I was surprised by it. I think it was a one-dimensional idea that maybe people didn't care about. So, you know, it's worth an experiment, but this idea that if you hold my stock for two years, I'll give you a different price than if you could sell it tomorrow. I wonder if that was just a failed experiment

that shareholders didn't care about on either side, right? Yeah. The discount wasn't worth it for the liquid, I'd rather have the liquidity. And so sometimes you make a product and you think, intellectually, it sounds like it's a good idea. And maybe it just doesn't work and people don't want it, practically speaking, or maybe the right company hasn't listed there yet. You know, if SpaceX decided, like a, or Stripe, like some really desirable company, no offense those other two companies, but a really desirable company said, you can buy our shares, but only on the long-term stock exchange or only on the Texas stock exchange. And you can only trade them, but, you know, quarterly in these redemption periods or, you know, we're going to give you a discount on them

or more rights on them if you hold them for two years, whatever it is. You know, maybe it would work. And that's, I think, going to be the key. If they attract SpaceX or Stripe, like the Texas Stock Exchange, if they attract a company like that, then it's going to be what do they say, fait accompli. Like, it's going to be a done deal. They will get other folks to follow suit. Yeah. And it really is, I think, about the regulations. And so. Well, I mean, Texas does have a, a, a, a, a, a, a take on that, especially at the AG level. But when we do need- Compliance courses, right?

So maybe it'll be riskier to be with that cohort of companies. If they reduce the compliance course and maybe it's a loss and maybe it's a little freewheeling, maybe the inventory there will be more risky, more risky, more rewarding. It's actually pretty common to see, uh, there being kind of a smaller exchange focused on, uh, higher growth companies. I think it's called the starboard in China that memory serves. And so there are, you know, this idea that there are higher risk changes for companies that want to have a different set of rules. There's precedent for it.

And honestly, what we need is more public companies. There have been a decline in the number of public companies for some time now. So, you know, to me, sure, it may feel from my perspective a little virtual signaling, but if it gets more companies public total, then I'm so here for it. Because there's just not enough. But one company that is going public is Circle. Jason, I cannot tell you. I've told him about this. Do you own any stable coins out of curiosity? I don't own any stable coins. I'm fascinated by the sector. I've had Jeremy Allaire on the program. I've known him through a couple of companies. We're not like best friends, right? And the couple of acquaintances, but he's been on the program. And, you know, stable coins seem to be an incredible way to move money around really fast. In the case of Tether, which has been dinged with human trafficking and all kinds of. dark web kind of activities, perhaps too easy to move money around and too hard to trace

money, et cetera. And they had a bunch of compliance issues. But Circle's been doing this in a very buttoned up way here in the United States and the fact that they're able to IPO now, there are, there's a fundamental question of should somebody be able to have their own currency in, you know, the United States? And will that in some way compete against the U.S. dollar and the Fed? I guess that's, I guess, the big issue here in the United States, but yeah, tell us about it. Well, I want to start right there because to be on the other side of that, to flip it,

I think that the rise of stable corn in the decentralized world in general has been the biggest endorsement of the U.S. dollar that you can possibly come up with. So to me, it's a strengthening element. Because? Well, I mean, look at the two biggest stable coins, which are also, I think, two of the top six cryptocurrencies by market cap. Heather and USC, both of which are dollar stable coins peg to $1. No one really wants a euro stable.

No one's dying for a pound stable. I'm not seeing anyone hacking their way to create a Chinese yuan stable. People want dollar. And I think by giving people access to a dollar equivalent, if you will, has been awesome. And this is one of the two use cases that crypto has nailed. One is Bitcoin's worth a lot of money, hashtag store value. I'll let them happen. Two, this is a way for everyone to buy dollars around the world, no matter where they are

or what their onboarding point is. And great for them. It's great for people who have a currency that is less stable and they might appreciate half their dollars or 25% of their dollars being in USD. Yes, absolutely. And one more thing, these stable coins, the whole idea is they're backed one to one with our asset. So if you put a dollar into circle, which makes USC, they buy a dollar worth of cash.

a cash money market account or a short-term treasury. Exactly. So this money that someone from Iran is putting into, not Iran, I don't want to get circle in trouble, a country we like with high inflation. There we go. Buy some stable coins. That money from Circle goes into U.S. Treasury, making the local economy stronger.

