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## The Besties welcome Thomas Laffont! [00:00] All right everybody, welcome back to the number one podcast in the world. I'm your host and executive producer for life. Isn't that right, Dave Freeberg, Jay Cal, not at all what you are. Make sure you tune in startups and apply to Founder University. You're something very different. With us again today, the Sultan of science, David Freedberg. Can I just congratulate you on your fourth baby. If you double that number, you're going to be able to catch up to Chimoth and his five plus three illegitimate. How are you doing. [Music] Let your winners ride. [Music] We open sourced it to the fans and they've just gone crazy with it. How you feeling. You're tired and grumpy, aren't you. You're a little transition for me. I didn't have to do the work. It's all Are you tired and grumpy. And how's Allison. How's How's the Everyone's wonderful. Thank you for asking. And a beautiful boy. Beautiful. Nothing more is crushing. Nothing more amazing than seeing a child. How's magnificent. Magnificent. Thank you for asking. Thank you for asking that. Yeah. Okay, let's move on. Thank you. Thank you for all the kind words. And uh just we sent over a gift basket, Chimath and I. Longhorn Pana Stakes uh a 10-year uh membership for Oh, hey, congrats to Olivia Landon, by the way, of Long Hill Wagyu. She had twins. That means she's going to have more people to work on the ranch and slaughter cattle to send us our pana. Congratulations. Shout out. Congrats to Olivia Landon. It's so funny cuz we love this. We love these steaks so much. She doubled. We mentioned it on the pod and you idiots started like searching for it. Lunatics and they ordered out all the Koolette steak. So now Chant and I are screwed. No crew. No, they ordered out everything. Everything was sold up. Everything was sold up. So now we have to gatekeep with us again. Your chairman dictator Chimath Polyhapatia. He of two votes in our fine organization. How you doing, Chimath. I love voting control. I'm doing great. He starts Thomas Lefant with a uh tie and then all of the gamesmanship happens between the team of rivals me and Freeberg. With us again, Thomas Lefant, a gentleman, a scholar. No idea why he's here. a true I don't know how he wound up on this podcast, but a true gentleman, a true scholar and host of Easts meets West, an incredible conference that I attended this week with our bestie David Saxs, who of course is at the White House and can't join us. Uh, but Thomas, what a great event. Thank you for including me. No box lunches, by the way. We we took your feedback from a couple of years ago, so I hope that we met your standard. you did upgrade highlights for you guys at your conference, Thomas. I mean, I think for me, obviously, I think a lot of news in AI this week. So, I think that was kind of the center piece of most of the panels pretty much up and down the stack from SAS companies trying to transform into AI to obviously the big Zuck news on scale and then potentially I saw in the information today the the Nat Friedman news. So, it feels like there's a lot going on in the industry. So, should be fun to talk about. Yeah. And we're going to talk about it all today. We got a a really. ## State of LA, Hollywood's decline, positivity around GDP growth and AI productivity [03:26] full docket. Rick Caruso, the uh mayor who would have saved Los Angeles from the fires. He was there and you actually hosted at his incredible facility. What a we did. We talked about the the state of LA, which JCL, is that is that it looks like that's where you're at, right. Yes. I'm at my uh LA home, which uh aka the compound. Uh yeah, it's uh it's available on Airbnb, so I'm here in LA. But yeah, Rick Caruso, what a great speaker. Interestingly, Jake Al, today a friend just sent me a chart showing the recovery of restaurants postco andif uh LA is 50% behind on the recovery per store location versus the national average. What do you attribute that to or what did they attribute it to. I think I think there's kind of a couple different things, right. And I think one the economy which you know unlike the San Francisco economy being levered to to AI and on the upswing is more levered to entertainment and I think you know secular decline I think you know someone mentioned at the conference that filmmings in LA are down 50% from peak so I mean that's just a a massive move down losing share to other geos both in the US I think Georgia right Jay Cal was mentioned I mean, Ted Cerrone has explained exactly how aggressive New York is being, uh, the UK is being, Atlanta, I mean, so many different hubs for movies giving much better deals than Los Angeles is. Yeah. So, I think it's a it's a combination of I think, you know, being levered to one industry that's kind of in secular decline. I can tell you from Mr. Beast that for Beast Games, we had a deal in Las Vegas and in Toronto, we got huge tax credits. And in the second season that we're doing for Amazon, we did an enormous deal with the Kingdom of Saudi Arabia. And so we're filming a bunch of episodes there. We're building the sets there. We're actually going to keep them there after it's all said and done. We would not film in Los Angeles unless we absolutely had to. We will stay as far away from California as possible. And regulations are such a big part of this. It's on economic. You can't make it work. Yeah. 30% more expensive I think it's is the kind of the official number on on well there's also speed right Thomas like how quickly can you stand something up how many how much paperwork do you have to file James Beard Foundation I'm seeing here from the research has found that all these independent restaurant owners said they just can't get staff here so in Los Angeles it's just hard for people to live here and it's hard to get through the regulations and if you make it hard there are other options for people this idea that California has a lock on uh anything other than incredible weather and beautiful people is Farsol. There's a lot of beautiful people in other places with decent weather and you can you can go do your projections there. So another topic that came up that a lot of people were talking about something that I know you've talked a lot about our our debt issue and the debt to GDP ratio. There was a lot of talk on the on the flip side on the GDP side. What if actually AI can increase productivity and regrow GDP faster than expectations, right. And perhaps that's one of the reasons why, you know, interest rates might not be quite as high as you might expect given some of the trends that you guys have talked about. So, I think a lot of a lot of discussions around AI productivity and what we could look at over the next, you know, five to 10 years because of the the improvements we're seeing. This is particularly beneficial to the US, right. I mean, if you think about where AI is going to acrue economic surplus first, it's likely going to be in the US, not global GDP. So, the US kind of does it compete dollars or it increases overall productivity or both ahead of the rest of the world. If we do see advances from AI to accelerate GDP growth, is that because of all of the onshoring of manufacturing and industry that we outsource today. Like do you think that that goes handinhand with AI acceleration. I think that's part of it and I think the other part is just getting even out of the you know the knowledge worker workforce, right. Just getting significant productivity productivity improvements there. One of the things that we showed in our keynote is the adoption of these technologies and even taking doctors as an example, right. An area you know well you know this new company um kind of coming in and and developing kind of a diagnosis kind of engine right that's now used by a third of doctors. So you know I I think that uh it's open evidence by the way is the name of the company and already a third of US physicians are on the platform using it you know 10 times a day to kind of help diagnosis. So in particular in oncology as an example it's seen significant traction. So, you know, you multiply that by the legal profession, coding. I think we're already seeing, you know, what if we just see kind of a an explosion of productivity gains across, you know, both the physical and the digital economy. Yeah. The doctor one's a good example. If someone had the opportunity to go get more regular preventative checkups, um, they would. The problem is it's very expensive. It's hard to get an appointment or insurance won't cover it. But if the cost to a doctor goes down because they can leverage AI, the throughput goes up by 10x. They can see 10 times as many patients per day, then suddenly diagnostic care becomes more available. They can charge for that. They don't need to charge the same amount. The price will come down per checkup, but you'll more people will be able to get a checkup per day. So that grows GDP in diagnostic care. That grows the size of that piece of the economy. It's a very good example. give you, by the way, anything where AI provides leverage to a service provider where their throughput now goes up. Um, I'll give you another example of that. Um, Dave, uh, so there was an LA dentist that kind of hit got viral this week. I don't know if you guys saw this story, but basically he um he created an ad using V3 about a skydiving gorilla. Yeah, I saw that. Who, you know, ultimately needs to get his teeth fixed because he was drinking while he was jumping out of the plane. And you know, it's a very kind of funny viral ad. He probably made it for a couple, you know, hundred bucks. And now his practice is totally full. He's been flooded with requests, right, for the new dental implants. So, you know, to your point about increasing productivity, boom, there's how how V3 can help a local dentist. All right, everybody. Welcome to the number one podcast in the world. We got a full docket. Full docket. But we're going to rocket the docket because there's so much going on here. Zuck is tilted. ## Zuck on tilt over AI: $100M offers, Scale AI deal, hiring spree [10:19] clearly. Uh this has been the big discussion in Silicon Valley for the last 10 days or so. According to reports, Zuck is super frustrated that Meta is falling behind in AI. So he is swinging for the fences. Sam Waltman said Meta has offered top open AI employees a $100 million, wait for it, signing bonus. That's not comp, that's a signing bonus. Who knows if this is true or not, but he's also offering 100 million a year in annual comp. He's clearly cut out tens of billions of dollars for this effort. Not dissimilar to