So it's a really virtuous cycle. And I think this is an awesome company. I loved it when it was going to go out via SPAC. It raised that price and then moved back from that, filed privately. And I'm counting down to when it lists. This is going to be such a cool company to see, Jason, because interest rates have gone up so much since 2021 when it tried to list VAS back that I presume it's grown dramatically because think about it, $32 billion worth of stable coins under its belt. Now call it, I don't know, four or five percent interest on that. It's a billion, billion, billion five a year in revenue.

It's incredible. And this is, I think, what people who own a stable coin have to realize, you buy a stable coin, you get no interest. you're just getting a stable coin. So every year, as inflation goes up, the value of that stable coin is going down. The hedge against that, obviously, is what the stable coin provider gets for giving you that technological service. And so Tether, which had a myriad of questionable assets according to multiple sources and was only doing testations, a very light form of verification by, dare I say, unknown accounting

firms on islands. Lesser known? Obscure perhaps? Yeah. You know, Circle is doing it all right. There got, you know, major audits going on as opposed to attestations and that kind of stuff. And so the devil's in the details. If you have, I think Tether got up to 70, was it 70 billion, 80 billion?

It was pretty large amount of money. And people were really concerned that maybe their holdings were in Chinese commercial paper because that's where you used to be able to get a return. So maybe they're getting 70% on that Chinese. Chinese commercial paper loans essentially in China, but maybe it's not that stable. Then all of a sudden we have inflation, interest rates go up. Tether started bragging that they've got like, you know, billions of dollars in revenue a year.

So you're the sucker at the table, perhaps if you're keeping your money in stable coins, because you're not getting that interest that you could get if you kept in a money market. All right, founders, you're busy building a product or service for your customers. You need help doing important things like registering your company. With Northwest registered agent, you're going to set up your entire business identity in one place. It's going to do everything for you in just 10 clicks or 10 minutes. You've got to save time. You've got to save money.

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getting you up and running in no time. Visit Northwest registered agent.com slash twist today. Which, by the way, my favorite thing to do every month is to go to my Fidelity account and look at how much free money I got from the, we keep our emergency fund in the money market account there. Yeah. Just makes us money for free. So everything you're saying is dead on.

A couple of small quibbles, though. I just pulled it up. There's now $112.8 billion worth of tethers out there. Wow. Yeah, right? I thought it was 7582. Yeah, that was the last number I heard last year, but they've grown significantly.

And I was doing some research on this. And I ran into a really interesting question, because if you hold USDA, on Coinbase. And Coinbase is a partner company with Circle in the USC universe. They will give you, I think about 5% yield on your held USC. And I was like, wait a minute, is Circle just paying people to hold it and then does that take away all their revenue?

So I chased this down through Coinbase's last earnings report. And what we found out is that the company in the second quarter expects $150 to $180 million in sales and marketing costs, quote, driven by significant. I'm frequently hire USDC customer reward. So I think that Coinbase is using its sales and marketing money to pay a yield on USDC holdings to incentivize people to use it. But that doesn't mean Circle is, which means their business, I think, is going to be stellar. Because they don't have to have a lot of staff to have an account with a lot of money.

One of the things people have learned over time, and this was one of the value propositions of Robin Hood is it's hard to get somebody to open a lot of. a brokerage account or a bank account or a credit card. And probably a brokerage account is really hard. A bank account's less hard and a credit card. Hard. And so that's why the rewards that you give, like the affiliate fee or the cost of acquisition to those things is typically hundreds of dollars. So to get somebody to open an e-trade account, you know, if you were to do that through an affiliate network or you were to spend money on television ads, you might spend two, three, $300 doing it, $400 to do it. So that's why Robin Hood was like, hey, give your friend a free share.

You get a free share. We'll give you $10 worth of an Uber share or an Apple share or something. And they basically said instead of paying CMBC to put e-trade ads on or Robin Hood ads on, we'll just give the money directly to you and your friend and it will spread virally. And you may have seen Robin Hood now is like if you move your money into Robin Hood and you move your equities into Robin Hood from another service, I think they give you like a one or two percent one-time fee for onboarding. So if you move $100,000 in shares from your whatever account, they just give you two grand or something. You move 500, you get 10K free.