when he did his VR efforts that didn't work out so well. Here's a 30 secondond clip of Sam Alman talking about this on his brother Jack's podcast uncapped. They started making these like giant offers to uh you know a lot of people on our team. Um you know like $100 million signing bonuses more than that comp per year. Crazy. And I'm actually It is crazy. I'm really happy that at least so far uh none of our best people have decided to take them up on that. I think that people sort of look at the two paths and say all right OpenAI's got a really good shot a much better shot at actually delivering on super intelligence uh and also may eventually be the more valuable company. Meta just also vested over 14 billion I'm using invested in quotes in scale AI for 49% stake and uh this probably is better described as a shadow aqua hire to get around antitrust scrutiny. You remember Microsoft did that with Inflection AI back in the day. Google did it with Character AI and Amazon did it with Adept AI. I'm not sure if this is necessary anymore uh since Lena Khan's no longer in the position. Scale CEO Alexander Wang and others will be joining Meta to work on a new super intelligence team. They're saying that Scale is going to remain an independent company and get a new CEO. Not sure if that's going to happen. And if you don't know, uh Scale does data labeling. They get experts to help train language models. Two of their biggest customers are OpenAI and Google, and they both canled their contracts. So, Zuck is taking that chess piece off the board so he can get all that data into his LLMs. He's also reportedly in talks to hire former GitHub CEO Nat Freiedman and Daniel Gross to work on AI. They have a incubator investment fund for AI. Daniel Gross had a really cool startup incubator called Pioneer Labs. I had him on this week in startups a couple years ago. Really smart cat. Meta has 70 billion in cash. Thomas Lefant, when you see Zuck doing this, what's your take not only on what Zuck's doing, but how big of an opportunity is this, you know, in terms of the prize of having the best large language model. What is he going for here. And uh what's your take on these really aggressive packages and 49% purchases. I mean, look, I think one it it feels highly rational, right. If you think about Meta's market cap is uh rough math 1.7 trillion. If you're the CEO and you ultimately believe that maybe 50% of your market cap is at risk because of AI 850 billion, why would you not spend maybe four or 5% of that if you think it increases the odds even slightly that you're going to win the market. So to me it it kind of reminded me of a few few things. number one the scale and size of the opportunity right obviously people think AI is massive but frankly um Jake I'm even wondering putting the regulatory scrutiny to the side if it was time he just didn't want to wait and obviously doing it this way I think Alex literally the next day who's the co of scale can show up to work at Meta so I think it's it's urgency of a large opportunity um I'm curious to get Chamas's take because it reminded me a little bit of the pivot away from HTML 5 and also So a a much smaller acquisition but one that we really felt which was of a company called Onavo. And for those that may not remember Onavo was a small data service provider but what it did is it had a panel of phones and we as investors could see what people which apps people were using and the data was incredibly valuable because it was the only service that gave you true engagement data. And so obviously as an investor you felt wow this is an incredible tool and eventually it sold to to Facebook and Facebook used it internally and didn't allow anybody else to use it and we lost one of our key abilities right in the mobile app revolution to tell who was winning and losing. So um and you're saying the scale acquisition is you know uh parallels that in a bit there's this great service a lot of people rely on it. He buys it shuts it down for everybody else gets the tool for himself. gets the data for himself. Correct. So, I definitely see parallels and I think given this, you know, their market cap and the size of this opportunity, I think it makes a lot of sense. Shimath, your thoughts on Zuck's action. Obviously, folks know you worked with him as you went from tens of millions of Facebook users to hundreds of millions. And you were there actually during the uh HTML rapper app disaster. Uh that uh I think maybe that was a debate at our executive team at our M team and I was on the side of apps and well without embarrassing him. Somebody else was on the side of HTML 5. I thought it was [ __ ] stupid. Why. Why. Why was that. But that decision one because you know all of my political capital at the time was also wrapped into native apps, our own phone, an entire verticalized integrated stack. And politically I think I made the decision for them very hard because I was not a very play nice in the sandbox with others kind of executive. I was more of a scorched earth get it done kind of person. Okay. So no changes over the last 15 years. That's good to know. They made they made an enormous mistake, but then they admitted it about a year after I left. They said this was the single sucks at Explain in plain English why HTML 5 rappers versus native apps. I can't cuz it's [ __ ] Okay, great. Uh I can explain it. So like native apps are was obvious in 2010 obvious and the only the only reason to use HTML was as an endound for different carriers and for different ecosystems that were trying to charge us a toll. So in 2010, I went to Mobile World Congress and I took a group of my most talented developers and we built an entire replica of Facebook that we called Facebook zero which was only available via URL and we launched it at Mobile World Congress and we did it and I announced it there because if you went to India as an example, all of the folks there would try to charge us a tax but if you could navigate through the browser you wouldn't have to pay it. Right. So that was a good example of what to do in a developing market when people were toll taking. But the real solution was to build an extremely integrated app from the software all the way to the hardware. And the only way to do that was as a native application. And that has tremendous applications to today. But just to finish on yesterday, my proposition was full phone, full stack, full app, all of this other HTML stuff should only be as a side thing that we do in markets where they try to make it difficult for us. Instead, it became politicized and it became a big bet on HTML 5, which I thought was absolutely stupid and unjustifiable. And that was also when I said, "Okay, well, this phone's not going to happen, so let me leave." And a year later, I think Mark, to his credit, said, "This was really stupid." And ripped all the HTML 5 stuff apart, went native, and the rest is history. So, let's fast forward to today. Yeah, there it is. Biggest mistake was betting too much. It was It was an And that was again, I'll just say it. people politicizing what should have been an obvious technical decision. Okay, the other piece to that just to add to it was it was also a religious decision then people liked the open standards of HTML 5. certain developers who felt like we have to support openly stupid people thought that. Only stupid nontechnical people thought that. It was stupid. It was obvious. You'd have to be a [ __ ] [ __ ] And there were [ __ ] morons at the executive team that advocated for this. Anyways, we were right, they were wrong, and he was fine. Okay, fast forward to the where are we today. It's the exact same story playing out. Now, what do I mean. You have to look very carefully at Microsoft's deal with Open AI. Why. Because what you see is the compounding of secrets. There are secrets in the training layer. There are secrets in the model layer. There are secrets in how these things are tightly coupled to infrastructure and compute. And what we have to remember is what Open AI got from Microsoft was an extremely competent partner that built an enormous Azure compute infrastructure to train everything from chat GPT all the way up to the 03 model everything. Why is that important. Because you start to figure out these tricks. How do you really optimize these models to be extremely performant. And now if you look at all of the other models, they've also had some level of that advantage. So if you look at Deep Seek, what did they do. Well, we don't know. But what we have been told is that there's very tight coupling to hardware. If you look at what XAI is doing, I think what you can bet is that there's an extremely tight coupling to hardware and infrastructure and compute. If you look at what Facebook is doing, they generically train on Nvidia and they launch it in the open source. So I think that what they need to do is more of the open AI, more of the Google playbook. Look at Google. Google's Gemini models are extremely tightly coupled to TPU and it enables and unlocks an entire stack of secrets and capability that then get manifested in model quality. So I think the first thing that Mark has to do if I were him is start to chip away at all of the sets of secrets. So what secrets do you get from Alexander Wang and scale. It's what are the labeling techniques that allow these models to be more and more performant. What labeling techniques are used in the reasoning models. What labeling techniques are used in more traditional LLMs. It is clear that Llama doesn't know this. Meta doesn't know this that well because their model quality is meh. So now what you get is that set of secrets. So what do you get from Nat Freeman and Daniel Gross. You get what are the apps doing. How are they approaching writing agents. These agentic tips and tricks that make usability and value more obvious. But then what's missing. I think the thing that's missing is the infrastructure and compute set of secrets. I think it's insufficient to buy stuff off the shelf from Nvidia and expect these models to fundamentally compete. So I think if I were a betting man, he's bought the training secrets, he's bought the app secrets, and now he has to buy some infrastructure and compute hardware secrets. you put it together and he's got a pretty good strategy here. And also just to add to that, Shimothnat and Daniel have invested in a lot of AI companies and those companies are have secrets of their own. Yeah. And those are and actually I think they have some along the full stack. Freeberg, your thoughts on this strategy as described by Thomas and Shimoth and just the data we're seeing on the playing field aggressive acquisition