Exactly. So if you move a certain amount of money, you get like this free money, but you have to keep it on file there for X number of years. Two years, three years, you have to pay it back or something. Anyway, this is called customer. You're just taking customer acquisition cost money and you're moving it around. In the same way, Uber, when they didn't, and Lyft, when they didn't have drivers, would say to the drivers, when you hit 100 rides, we'll give you $100. So, you know, one of them could steal drivers from the other and drive, it goes under driver acquisition costs. You can move these things around the balance sheet.

But eventually, you're going to need to, yeah, pay the Piper. You have to make that money back. And so be careful, folks. Yeah. But one thing that has changed is just the pace at which interest rates have gone up. And we have a chart that we're going to pull up about this to show the scale of the change. And this is important because I think this is going to dictate how quickly they do go public. So if you're looking at the video, this is just,

the federal funds rate for five years. It's gone up very, very steeply. And it just gets to show up right in history, I think. That's, I was looking at the chart to prove that. And there's been some really wild stuff over the years, at least in recent memory. In the 70s. Yeah. Times used to be very different.

The rates went up very dramatically, very quickly recently, which made a lot of businesses better, including Robin Hood, because it held a lot of cash, which it not makes a lot of money on. But here's my, here's my bet, Jason, and I read about this for my newsletter. I think that they're going to want to go public before rates begin to come down. Because right now, they have rising AUM at the highest rate we're going to see for a long time. So their growth story is never going to look better than it does at this moment. So just stress test that for me to make sure I'm not insane.

Yeah, you're right. If rates went back down to 1 or 2%, then this business would be making a lot less money. And rates will go down slowly. I think most people are realizing higher for longer was the right call. A number of my friends made that call, higher for longer, to try to keep inflation from coming back and roaring back to 6, 7, 8, 9%, whatever, I think it peaked at 9.2% or something last year.

And now we're down to the free handle, and maybe we see a two handle soon, right? And so, yeah, they'll make a cut later this year, maybe two this year. And yeah, so it will be peak interest rates this year and then slowly we taper off. And yeah, their revenue will go down. And then that means they have to have more assets under management to make up for that.

But, you know, there's, I think there's a lot of interesting things that these stable coins are going to allow people to do, you know, in the same way, Venmo, PayPal, Bitcoin have, you know, in a way, this is kind of like Bitcoin in that it's going to be pretty frictionless to move it around and pretty immediate. So you and I have to settle a poker debt. Are we going to use Venmo? are we going to use Bitcoin, you know, are we going to hand each other cash? Or in the future, will, there'll be a stable coin inside of Twitter, X.com, right? Like, maybe Elon makes his own stablecoin and puts it in there, you know, since he's going to make banking a big part of X, according to the public reports, I have no inside information.

So what if there was an X.com. Yeah, well, I mean, I have to. No, no, I know you have to. It's just, it's almost like you're the guy in the commercial like, this drug will save your life may cause diarrhea, death, hemorrhages. I mean, just people, the reaggregators might just say, like, you know, Elon's friend, Jason says stablecoin coming. And I just always have to like cut that off at the past. I don't have inside information. But, you know, he has talked about Doge and why not have an X.com stable coin? That would be a great idea. Actually, I should tell him, like, to look into that. Because then you can just move money back and forth, you know, after you have a meal or a poker settlement or you're chopping up a birthday present. Yeah, it's all great. And if there's no, the whole point of this crypto stuff, wasn't it supposed to? to be that we could transact without huge fees. And then it's huge fees. It's huge fees. It's worse. It's worse than that. It's huge fees for slow transactions. And that that's not good.

But people did say this is going to be great for remittances. This is going to be great for an inflation hedge in certain economies. To me, Staplecoins actually fit that bill. Bitcoin is a pretty variable asset still. So to me, Stables really plug that, that like, crypto promise from 10 years ago. Hey, don't tell this with our story from last week of Wells Fargo, letting people pay their rent on their credit cards and then having to pay 3% of that back to them in miles. If there was a Wells Fargo or used USC, then yeah, no fees. There's a lot of cool stuff. This is why I'm excited about this IPO. I will say that I have one last chart I want to bring up just to show you why this came to my attention.

I wrote about it. This is a chart from Visa's crypto dashboard showing essentially volume. Now, most data sets show Tether being far more active than Circle, but you can always strip away certain crypto transactions to see what's real, what's spooked, or what's essentially just bot activity. But that, to me, shows a lot of actual usage of USDC. This is a chart just comparing the two and it goes up to the right. So I'm very curious what this S-1 is going to show us, Jason.