of talent and companies. I don't know if I have much to add here. Okay, one additional point Shimoth by the way that you mentioned if we look at the winners right in models of the past 12 months anthropic the same right they've been very um kind of deliberate and have explained how TPUs right they've been a big user of them how it's helped define their training models so I think you're 100% right if we look at the models that have really performed it's ones that have that that quote secret as you mentioned when I first started 8090 a year ago one of the key bets I made which was a mistake and we unw wound the bet. But the first bet that I made was can we build a transpiler, which is to say, can you take a CUDA workload and then can you redirect it away from Nvidia to different hardware. And basically what I learned in that process are all of the attention mechanisms that are built into transformers that really differentiate how good the models are need to literally be handtuned for every single target of silicon that you have. So when Amazon just kind of wakes up and says, "Here's this chip," it means nothing unless you can incentivize somebody to build to it. But the opposite is also true. If you have a model and you just run it generically, you're not going to get the gains and it's not going to be as special as if you have a dedicated infrastructure and compute architecture and say we're going to tightly couple these. It's been clear that OpenAI has had that, Anthropic has had that, Google has had that, Deepseek has had that. And I think Meta needs to do that. Otherwise, they're always going to be floundering on their back heel. One quick misnomer, I think, you know, when people hear labeling, they kind of assume a photo of a dog and someone says this is a dog, right. I mean, that's definitely how it started, but if you look at sales business, it's completely more from that. So, you could actually label the problem. So for example in in simple terms 2 plus 2 equals 4 is actually um a reasoning data set right. So you got to think of labeling not just in the simple terms of you know this image but of massive data sets of of outcomes and that's what's kind of really used to tr uh train these reasoning models. Um, but I think there's another. ## Mag 7 AI Showdown: Ranking the most likely AI winners, biggest stock divergences, and more [23:58] Yeah, there's another story here, guys, in my opinion, and it's the performance of the Mac 7, right. And I I'm going to have to check with my data science team, but I'm wondering if we're this is the year where we've seen the greatest divergence amongst the Mac 7, right. So if you look at the Mac 7 and if I just gave you right this performance you can see okay so Meta's up 18 Google's down Nvidia's up 8 Tesla down 20 Apple down 21 Amazon down three and Microsoft is plus 13 right so it's kind of interesting in a market that you know historically over the past few years where we feel the Mac 7 have been truly correlated now the market is saying wait hold on we might start to see diverging performance. What I read from that in in in one element is the market's starting to try and sort out who are going to be the winners and losers. Who's well positioned versus maybe falling behind, right. So, I think we're going to start to see some divergent performance from the Max 7. I think it's going to reward not Can you put that back up there for a second. I mean, I think that's so interesting because if you look at the conditions on the field today, you know, Google's down 8%. But again, I would tell you as a user, Gemini models are exceptional. Like absolutely just baron exceptional. I think Anthropic is incredible for Codegen. Incredible. What I see is every single company on this list that isn't Nvidia baking and rolling their own silicon. Yet Nvidia is up and the rest are down. I told you that I spent time last week at Tesla. I would not be sleeping on this business. I think that it is yet again back into the land of being misunderstood. The only one that I understand why it's down this much is Apple because it's not clear that they're even baking something in private. There's nothing public. There's nothing private. It just seems like they're transitioning into being a cash cow and getting into sort of that cash harvesting mode. But it's almost weird that the price action is what it is because I would have thought that Google would be up. Meta would maybe be a little flattish to down. Nvidia is up, but maybe it could be down. Tesla's down, but it should probably be up. Amazon's basically break even and Apple is down. And I think that kind of makes sense. That's sort of how I read this table. Yeah. I mean, what I love Chimoth, by the way, on that is that like now there's debates, right. And and you can argue whether you know you agree with Chimath or whether you don't. spending 20 billion cuz he's cuz he's not afraid. Correct. Yeah. No, let's pull the chart up again here. By the way, I think this is an interesting way to only the only reason Microsoft is not on this list is because of the limitation of the DOSS era interface of the Bloomberg terminal where it will only allow you to compare six charts and not seven. But we know that Microsoft is up 13. Q perplexity. Yeah. Yeah. So, you know, when you also when you look at these, there are some extenduating circumstances here like Tesla's car sales are down. All car sales are down. And I think that's the piece that maybe isn't being accounted for here and they're in a transitional period. Apple obviously Yeah. There's a lot of regulatory overhead. So Tesla losing solar and EV tax credits. Yes. Apple Apple being told to onshore and stop buying from China. So their supply chains being disrupted because of tariffs. those two companies in particular are far more affected than the rest and even Amazon you know there's been some conversation about tariff effect on Amazon but obviously that's offset with some of the benefits they've been realizing and promoting as Jasse spoke in his letter this week uh from AI so I think that there's a variation here that's probably a little bit more Thomas kind of tuned to these conditions that aren't necessarily call it natural market forces but are kind of influence influenced market forces associated with the the new administration and some of the policy choices that are being made. If we were looking at those number one and number two, which one do you think gets to AGI first, Thomas. Well, wait, hold on. By the way, the other thing you should note, Jason, which I find really interesting is nobody talks about AGI anymore. If you listen to the language of all the companies, it's all super intelligence, which is a much more achievable goal because it's defined as being, you know, multiples more intelligent than a human being. But I think you're I think if you actually did a search for the number of times AGI is being said today. It's meaningfully less because I think people have realized that that's not in the offing. Yeah. By the way, another lens chamat that I think about on these is who controls their own destiny of these seven companies in AI, right. And I would argue most I would argue Tesla does Nvidia and then it's kind of interesting, right. Neither Amazon doesn't have its own foundation model, right. They're kind of dependent on others, right. Microsoft 49% does right because of this kind of relationship they have with open AI it's both you know uh they they own a big share but they don't control it so there's kind of interesting and then maybe 6 months ago we would have said well Meta absolutely does maybe Zuck's trying to question that a little bit and you know it's it's fun in my opinion to kind of bring different lenses to this list right there's the regulatory one that Friedberg was just talking about I kind of think about if I towards the co. Do I control my own destiny in this market. Right. And I expect these companies are not going to want to be dependent on others and are going to at least want to say no. I'm going to control my own destiny whether I win or lose. Who's your number one. Who's your number two. If you had to could only bet on two here to achieve super intelligence AGI, let's just say win the AI re win the AI uh big prize. The big prize super intelligence AGI, you know, in the midterm, five years. Five years from now, we're sitting here. Thomas, give me your number one. Give me your number two. Look, I I think to me number one, I I still think Nvidia, right. I don't see the GPU kind of getting displaced. I see additional architectures kind of coming on board, right. And growing the market, but um at the end of the day, all roads still lead to the GPU for all of these models. So, I would kind of still put um kind of Nvidia on that. My number two, more of a dark horse, but I I would pick Tesla. I do think it has the most potential for vertical integration right from all the way the silicon to the model to actually the hardware right that might become super important not just in cars but in Optimus so Nvidia 1 Tesla is my dark horse wow stunning chimoth who's your number one and number two in the midterm 5 years from now we're sitting here on allin episode 700 Tesla's one and Google's two and the reason is because they are the closest to having that vertically integrated stack that I spoke about. I think that Tesla has the best vision models. Now with XAI, they'll have one of the best LLMs and reasoning models and they'll be able to eventually stick that on Dojo. And then all of that will be in all of the physical AI that you will interact with in your daily life, whether it's a robot or whether it's a car or whether it's a robo taxi. So that's number one. And then number two, for many of the same reasons, I think Google, because you'll have the Gemini family of models, which just absolutely kickass like V3, which we haven't really spoke about, is going to destroy Hollywood like in the next year. Like Hollywood is done, I think, but they're landing model after model. They have the TPU, and the next generation TPU, I think, is exceptional. They're baking quantum and then they have an entire funnel of billions of people that they can direct experiences to. So Tesla one, Google 2. Chimath, quick followup on that. I'm curious on Google. This is the because I I oscillate a lot on this particular name. Can Google win if search declines. Yes. And I think that what probably has to happen is bear with me when I say this, but if you had to boil down Google's economic northstar metric, right. not the value northstar, the economic northstar metric would be price per click and I do think that Google is extremely well positioned to pivot that to price per token and I think that they have some emergent classes of physical AI but they have the largest pool of people where they can generate a price per token value framework through YouTube through Gmail through workspace I think through search but probably it's a different kind of model. It just requires them to rip the band-aid off at some point. But yeah, I think Google can do it. I'm going to go with you, Chimath. I'm one uh my one and two are either Google uh or Elon. And I I'll just say Elon because I uh like you, I spent a day up at um XAI and I saw what a magnet for talent he is. I got to sit in some meetings and just he was interviewing people and he was working with that talent. 