I think I'm counting down to this one more than Databricks, more than Stripe. So this chart's interesting because it has USDT, which is Tether, kind of flatlined and it's not tracking a lot of these transactions. So that means I guess those are off market transactions. A lot of those are going on with USDT and USDC is a lot more trackable or traceable. I'm not sure what's going on here. There's also a multi-block chain components of this because you can buy, for example, at USC on I think 10 or 16 different chains.

So there's a data aggregation question. But no matter what way you want to look at it, what that chart says at a minimum is that through a particular prison that Visa prefers, activities going up quite a lot for USC. You want to strike while the iron's hot. Get the S-1 out there. Make a bunch of money. Hazzah, haza, haza. I'm stoked about this. But this is a startup show.

Where are they going to go out? I'm waiting. I'm trying to manifest this. So they filed, but they haven't, yeah. They filed privately in January. Got it. Like, it's been a minute, man. It's been nearly half a year.

Like market wants inventory, so I think it'll do quite well. I mean, market is, this is the crazy thing. Everybody, you know, wants to talk about how terrible the economy is. And every time I kind of point out facts, people are like, you don't understand poor people. I'm like, about my life being poor, lower middle class. Like, I do understand. I worked all the worst jobs you can. Lowest unemployment of our life, real wages going up.

Inflation's been tempered down to three almost in the 2% kill zone. And stock market at all time highs. What am I missing? So I've struggled with the exact same thing to you imagine because when you look at the top line indicators, it's going great. It's like you're in a car and there's no warning lights. You're going 65 and someone in the back is getting like motion sickness and blaming you. And you're like, but the car is fine. I think we're seeing a partial K-shaped recovery.

So V-shaped, it goes down and goes up. A K-ship recovery is one with this bifurcation of the state of the economy for people. And I think that for a lot of folks, things are great. Personally, my family, doing fine. You're doing fine. You have equity exposure. You're great. If you don't, you're struggling.

And I think that people have, I'm going to abuse a concept, but a lot of like inflation PTSD, I think is still growing up in a lot of people's, a lot of people's ballots. And if you haven't gotten a raise in the last two years, you're probably really hurting. So I think there's also some lag. But I mean, if this isn't a good economy for most folks, then I don't think we actually know how to define that as a species because everything looks pretty good. There is some pessimism, I think, because of the political overhang and the political rhetoric going on, where people want to incessantly frame it as this is the worst economy of our lifetime when it in fact is one of the best economies of our lifetime. And you are right about inflation.

If inflation comes down to 3%, there's still inflation. It's 3% inflation. So you're $100 in groceries, now 103. So it's not 100 going to 109, which is sticker shock. But I do think you're right in the K analogy, because if you are a wage earner without equities, yeah, you're only focused on that 3% right now and you got the sticker shock of the 9% and you've got loans. So instead of getting 5% on your money, when you wake up and you see your money market,

they're seeing their credit card bill come in or their mortgage or their variable mortgage come in or their variable car payment come in and it's higher. So yeah, that's exactly what it is. It's which side of the trade are you on? Are you on the get 5% or give 5%? So one thing that people outside of the U.S. might not understand is how partisan everything is in this country. Yeah. And this chart shows the two major political parties and their views on the economy during different times. So during the Bush years, Republicans or people that leaned Republican, thought it was doing great. The moment Obama took over, the economy, terrible, worst thing of all time, did not change their mind until Trump took office,

at which point Democrats began to ease off a little bit their views. So I also think that when people discuss the economy, they're really discussing their political priors in terms of how they want the economy to be doing under an administration. So for example, right now, if you think that Biden is not a president, you don't want the economy to be strong. Because then that goes against your narrative. And I saw the all-in segment when you were like, economy's doing good. And people were like, no. And you're like, well, let's go through. it. Yeah, and I went to the facts and they got really upset. You know, Sax was really tweaked about it and I was like, I'm sorry, but facts. Yeah. Well, I thought when people go, well, I don't trust the data, but then they trust it immediately when it's in their favor. That is the thing about partisans. You and I are both pretty independent, I think. And, you know, I might be starting to move back into a libertarian era. I'm just kind of so tired with how oppressive it is to have these two parties constantly want to involve.

themselves in our lives that I'm like, you know what? I just less from the government. It's just, it's too much. Everybody wants the government to solve everything. I'm like, I'm starting to get so frustrated. I'm just like, can you just leave us alone? Do less. Do a lot less.

Let local governments do more. I mean, look, I haven't been really good at taking direction my entire life. You can just go look at my elementary school, disciplinary records and so forth. So you're not, uh, I, look, it's not popular. amongst my friend group to say this, but I've never fully shed my late teenage, young male libertarian streak because I've always found structures to be kind of silly.

And a lot of norms are a little ridiculous. Like, the reason why I made fun of you wearing a tie the other day was because one, I like you. But also, too, like to me, whenever you turn on like the Capitol Hill TV and you see like eight people for a podium and they're all wearing a suit and tie, and I'm just like, what are you proving?

Like, really? Like, but in my youth, my parents, if I'm being totally honest, I was going to wear the suit and a shirt and not put the tie on. I had been at a wedding and my friend bought me that gorgeous pink Tom for a tie for the wedding. So all the groomsman had the same tie. And I was like, you know what? I noticed the other guys weren't wearing ties.

Like, this is the ultimate troll. So at the last minute, I turn my camera off, I put the tie on. We're like, we're supposed to be 10 minutes from Showtime. Well, I turn my camera on the tie. I was like, you're wearing a tie. And then everybody was like, Breedberg was like, oh, do I have to wear a tie? Everybody started second-guessing their decisions.

That's really funny. But I think I'm going to start wearing it just to troll people because they really got into this better call Saul serial killer phase for me. Let's talk about Twist 500. I mean, this is coming along nicely. We got the website up. Go to twist500.com. It's a Coda website right now.

It's a database. We had maybe 20 companies in there and we're every week trying to add some. So here, we can show it. And the goal here is for us as a community, just to understand who the 500 most important private companies are. We know there are probably venture-backed, you know, some amount of backing for maybe 30, 40,000 companies, I would say, active companies, right? And so, and a couple of thousand funded every year.

So to pick 500, it's probably like 1% I think of the pool. And so we're starting with the obvious. categories, yeah, and the obvious largest ones that are not yet public. Yeah. And so one thing that I did, just because we're kind of chipping away at this week by week, it's going to take us a long time to fill the list and then we'll recycle names as we take them off. But I went and grabbed some of the most interesting companies that reached a $1 billion

valuation or greater this year with the following caveat. I ripped out most biotech because I don't understand it. We'll have an expert help us with biotech. And I didn't include Chinese companies because it seems that we're discussing the world economy and Chinese tech companies are a little bit bottled into their borders. And given that, I don't think the twist audience is super concentrated in Shenzhen and Shanghai, lovely places, but probably blocked there. So I'm focusing on X China.

So that's what we have in this list. I think those are two good calls for now is to leave out biotech until we have the expertise on board to do that and leave out China because they've opted out essentially. Yes, they have said, not so much. So a couple of names to go through. One is hundreds. Now, this is a company that's doing cybersecurity for SMBs. I like that because everyone needs to have a better cybersecurity posture.

And Jason, they just raised a Series D from Kleiner and Meritech 150 out of 1.5. Seems to me a shoe-in just because it's big enough, big backers, cool market. Yeah. And to get that valuation, they're probably in the tens of millions of dollars of revenue a year. Just so people understand in private markets. you know, 25, 50 times revenue is possible. It may not be possible in the public markets, but, you know, people have protective provisions on their investment. So if this is at a billion plus valuation, maybe they have 50 million, 25 million in revenue. I'm just taking a

ballpark guess here in terms of how valuations work. Yeah, I was thinking like 35 to 50 would be my guess, give it a nice solid 30x multiple. And you pay a little more because you're expecting the company to grow a lot with the money you give them. Yeah. Yeah. So you're You're not buying a dividend stock when you're buying a startup share. Okay, so Huntress is on. And then there's a new one. This is called Creatio. It is a low-code company.