8:00 at night, there's a lot of people there on a Saturday grinding it out. It was nuts. I first went to XAI in the 15 minutes that I was in the parking lot finishing a call, the kinds of people that were walking in and out of there, you could tell they were big brains. Yeah. I don't know how, you know what I mean. Like from every walk of life, they all just looked much smarter than the rest of us. Yeah. It some of them were like chain smoking cigarettes and just like stressed out. It was crazy. I hit a couple of zins. I'll be totally honest. Um, but the reason I say Elon versus Google is I think Elon's in a unique position. And I don't have any insider information here and and I haven't talked about this or I'm not back channeling from Elon lest anybody aggregate this. I think what Colossus has done and what Tesla has done both of these things Tesla with their own stack of hardware to your point Chamoth hardware plus software plus the user application of FSD and Optimus. Then you put that together with the data the real-time data of X formerly known as Twitter plus um you know what he's building with XAI and obviously those two companies merged. I think Tesla board, XAI board have to get together, put those two companies together. One's worth a trillion, one's worth 100 billion. Put them and just have all that brain power going in one direction as opposed to Elon test switching between the two. You do that, I think he wins number one. You don't do that, I think he either gets one or two and then I think Google um is going to have a better search product. Thomas, I think it's a really important point. Do they lose search share. Doesn't matter. What I think matters is are their ads more effective. Is their ad network more effective. And I think based on what they know on you from your chat searches and your discussions and what they analyze in your email, just analyzing your Gmail and your surfing behavior and Chrome if they get to keep it, your Android phone if you use it, your YouTube list and what you how when you drop off allin and when you start listening to another podcast, whatever it is, all that data, all that data is going to lead to an ad network that performs so much better that even if they lose search hair, their ad network is going to continue to grow. and I think it will increase in velocity. So those are the my top two. Freeberg, I'm curious from your position. Which one you think is number one and number two. I saved you for last because you know what we do here. We save the best for last. Freeboard, go ahead. I think there's a difference in how I would kind of lump them. I I think that Tesla probably has the it is the best place to invest if you want to have a shot at a massive new industry. So, they've got a baseline business in in obviously the automobiles, but I think this humanoid robot opportunity is absolutely mind-blowingly ginormous. And I don't think that there's a better company on Earth positioned to execute against this humanoid robotics opportunity than Tesla. So, you know, it's sort of like I would call it a low probability, high upside sort of call option embedded within that business. And obviously you're paying a premium for that because it is still a very healthy premium you pay for that business. I think Nvidia to Thomas's point I think the common thesis is it is the most protected. The durability of the business is there. But I would argue that there's actually a low probability but very high severity risk to Nvidia in China. There was just a demonstration last month of a 1 nanometer semiconductor manufacturing process out of China. I think the more that we continue to try and isolate China from a policy perspective, the more we are emboldening investment in China, meaning from the government, from private industry into China to create alternatives to the chip stack where the United States companies, particularly Nvidia, have emote today. So, I do think that there's going to be an emergent competitive threat coming out of China to Nvidia. And just like we were knocked over by DeepSeek, I think we will be knocked over by some semiconductor manufacturing processes um coming out of China in the near term. But the overall kind of by the way Dave just on that point I think Sax's work on the diffusion rule just generally I don't think has kind of gotten enough attention in the rescending of the diffusion rule which essentially handicapped our ability to even arm our allies right with our semiduct with our semiconductor technology um in my opinion was kind of a milestone and very important moment um to to try and offset exactly what you were just describing. That's exactly right. I mean, there there there was a report a few months ago and I mentioned it on the show or maybe I didn't or maybe I sent it to Sax and we talked about it offline. I I can't remember but it was about a $40 billion investment being made in developing competitive semiconductor manufacturing full stack solutions out of China. So I I do think that the lithography IP moat is being crossed in China. I do think that China is developing actually new technology for uh DUV and EUV systems. I I do think that there's a risk uh to Nvidia's core. Now look, Nvidia is such a durable business. There's great modes, great advantages, but we're creating every incentive for an alternative to Nvidia to emerge from China. And then my my third kind of categorization would be what's the portfolio uh solution. I think that's Google. I think that there's a diversification of high beta bets inside of Google of any one of which could have call it a trillion dollar market cap outcome ranging from Whimo to quantum computing to the biologics work that Demis is working on out of um isomorphic. Uh there's a number of things that do not get a lot of attention at Google. So yes, there's a there's a core business that that may be at risk, Thomas, but I think that there's a a portfolio of options you get at Google and you just need any one of them to hit to kind of make up for the loss. But I do think also Sundar in my interview with him, which we put out a couple of weeks ago, is very thoughtful about where search evolves to and he is being, I think, reasonably aggressive in in trying to evolve the search product architecture to meet the market, to meet the consumer. I do give him credit for that. So Google would be in a good place for me as an overall kind of pick in that set of options. So just to be clear, Nvidia 1, Google 2 or Nvidia Tesla. Like I said, I think in terms of like having the right sharp ratio is how I would think about it. The alpha and the beta adjusted returns, I would put Google number one. I would probably put Tesla. Uh Tesla's valuation, I think, already has a premium associated with those options. So I don't know. Yeah. So I don't know if I would really pay that premium. I think um aside from the valuations, let's take valuations out of it. Just the the game here is who wins the AI prize 5 years. That's how I understood it as well. Yeah. So valuation irrelevant. Valuation irrelevant. Who wins the AI prize. One, you're saying Google. Two, you're saying Tesla. I think Google's in such a position. I I mean, look, Demis uh Demis, I think, has been fairly koi about where they are. They obviously promote Gemini 2.5, but there's a lot still coming. And it's and and as Chimath pointed out, it's not just LLMs. There's a pretty sizable family of models including a a lot of these um graph-based models that are being used in really novel applications that no one else is even close to, no one spending time on. I mean, some of the weather forecasting, it might seem small and trivial, but it's a demonstration of Google's competency in in core model development that shows an understanding and a depth of research and work that goes well beyond LLM. So, I'm pretty bullish on the depth of talent, the full stack. Yeah. Yeah. And whatever they learn there could apply to Gmail, could apply to search, could apply to ads, could apply to YouTube algorithm, right. It's just goes up and down. Yeah. Yeah. From a product perspective, I do think you see this kind of multi-model emergence that that we're now seeing that no one talks about the single model that sits behind the application. There are multiple models that work together. And obviously this agentic architecture unlocks another layer of not just kind of solutions to complexity. Sure. And so there's there's quite a lot I think that's emergent here um that Google will start to kind of benefit from uh in the year ahead. I mean, for those of us, you know, who love tech, right. If we if we step back for a minute, I really feel like to use the analogy of this podcast, like we are now at the WSL World Series of Poker, right. We got seven companies around the table. The stacks are trillion in size, right. And all of us are going to get a front row seat to see what happens over the next 5 years. I mean, and on top of that, we're going to get to analyze, bet ourselves on who we think's going to win. We know there's some other companies that are pushing to get at that table, right, with some sharp elbows. I mean, what a time to be doing what we're doing. I don't know if I love the analogy because I don't think first of all, it's a zero sum game where there's this x number of chips and someone ends up with all the chips. I do think you could see as an example, just talking about the scenarios we we just described, Tesla developing an extraordinary humanoid robot business that's worth a trillion dollars. Google building, you know, to Chimath's point, a media empire based on generative AI in media and then, you know, Nvidia building an entirely new chip stack that everyone's participating in. So, all of them in an ecosystem based way could could be major winners here. Yeah, you're right. I I didn't mean it in the zero sum nature of it. I meant it more in the in the stakes, right. And and and there's a lot of hands to be I like