And I feel like we have not talked about low-code and no-code for years, because I think it became like cable stakes inside of software. Like, of course, I can drag and drop and define my own logic. Yeah. But I think it's still pretty cool. And this is a company that was bootstab for a long time, raised around in 21, 22, and then just raised a big $200 million round. Wow.

that gave it a $1.2 billion valuation, growing it over 50% per year, and if memory serves, might hit cash flow positivity this year. So growth, scale, I mean, it's got some great backers. To me, this is a super cool company. I don't have a use for it,

so I wasn't able to test it. But clearly, Jason, people like it enough to pay for it because they wouldn't have raised that kind of capital today without a big customer. Yeah, and I think a lot of this is the consolidation of SaaS. So just looking at,

what they provide, a lot of apps available for customization, so you're running a large company, and, you know, maybe you don't need this particular vertical SaaS software. You don't want everybody to have to log in again. You want to kind of take some off the shelf SaaS software and customize it. And, you know, it's good enough, right? And which is what Chimoth is doing with this 80-90 company, which is like 80% for 90, 80% of the features for 90% less. Uh, And so I think that will be a trend. And, you know, some LPs and GPs are showing some concern in the SaaS space because, you know, what if my company becomes a feature set and gets 80-90ed by a company like this or HubSpot or Rippling or Gusto, you know, decides we're going to put expenses in there. And then what happens to expensify?

You know, all these discussions are starting to happen where you used to be, want to be best of breed. and now people are bundling like Microsoft Office, and we just saw some action in the government about bundling around Microsoft's products again. And so bundling is kind of happening in SaaS. It's just your vertical SaaS company is my next feature. That's a quote that we should hold on to. I'm going to burn through a couple of these quickly.

Altruist and Clear Street. Altruist is selling software to registered investment advisors, now worth $1.5 billion. 550% revenue growth last year. That's why it's doing well. And I'm sorry, that's the company that might be cash flow positive this year, not creative. My bad. And then clear straight, it's essentially selling software to brokerages, now worth $1.7 billion,

raised a $165 million series B. So proof that Fentec is still in the mix, 2004 new unicorns off the back of fast revenue credit. Harder than ever to get a billion dollar valuation on Fintech, I think, but still happening, still pretty cool, two companies to watch. And then just for the sake of time, I'm going to throw one at you that you might not want on the list. So, Oh, interesting. So Monad Labs or the other crypto one that I now, of course, oh, yeah, Farcaster. So there's two crypto unicorns that I want to talk about. Yeah. Farcaster.

It's a Web 3 social network raised 150 million at a flat billion dollar valuation in May. It had 80,000 users at the time. Jason, would you have a fixed a $1 billion value? to a Web3 crypto social network that had 80,000 users. Yeah. So obviously, that's a large amount of revenue on a per user basis. So if you had a million users and you have a billion dollar valuation, I think that's $1,000 a user, you have $100,000. I think that's $10,000 a user, right?

You've had a billion and it was a billion dollar valuation. It would be a dollar a user, right? So you can kind of do this math pretty quick here. There's no way to make that money back, even if it was a subscription. service, which I do think they do have some number of early subscribers, paid subscribers, on their system, and there's like a currency built into it. And I think the founder is very clever. So there's some intangibles there, but it doesn't make economic sense if you were to pencil it out like that. So then why would investors make an investment like this?

Well, you know, then you have to start backing into some intangibles here. What is the prize? If this warpcast and decentralized social media does win, what do you win? You win not just Twitter. You win a piece of TikTok, you know, Facebook, Instagram, etc. The whole social media space, the whole social media space, you know, makes hundreds of billions of dollars in advertising revenue. So, yeah, this theoretically, if, you know, this federated, nobody owns your, data system works, it's like a very intellectual argument that's been going on for over a decade. You own your social graph.

Yeah. Is it worth a billion? Of course not. Is it worth a billion with 150 million in cash in the bank? Right? They raised 100 or 150 or something, I think? Let's see. Farquester raised 150.

Yeah. So, okay. So if it's a billion dollar valuation, you back out the 150 million in cash. It's 850. Still not worth it, but, you know, you have the protective provision. So when you place a bet like this, you're placing it's going to go to $50 billion. That this is going to become a $25 or $50 billion asset. You're making a later stage investment, a Series B or C level investment, essentially,

even if they call it a series A and what they called it. Putting the naming aside, they're betting it's going to get to $25 to $50 billion. Is that possible? Yeah. Is it probable? No, of course not. That's why it's a bet. Yes.

But they have downside protection. If this gets sold for $150 million, they get their $150 million back. Yeah. And they might have a liquidation preference. of 2x in there. So they get 300 million. So the first 300 million sold goes to these investors. They've got some downside protection.

They believe in the founder. So that's sometimes what happens here. But it's a big prize if they won't. This is why this is different. I would include them, of course. And it's also the nature of the investment. This is Fred Wilson and Union Square Ventures, I think, are involved. To some degree.