the analogy because there's a lot of hands to be played and there is a price pool, right. And and you could have three or four people at that table. One. ## Why Apple is fumbling AI and how they can fix it [42:41] thing I just want to point out here is just speaking of regime change. What is going on at Apple. Like they Siri was just the early idea of an AI agent. It's just totally disgrat. It's disgusting. It doesn't work. It's embarrassing. And then their biggest developer conference, they're redoing the UI like time for regime change at at at Apple. No, this has happened many many many times in many industries before which is that companies that were stalwart organizations transition themselves from being a growth business to being a cash cow and these are well doumented transitions and it requires an extremely brutal reset if you want to shake that up. Yes, I think that the same thing that I think you have to respect Apple for, which is stability, the duration of some of their best, longest serving executives are there for 20 and 30 years. On the scale of innovation, it's a horrible thing. And the reason is that we all just get old. Our skill sets become rusty and we don't have the energy or the capacity to think about what the future actually looks like because we are not living it. And then what happens is you task those decisions to people that you try to hire. But you know, you saw it in the clip with Sam. Even in all of that crazy recruiting chaos that's happening right now for these brilliant machine learning and AI people, maybe that's a fight between OpenAI, Meta, and maybe Google. But what you don't hear is Apple. So who's Apple getting. I have to think that Apple is not getting any of those people. So by the time you end up at Apple, it's just a different caliber of person. That is true. and they're living inside of a cash cow organization that's going to optimize for don't make mistakes, right. But that's h it's happened to HP. It's happened to Lotus. It's happened to Intel. It's happened to General Electric. It's happened to companies. It's just and it's happening to Apple. So, we should just not sweat it and move on. I don't know. Thomas, what are your thoughts. I mean, it's kind of shocking with all that cash and they don't acquire anything. They had project Titan $10 billion to build their own car and they just shut it down. Imagine if they kept going with that. You think regime change time. Maybe Tim Cook retires and put somebody who's a product person in charge of it or maybe they should merge with Tesla and put Elon in charge of it all. There just seems to be no new products coming out of there. Like it's absolutely uh confounding that they're optimizing for share buybacks and earnings per share instead of having some amount of that money go towards innovation and acquiring companies. Biggest acquisition is Beats. Give me a break. I mean it's interesting right for me and I've studied Apple basically my whole career and it's kind of interesting right because if you think about the their defining competitive advantage right was the integration of hardware and software that led to the beautiful MacBook that we're all using it led to the iPhone and right the fact that they were so coupled between hardware and software the user interface you know etc and I think it directly led to them winning let's call the the mobile era right but I back to Chamas's point and I think the analogy holds in AI they're the opposite right they don't control I don't you know the silicon they don't control the underlying models um and so now they're back to maybe you know using a historical analogy the PC makers who didn't control the OS that's right so I I think the good news for them is look they still have a monopoly on users they have three trillion of market cap to kind of play with so I think it's way too early to count them out. But I think, you know, the market, let let's posate, what's the most extreme thing that they could do, right. Just for just for intellectual sake, right. Uh buy OpenAI for 500 billion. I'm just going to put a crazy thing out there, right. So, you think, okay, that's the most extreme. Well, is it even that extreme. And what would Apple's stock do that day. Go up. That's my view, too. Right. I actually think it would go up, not down, even if they did something like that. So I do think they need to be kind of aggressive. I do think to your point I think Freeberg, it is important that you know all seven of these companies could actually win and do well, right. That that is a absolute possibility. But I I would love to see them be a little bit more aggressive. I mean you guys remember when Steve Jobs bought Finger Works, right. It was this tiny acquisition. They made this little trackpad that you could use your fingers on. No one figured out why they did this and then in turn into multi-touch and scrolling, right. So, I think it's it's going to be fascinating to see what they do. Thomas, that was a great question I was about to ask. If Apple could do one thing, they could do one internal project or buy one external company. Maybe we could do both around the horn. What would we advise them to do. My number one is build a humanoid robot. Like, how does Apple not have a humanoid robot. That seems like that's obviously the next giant consumer market is having Optimus or Figure in your house. Freeberg, I'm going to go to you first since I went to you last last time. Is there a product that they could do that they could build that they would be uniquely suited to that would turn this all around. If you could pick it on their road map, what would it be. I do think there is. I do think they're doing it and I do think they have a shot at winning, which is this kind of ambient AI assistant. I don't know about you guys, I must own 30 friaking Apple devices. Uh, I have many Apple computers I use in different offices. I have phones. I have many AirPods. I got everything. Watches, everything. I'm ubiquitous on the Apple platform. So, I'm an easy transition into this if it works. So, as everyone races to build kind of the agentic AI assistant that uh is sort of in my ear all the time or available where I don't have to stare at my freaking phone like this, um it is a great unlock for humanity. It's a great unlock as a consumer. it's feasible technically and I'm sure Apple of everyone that we've referenced today is best suited to both access the consumer design and engineer this solution in a way that can be truly transformative. I think it references a little bit what Johnny IV and Sam Alman have been talking uh about doing. But I do think that this is exactly the direction Apple is headed and I do think that they've got a very great shot at at winning at it. don't think they need to own the full stack to be successful here. Got it. Okay. So, we got Optimus, we got the device you're talking about, this ambient assistant is part Siri and part maybe a pendant that records your behavior in the world and gives you feedback to it. And that's what they're calling a puck perhaps that Johnny IV has made or these pendants that record everything. Thomas, what's your thought on the one product they could create. to that point. Um, it's interesting to think that the AirPod business at Apple is 3x Open's revenue base today. That's right. And that's just the AirPod business. And by the way, let me let me just say one thing about this. We all think about devices in the context of a single device being an assistant. I think if there are more devices integrated into our lives and the assistant is ethereal and ubiquitous amongst the devices, it's almost like uh the Star Trek Next Generation. You walk in, you say, "Hey, computer." And there's always a device available that's doing things. There's always a device observing, there's always a device able to take care of things for you. Whether it's in your ear, whether it's your phone, whether it's your watch, but basically these devices all instead of acting independently, they all know what you've been asking or talking about with the other devices. And so you could get in your car and you could pick up, you know, the conversation you were having, you know, while you were sitting in your office in front of your computer to do work. And so the agent effectively is almost like this ethereal ambient assistant. So everywhere you go, the agent is there. They could even be in a candle lit bath with you, Freedberg. They could be in there. They could Well, I mean, by the way, think about also, you know, it it it know having identity, so it knows who you are, but I could be in your in your home, Jal. Not that I would ever get invited to your home, but let's say I was there. Uh, you know, I could walk into the the living room and there's your puck and it starts talking to me because it knows who I am. And yeah, it's like it knows me. Yeah. Or you and I have a bath for two. You and I could be a candidate for two and it would know the when each of us are fighting over what music we want to play. The assistant will, you know, hear out the debate playlist. Do you have a uh a device before we go on to IPOs here. Do you have a device or an angle for Apple to go after if they were truly ambitious. Or maybe they are and it's just in stealth. What do you think. You think it's the goggles, the glasses. You think it's a pendant. You think it's optimist. What do you think. I don't think they have any chance of anything. Great. Love it. I would take the exact opposite of what Freebrook says. Look at this chart and I'll tell you why. Okay, here we go. This chart is not This chart is not a strategy. So, this is a chart of Apple's revenue and what you see is iPhone has completely stalled out. And so to Thomas's point, where do you make money. You make money in other hardware. This is not a strategy of success. This is a strategy of inefficiency. I lost my AirPods. I need to buy a new pair. Oh, the cables changed. I need to buy a bunch of those. This and that. And a this and that strategy is not a strategy. It's a tactical play for revenue optimization in the short term. A company that focuses on this kind of revenue growth is not capable of creating something that's exceptionally unexpected. That will come from a new company who has no ties to the past, has nostalgia on the fact that we're going to swap out the connector type and you know book another billion dollars. The what Thomas said is an indictment actually about their ability to do it. When your AirPods business is two or three times bigger than Open AI, what there is internally when you try to have a strategy meeting about what to do is derision about Open AI because you're like that's small and even our AirPods business is three times big. That's what some smartass MBA will say in that meeting and it'll shut the meeting down. So, how do you expect that culture to then all of a sudden get their act together. I think it's exceptionally hard. And here's the clip on Q. Play the clip, Nick. It's a great point. Here's the clip. I'm Apple nostalgic. Me, too. Bring Steve Jobs back. Watch this lunacy. You probably saw that Johnny IV is linked up with Open AI to create some sort of future AI device. Yeah, I don't know what that is. I don't either. Yeah. Is this a space that Apple's looking at. Is this a space that goes beyond what you have in the current lineup of devices. Something that is more personal. Maybe you wear it. Glasses. I I think I mean I think we have some extremely personal wearable devices. If you want something that's uh aware of your environment with with audio, I think you're you're wearing one right now on on your wrist. Um if you want something that you can capture the environment with and see and also receive visual content, you might just have one in your pocket right now. Um are there other form factors that can make sense to AI. Uh sure. But uh pretty hard to beat something that's uh with you all the time and glancable or you know provides a nice screen that you can interact with. Um so uh yeah I I don't know what they're working on. What do you think Jimoth. Again I think I want to be very clear about what I'm saying. That is a very competent Craig Federi very very competent executive and whoever the person beside him is that guy's I'm going to assume competent as well. They're competent at making money the way that they've made money for the last 17 years with no meaningful disturbance. And I think it's just something to appreciate that after 17 years of unmitigated linear success, it's very difficult to retool yourself. It's like asking Michael Jordan to go and all of a sudden become an all-star baseball. It doesn't work. And so I think I I think it's okay though, this is my point. It's okay, guys, to have creative destruction of companies. Like there was probably a version of us blathering on about HP and being nostalgic about the transistor radio that they made and the, you know, HP12B calculator that they made and oh my god, why can't they figure their [ __ ] out and where are we today. HP doesn't even exist. It's okay. I mean, just Thomas, the fact that they launched Siri, they bought that company, and Siri can't do anything other than like an alarm, can barely play a song, it barely can do directions. I I I mean, literally, we're in year like 27 of Siri, and it can't do anything. And then I have the the Google and Gro voice, and when I turn that on, it does whatever I want. It will load on my Pixel. It loads other applications, fires it off, does specific tasks in it. It's absolutely descriat on your Pixel. I have a Pixel when I when I flip open my Pixel. I have to I have the Pixel 9, Chimath. It's the Anaconda of smartphones. Pixel 9 foldable. Got it. It's the greatest assistant ever. It's what Siri. It's what Steve Jobs showed Siri. I had you at nine. He had me at Anaconda. Yeah, I had you at 9 in. And we can all aspire. Maybe get Roman extra get that extra inch. Thomas, go ahead. Chamath, I would argue to you that I think this management team has done it once and it's in the transition of their gross profit base, which doesn't show in the chart that you just highlighted, but was something that I kind of lived as an analyst covering the stock for a long time where if you remember over a decade ago, 90 plus% of their gross profit was a onetime hardware sale on the iPhone. And no one thought that they would ever be able to get away from the drug of selling that one iPhone unit, right. And cut to, you know, over a decade later, it's 40%. Right. And I don't think they get enough credit for actually transitioning from hardware to a recurring gross profit base. But look, you might argue that that was an easier pivot and challenge than what they're going to face. And so, let's see whether they can do it. The other thing guys I wonder about um. ## IPOs and M&A heating up in 2025 [57:02] let's I know we want to talk about IPOs but I do wonder whether Zuck buying scale for 15 billion gives air cover for other companies to really start being aggressive right and and to me as we think about circle and coreweave two companies that have gone IPO recently it's it's kind of amazing kind of numerically that the charts are almost identical even you know on a dollar basis on a share price, right. Because to me, what it says, we were talking about the dispersion of the Mac 7 before, right. Which are going to do well, which are not. I expect we're going to have a lot of opinions on this over the next few years. And frankly, they may change. We, you know, we may think Apple one way today, it may change in a month, right. But I do think the market is starting to realize that there is dispersion that AI might create some all winners or some winners and then some losers, right. and is starting to think about, okay, how do I want to be positioned for the next five years. What are big open-ended growth opportunities. And here comes two companies, one lever to crypto, right, and the other lever to AI. So, I don't think it's a surprise to me. These things are intertwined. You're 100% on because here's the thing, the average profit margin of the S&P 493 is, drum roll please, 12%. The average growth of the S&P 493 is, drum roll please, single digits. So to your point, why would you belong any of these 493 companies that may turn around and one day just get decapitated by something you don't even know that's getting cooked up by a couple kids in a garage using OpenAI or Grock or what have you. It just makes a lot more sense when you find investable companies in the big themes of the future to at a minimum hedge, right. be less long the past and frankly make some bets about the future. And I think that that's where you're seeing these IPOs just absolutely rip. What is a better comparison in my opinion are the companies that are truly levered to the future themes of AI and crypto versus any of these IPOs that have happened of companies that are not. And I think what you see is there's a dispersion there as well. And they are being treated almost as similarly, Jason, as the S&P 493. It's like, yeah, it's good. Yeah, it's fine. They get some reasonable gains. But if you're lever to any of those two two trends, you're off to the races because it's just so disruptive. People don't want to be bag holding these old legacy companies. We're already into our next topic, which is IPOs and M&A. Lena Khan is no longer in the building and M&A is back on the menu as are IPOs as Tom has pointed out. Three IPOs March 28th, June 5th and June 12th. Coreweave, Circle and Chime. Obviously Coreweave up 4x after going public, $81 billion market cap. Absolutely stunning. Circle 25x oversubscribed, 6x from its opening price, $ 48 billion market cap. Chime, that's a NEO bank like New Bank, which is already public. that was up 40% uh in its IPO price, but then it went down 20%, $12 billion market cap. On the other side of the ledge, we have a ton of M&A this year. So, when you look at what's happening under the Trump administration, look at what's actually happening. The game on the field is three major IPOs. Uh and then massive amounts of billion dollar acquisitions. Obviously, we talked about Google acquiring Whiz 32 billion. Uh SoftBank bought Emperor. I don't know what they do, 6.5 billion. OpenAI bought two companies, one for three billion, one point for 6.5 billion. Developer co-pilot, Windsurf 3 billion. Johnny Ives IO making some sort of a puck or hardware device. Data Bricks brought Neon for a billion. Salesforce uh did an $8 billion acquisition. And then interesting, Door Dash bought two companies. Uber made two smaller acquisitions. There is a ton of activity here. What does it say about the market, David Friedberg, that we're seeing so much M&A and these amazing IPOs coming out all within the last 3 4 months. Okay, so let me just follow up to a comment Chimath made and ask Thomas his view. I have a a theory and I haven't looked empirically to see if it makes sense. For most of the S&P 500, the fundamental profit growth is pretty anemic with the exception obviously of a couple of the big tech outliers, the MAG7 and a few others. But for for the majority of the S&P, this is a pretty kind of anemic environment relative to the transitions that are underway in the world fundamentally with with AI and ancillary technology. So are the institutional fund managers hungry for access to some of these new you know high growth offerings and they have been held off because and just to kind of go back I think it was around 2008 or so public institutional fund managers started to do crossover investing into private equities and that scaled up and scaled up and it it entered obviously a stage where it was a heavy flurry a lot of activity and a lot of crossover late stage investing um you right until 2021 when things started to pop 2022 and because they were overexposed with their private equity portfolios relative to their public equities they came out of 2122 with the market declining and they now had a higher concentration of private equities than they were supposed to have and so they have been kept out of the market for the last 3 or so years of the private market and now is there kind of this pentup hunger or pent-up demand for new issuances for high growth tech issuance Is is that what we're seeing. Is there kind of this pent up demand because they've had to stay out of the the private market for 3 years. And if there is, obviously it bodess well for latestage growth startups that are looking to go public because the demand will be there. And I think the reports were that the Chime IPO was like 18x overs subscribed. I think you're right and and something that you know I've talked about with you guys and uh was a was a big conversation at our at the all-in summit last year was the health of the uh private ecosystem right and we talked about the concept of look if you put a dollar in you need to get a dollar out right and so I do think that we're starting to see a healthier market where we know a lot of dollars have gone in but now we're starting to see some dollars coming out so I think that's both in M&A by the way and it's also in IPOs So I think that's one element. But I also think the second element which is we're the tailwind of the mobile and SAS era, right. And even if you look at the SAS companies, we kind of put this together in our deck when