I think when you see a crypto round of this size, it tends to have a lot of players behind it. You've heard it the same way that I did, which is either this is going to go to zero or it's going to become the decentralized Facebook and therefore it's going to be worth a squillion dollars. And if you have a thesis that crypto is coming for the mainstream and the mainstream consumer, there will be a social play. This one has momentum.

Okay. I love to see a bet that I look at and go, no, because that to me is venture capital, not bank. And SaaS got a little boring there for a while. All right. Some other names we were to throw on the list include Weka

and QI Tech cognition and Sayera and Monad, labs. We'll have notes about all those in the Twist 500 newsletter tomorrow morning. So if you want to get that, make sure to grab that. Now, with the last time that we have left, Jason, can we talk about AI music, please? Please. Yes. The music industry is one of the most protective of their rights. I would say the most protective, the most litigious. If you've run a startup that in any way bumped into the music industry like Peloton did, it can be lethal or like Spotify did. And the majority of Spotify's revenue goes to musicians, right? It's just a very hard group of people to align yourself with because they are savvy. Some people might say cutthroat. And if there's a dollar

of revenue, they're going to squeeze every cent out of that, you know, and you're going to get pennies on the dollar if you're involved with music industry. Of course, it's probably one of the easiest things to replicate with AI. So now you've got a great paradox. What could AI be the most disruptive to? And who's the most litigious? Okay. It's going to be the most disruptive to music and coding, you know, and writing, you know, today. Okay, who's the most litigious? Well, writers are the least. They're suckers at the table. Journalism and media suckers. They never defend their rights. Poor, sir. We don't have... Yeah, you're also uncoordinated, right?

They've always been uncoordinated. They don't fight as one group. I thought you meant physically uncoordinated. I'm like, how'd you know my basketball team was terrible? Absolutely. Yes, turnover central. No, I mean, look, Vox, Jim Bankov's like, I'm sorry, how much money are you going to give us open AI? We'll take it. And then New York Times was like, how much money are you going to give us? We'll fight it. Which Jim Bankoff and the Salzberg should have gotten together and said, how much can we extract out of these guys? How much can we take them to the cleaners for? Let's file a lawsuit. Let's have our starting negotiation be.

We're shutting you down with an injunction. That's what the music industry does. And that's not what journalists and media companies do, generally speaking. Well, there's also the public benefit element of journalism and how the debates about should it always be free or not in blah, blah, blah, blah. The thing is, these AI music startups, especially Suno and Udio, you have talked about on the show with Sunny. And to get people a taste, I want to play the clip from you, Sunny, and Sunno, because I think it's a lustrative of the quality and kind of state of the art. So just listen to this clip, everybody. Okay, here we go.

We'd say here, a rock song in the progressive rock style with finger-picking electric guitar about a rock band playing in a dive bar. And kind of alluding to Sultans of Swing here. Okay. Hmm That is literally It doesn't sound like Mark Exactly like Mark Knopfler But it is definitely

Like a bluesy It's more John Mayer Who is influenced by I was kind of blown away By that clip because there's even Little Flubs in this fingerpicked guitar To make it sound like a person's doing it Personally

As a big music guy myself Much like you I am very emotionally wedded To certain record of certain artists and certain sounds and times of music. I know that I'm a freak, right? Most people just want tunes. They just play whatever's up.

So to me, I can see that really coming into this. But there's been a news item past the RIAA lawsuit, which is that the FT reports that YouTube is working right now with record labels to give them a bunch of money up front so they can build their own model so they can offer this to consumers. And this sets up this really kind of crappy thing when YouTube is doing it right, because they're rich. And Suno and Udoo went around the legal system because they weren't. And so we're in a situation. It's almost like music is anti-innovation because they are so extractive, as be said, that now we're going to see Suno and Udoo, in my view, probably lose these suits. And then

we're going to end up with Google, YouTube, and their bank account getting the AI music business for themselves, which just is not what I want to see as a guy who really likes startup. And I also don't see a way to fix that, Jason. This is going to come down to training data. And so if soon, it's called Suno, right? That one that we were just demoing. And that's the one that's been sued. They've both been sued.

No and Udo you have both been sued. So what Suno needs to do is license some music and tag it and train it. If they want to do that, there's a very simple way to do that. You raise $100 million. You hire a bunch of artists. You have them signed work for hire agreements. And you say, play whatever the hell you damn want from this list of blues, folk, country, etc. And put it into our database.