we were preparing it for our conference um this week. Chamath, I think you'll find this interesting, right. If you look at SAS in 2021, the median growth rate for SAS companies was 17% and a quarter of those were growing over 25%. Mhm. Okay. If you look at SAS today, the growth rate has been cut in half, 17% to 9%. And only 5% of that cohort is now growing above 25%. So I think Dave, what's clearly happening, right, is other sectors which were predominantly seen to be growth are now slowing down, right. So that's kind of one piece. So the market can no longer just rely on saying, "Oh, I'm just going to own the Bessemer SAS index, right, for the next decade and I'll do great." Because those companies have really slowed down. And I think it's starting to look forward and think, okay, now over the next 5 to 10 years, what are the companies that can compound at maybe 25% per year over that time frame. And I think companies like Cororeweave and Circle and Chime, by the way, and others are going to kind of fill that gap. I um I really like this chart. If I had to guess about what has changed from 2021 to 2025 is that most companies have realized that buying yet another vertical software solution is not going to help their business that it typically adds bloat, it adds cost and it adds people. And I think starting in 2023, what people started to guess is at some point in the near future, you're going to have some AI way of rewriting all of this vertical software. And I think that's why it stopped growing. I don't think this SAS market ever had the return on equity that it was supposed to. And I think so many companies have woken up from this hangover saying there's got to be a better way. It can't always be yet another tool, yet another program, yet another multi-year delay, yet another price escalator. And I think that that the jig is totally up for software. You're referring to the Salesforce and the SAS category, Chimoth, and what you're doing at 8090 specifically. Yeah. Well, it's it's not just us, but like if you look at anybody that's rebuilding software, it is so much easier to rebuild software from scratch today. Like my team of 30 people can transact hundreds of millions of dollars of work. Not because we are so prolifically amazing, but frankly because well, I think the team is good, but honestly because the underlying tool chain gives you a level of leverage. And so if you rebuild the software development life cycle using these tools, you can't help it but become much more efficient and you can't help it but deliver custom solutions that are meaningfully cheaper. And I think Jason, if you look at the entirety of the software that runs the world, we're going to rebuild it soup to nuts. all of that and the tool you're referring to just for the audience is the AI co-pilots that are making that are contributing 30 40% to code bases at Microsoft and less less specifically that because those are those are good for individual people but the software development life cycle is more the horizontal end to end of making things got it so what we do internally at 8090 is we have an entire process that starts from the PRD all the way out to the functioning code and we use different techniques at each step but what you get is a 50 60 70% increase at each step which then compounds. And so you have the ability of a team that would otherwise be able to service tens of millions of dollars be a team that can service hundreds of millions and then a team that would otherwise service hundreds can service billions. Let me ask you guys your response to this theory. If there is going to be this kind of accelerated call it custom software rebuild of business models and you take the S&P 493, do you think that we enter an era where there is a similar dispersion as we're talking about seeing in the MAG 7 with the S&P 493 where there are going to be probably the biggest money-making opportunities for investors that we've seen in decades between those that do adopt and do rebuild using AI and those that don't for 100 100%. I had a call yesterday with one of the largest private equity funds in the world, hundreds of billions of dollars under management and we're doing something with them at 8090 with one of their most important assets. And when you're an owner of a business and you can direct specific change and you can rip out hundreds of millions of dollars of software licenses and replace it with tens of millions of dollars of highly customized software. It's an enormous lift to opex and business model quality. So why doesn't it happen more. The reason it doesn't happen right now for this S&P 493 is that the IT organizations inside all companies essentially speak a different language than the CEO, the CFO, and the board. So if the CEO, CFO, and the board of directors of the S&P 493 speak English, the IT organization speaks Mandarin Chinese, and you get away with saying all kinds of [ __ ] I'll give you an example. I went to a CIO conference. one person that I met an $18 billion a year IT budget. What the [ __ ] does that actually even mean to spend $18 billion a year on it. I'm not saying that this is a mag seven company, guys. And when you take that example and you multiply it by 50 and 100 and 493 examples of people spending money, there's an entire cartel of influence that's been built in software that's going to get undone because you're not going to be able to justify it. Free. Absolutely correct. And the response from the SAS industry is changing from the per seat model as the number of employees at these companies continues to get lowered. Obviously Microsoft a lot of layoffs. Andy Jasse talking about layoffs. They're moving from the per seat model. They're not taking this uh laying down. Uh they know that people are going to make custom software. So what they're doing is they're moving to a consumption model. So you're seeing people charge per call, per customer support call, etc. And well, it's I'll tell you why it doesn't work. They're working in combination. Hold on, hold on, let me finish. The other thing they're doing is they're dramatically lowering the number of people and the developers they have on their team. And then a lot of what's happening in the background is the third piece they're doing is they're starting to uh do rollups and people are starting to talk about how can we take you know 20 of these SAS companies lower them just like you're doing to compete your thought playbook. Well, I just wanted to comment on this like consumption based pricing. It doesn't work. And what I mean is you can have some adoption in the short term. The best example is Snowflake, but in the long term it destroys your business. And the reason is because you don't know which data is valuable and you're not going to put up with a variable business model that increases more and more cost because you need to trap everything. And so what happens is all of these other companies develop around you. People go back to Postpress, people go to Superbase, they find all of these ways of saying snowflake makes no sense. And the reason is because in this world, nobody's going to pay consumption because you're like, how do you expect me to, you know, hold and store and pay for terabytes and terabytes potentially a day of data. It's not sustainable. We'll see if intercom, Salesforce, HubSpot, and we see if all of those people start Slack start losing their customer base or if they lower their pricing to make it just too easy to keep those systems in. Thomas, your thoughts. Yeah, so two quick thoughts. Uh, number one, Chimath, to put a kind of a mathematical frame on this, right. We know that Anthropic is kind of the level zero of code generation. They're they're doing incredibly well powering companies like Cursor, right. I think and this is order of magnitude correct that Enthropic in Q1 added 70% of the net new ARR in the SAS industry right defined by public SAS companies right so let's just think that the company in AI that is most powering the disruption of SAS added 3/4 of the net new of the entire industry right so that's kind of point number one I think Freedberg point number two I think what we're seeing in the Max 7 right where we're starting to have debates about who's well positioned and who isn't who's going to win and who isn't, right. Is actually, as it was in the past 5 years, going to be a broader lens into the S&P 493. I think inside of boardrooms, inside of every investment committee, you're going to see the exact same conversations that we've been having about the MAX 7, right. Who who's well positioned, who can win, what are the management teams maybe like Zuck that are being aggressive and bold and capturing the opportunity, and which are the ones that are not. So for me as a stock picker, right, I think over the next 5 years, I couldn't think of a more interesting time where we're actually going to see dispersion between winners and losers. And do you think that these rollup models make sense. So you've probably heard uh and I don't know if you guys have considered this, but obviously some fund managers are putting together pools of capital to go out and buy businesses that they can then apply their knowhow. They're bring in smart people in AI to then create a category killer and go after that market. And are you guys participating in that. And how do you kind of view that opportunity. Are all the public companies basically too mature or are some of them going to kind of go after this type this model as well. It goes back to whether you can attract the talent to go and do these things. My advice to this large private equity firm is you can probably try to stand up your own AI org, but I suspect you're going to get the person that didn't get an OpenAI offer, didn't get a Meta offer, didn't get a Google offer, didn't get an 8090 offer, then didn't get an Apple offer, and then that's the person you'll hire. How good that person will be, who the hell knows. I think the problem is that even if you take some of these kind of meh industries and roll them all up, you ultimately have to find a buyer who wants to own that business after you. So the question is like if you were to buy a bunch of accounting firms or law firms or IT services firms and you do an incredible job, who wants to buy that in seven years. Meaning if you talk to like if you went to the OpenAI demo day, there was this really interesting chart where Andre Karpathy talked about integrating Google login into one of his apps. I think it was the his menu gen app. And the comment he made which profoundly hit me is like why am I doing any of this. Why isn't this just one click behind the scenes. And you could take