And we'll sell your music as a license so people can take that clip. So just play the blues. Now they sign a work for hire agreement. They also sign an indemnification agreement that's their music. They're playing it. You tell them, do not play John Mayer or. dire straits, play your own stuff, come up with your own licks, come up with your own songs, just sit in a studio, we'll pay you know, 500 bucks a day as a studio musician to just jam out

and train based on that. And then you're in the clear. And then you can go tell the music industry to F off. Right. That's not what they did. Would that be as good though? Because in the other clip, but we don't have time to play it. Actually, eventually after two or three years of doing it, yes. They just chose to cheat is my guess. And they went to the, open crawl and they went to one of these open crawls and said, just find every MP3, put it into this music thing, or it could have been even more sinister. They could have just gone to BitTorrent or Spotify or radio stations and said, just play radio stations, pull the metadata. You know, like there are all these, now that I'm getting into high fidelity stuff with my name,

N-A-I-M, you know, digital audio thing that I plug my high-end headphones into. And they play this high-bit rate. there's like infinite number of high, black, incredible radio stations that are streaming and they have the metadata. They could have just taken all those streams

and just fed it into their language model. And that's, they said, I saw on the documents that in their response that they couldn't tell them what we trained on

because it's proprietary data. That's not going to work. No, you can't say business secrets when the thing behind this curtain is my stuff. No. But there was an interesting

quote from the, uh, the Antonio Rodriguez over at Matrix, a venture firm that we've all heard of, of course. And it goes something like, honestly, if we had deals with labels when this company got started, I probably wouldn't have invested in it. I think that they needed to make this product without the constraints,

essentially arguing for freedom of operation, if you will, for these companies to mess around. And we'll see how this plays out. YouTube, of course, is going to get this right, because Google already has relationships with labels through Google Music or Apple or Android, whatever the hell the Google thing is. I don't use it.

I use Spotify because I'm boring. But I just hope that this sets a precedent of proper compensation for training data because it would be pretty much a bummer. I think if it worked out for music and then no one else's copyright was treated with similar respect. So could there be a precedent setting here, Jason? I think there's going to be some presidents set if the. these things aren't settled for large amounts of money. So usually what the music industry does is they'll go to the startup and they'll say, we caught you. Here's all the infractions. You now owe us

$17 million. How would you like to pay us? And you say, well, we've got $8 million in the bank. They're like, great. So now you owe us $9 million. How would you like to pay us to $9? And this is pretty much their approach. You say, well, I'm going to shut the company down. They're like, okay, that's great. We'll just have a judgment against your company. And I guess sell the IP and we'll get whatever the IP is worth. That literally is their approach. They will just, you know, and they've got a lot of people stealing their music and using it illegally in all kinds of different ways. And yeah, you've got to pay to play. And they're smart and they're savvy and they're organized.

And, you know, the Voxes and vices and Washington Posts and, you know, news corps. They don't have their own like united front. And so since they're not united in the way the music industry is, they all cut their side deals and they divide and they get conquered. We'll see if the New York Times takes their case to the mat. That's the case to watch. And we should put it on our docket to just keep an eye on it. Jason, I have to say, of all the shows we've done together, this is the first time that I'm leaving one kind of bummed out

because I think you're dead right on the media world and their lack of the United Front. I hadn't quite pieced it together in that way. Why do we always get bullied around? Why did we always lose? And yeah, I think that's correct. And I don't see a way to fix it. They take the quick check. So what happens is somebody like,

Sam Altman or Google or Facebook. They go to BuzzFeed and they're like Facebook's like, hey, here's like $5 million to make some videos for us. I'm like, oh my God, $5 million. That's a big ad buy. They're not thinking about like the value of Facebook and how much of Facebook's value is based off of their content being shared on the Facebook network. And what would Facebook's value be if they couldn't share a New York Times story?

They couldn't share a BuzzFeed story. And those people said, you know what? You can't share any of our content on your platform. That would be enormously useful for the world of media economics. And we haven't done that. And that's why the RIAA is feared. And no one else really is. We have to leave now, guys, but we will be back with a lot more.

ChatGIPT is out for Mac users. We've been testing that. We've got to talk about Baidu's write down. That's super interesting. More Twist 500. And we'll see you all next time. on this weekend startup.