that generalization and apply it to all of IT services. Why does any of that exist. Why isn't it all one click. And eventually if these agents become smart enough, the fear that I have is that there is no terminal buyer for many of these companies. Mhm. But they could still be public chimat. I mean they could they could trade at some multiple of cash flow and you're basically arbiting the cash flow. But I'm not talking about the private equity trade. I'm actually talking about the public equity trade. If you look at the 493 companies, those are better positioned. I think like instead of an IT rollup, I think what you could do is probably sort like here's what I would do. I would take the 493 and the filter that I would apply is what offline assets do they have. What online assets do they have. What percentage of those assets are defensible and unique and exist in a postAI world. And what percentage of those assets disappear in a post AI world. And I think where I would end up is I'd like own a specialty chemicals company or something, you know, like you're still gonna need lubricants and stuff and you can find some way to make it, but if you're like a You need lubricants. Sorry. Go ahead. You know, I love the lubricants, but no dy. No, Diddy. But, uh, baby oil making, you know, like five by the crate. ## State of liquidity: SPACs, Direct Listings, and more [01:16:18] Timoth, do you want to talk about your spack uh tweet. Uhoh. You know the market's back. Can we see this much. Can you play the siren. Can you play the siren. Well, as with all my tweets, like a combo, like a combo beach party, as with all my tweets, it starts when Look here, here's what X is an incredible platform. I use it for Pull up the tweet thing. Pull up the tweet. I use it for a lot of things, but your villain phase right now, man. You full super villain. It's so great. The retweet is more important. Yeah, I love that quote retweet. Here we go. Here's the tweet. Chimamoth says, "Incredible that almost 58,000 people voted in his tweet if he should launch a new spa." So, uh, give the people what they want, Chimamoth, or what. Well, I first I first started this because I when I use X sometimes to to just to like sound off because it d-stresses me during the day. Okay. I like I'll troll people or whatever. And then I just did this and I was so impressed that 58,000 people voted. But really what happened was I had a lot of very smart money people on Wall Street and some crypto folks call me that I respect and and basically what they said is like it would be really good if you did it. So I don't know if I'm going to do it but I'm heavily leaning towards doing it. Well the argument to do it is you learned a lot since last time. There's a lot of inventory there. You've got a lot of access to pre-market companies. I think what people need to understand is when you're doing spaxs and correct me if I'm wrong here. Here's what here's what I'll say Jason. This poll and this community note will be in every single document I do. Nobody that is listening to this should participate in this. This is going to be for me and a handful of, you know, advanced large pools of money. You should stay as far away as possible. Whatever I do next, don't participate in back. That's that's the rule here. Stay on the sideline. Do something else. Don't come in the arena cuz we're trying things. Timoth, don't you have enough going on. Like, why would you sp Why would you do this when you have fate loves irony. Fate loves loves irony, bro. Fate loves Absolutely. This will be hilarious. It would be the greatest IPO of all time. If the poll was yes, I'd be like, "Oh [ __ ] this is the last thing I need." All in spa. Let's go. Thomas commentary. Thomas, are you going to buy the all-in spack. What's going on. The spa market coming back. I'm open to all great companies coming to the public market. Love it. Love it. I mean, but So Thomas, can I ask you a question. Like tell us about the state of liquidity and actually about IPOs and spaxs in general. Like where's your where's your temperature on it. Just give us a read on what you think. I mean look, I I think we're getting real world data, Chimath, right. Like in real time. Um not just from kind of higher visibility companies like Circle and Coree, but um Chime also did really well. Um Caris uh company, you know, more in Dave's uh wheelhouse, right. Um also just coming out. So, and then wait till we see um the flurry of S1s that have already been filed, right. Figma is a is a generational potential company, right, that's going to be coming. So, I think we're going to see fantastic assets coming out and I think the market is saying we're open for business. The the MAX 7 is controversial. To Dave's point, the the S&P 493, there's going to be lots of winners and losers. It's maybe not as obvious. There's going to be some dispersion. So, bring on the new cohort. I think it's the first time you could probably argue that you could go short the S&P. Yeah. And pick a couple of winners. It's It might be the first time that I would feel in the last 20 years, cuz I I'm pretty negative on people being able to kind of pick stocks. But I do think that this is such a transformative moment that if you really have a sense for what's possible, you could start to see category killers emerge out of the S&P. And it's an opportunity to short the S&P and pick a couple winners. Totally. Do you Thomas, but do you do you care about how these companies go public. Like do you care about spack versus direct listing versus IPO. Like I don't I I only care about the quality of the underlying asset and what I think it can be worth 5 years from now. Now obviously I do care about the liquidity that I'm getting in the IPO Chimoth. So you know am I getting a million uh or 100 million or a billion as the float, right. That's number one. And obviously I also do care about the percentage that is floating and I do care about the lockup. Right. So those those three elements are really important in terms of a company going public and how we think about participating. Give the listeners the guidance there. So for the first thing bigger is better than smaller. Correct. So it's number one can I even buy it. Right. If if the IPO is so small um and you know we can't get a large enough position it doesn't really make sense for us. Right. So that would be kind of point number one, right. Point number two is how much of the company is publicly floating, right. Better there as well. Correct. We you kind of get a truer price, right. When a higher percentage of the company floats, um it's also most likely going to be less volatile and less susceptible, chimat, to um you know, pricing uh predatory pricing and and manipulation and things like that. What's the percentage float that I think 20% is in my opinion kind of a minimum. Some have gone out you know I think I remember correct you may know this I think LinkedIn went out at like 10% or something. I I remember it being really small and a lot of us thinking like wow that is a that is a small yeah which ended up by the way being very volatile. So, so number two, the float and then number three, the lockup, right. First, is there one. Um, in a direct listing, there may not be one, right. So, you may you may get in that scenario to a truer price faster. Um, and Thomas, why do you think there's been no direct listings. Like, why has that totally fallen away after I mean Spotify did one, we did one at Slack, and then where where are they. Like, why why don't people pursue those. So, here's a statistic. I actually had to double check this because I couldn't believe it. Right. If you look at the cohort of companies that went IPO in 2021, right. And uh and I'm actually not including spaxs in this particular analysis. Right. If you look at that cohort t + one year, the cohort was down about 40% on average. Right. Okay, fine. Maybe they went up too high. 2021 was a peak. They didn't do well in one year. T plus 5 years, it's down 50%. Right. which which really kind of shocked me, right. So I think there's kind of scar tissue on both sides of the table on the buy side about wait hold on what am I really buying and how do I make sure that um it's kind of a sustainable kind of company but frankly probably also from boards right who are taking their best assets public and may just want to um pursue a more conventional approach in the beginning stages right I can tell you for us direct listing versus IPO makes makes no functional You know, I think each has a benefit and I think in some depending on how how concentrated your ownership base is, how understandable your business model is and things like that, but we just want these companies to come. There's a market behavior, by the way, in direct listings, and I I've mentioned this once, but I've been in two transactions with direct listings. The first was Slack, and in the execution of it, we misexecuted. we meaning me because I had a huge ownership of Slack but I didn't know what to do with it and I ended up distributing portions along the way and it then went through all kinds of turbulence and then it got acquired slightly above the IPO price and what I learned in retrospect was the best trade is actually the first day trade on a direct listing. So then when it came back around and I got a distribution the day before of Coinbase and and I mentioned this to Brian, this was not a judgment on the company. I said, "If this direct listing process is going to map to what I've experienced at Slack, the right thing to do is to sell." And I sold that on day one at 335 bucks a share. And ju it's just it's I think Jason, it's still not at the IPO price. I think it might be getting close, but no, it's not back. So these Yeah. So these direct listings are not what they're expected to be either. Yeah. If we look back on spaxs, I think SoFi is above the price and that might have been one of yours from Joby getting close. These were venture investments. These were latestage venture investments in your mind, Thomas. And then retail tried to become venture capitalists and they didn't have the 5 10 year horizon that we as venture capitalists have. Is that your assessment of it. And are there any great ones that came out of the spa movement. Well, I mean the the direct listing era as an example, let's talk about Spotify, right, which basically has 7xed, right, over that period. So, again, I it's hard to tell, right, causation versus correlation. That's why like I think ultimately for me as an ultimate kind of long-term owner of these businesses, I really just care about the quality of the business and whether you chose to go spack or direct listing or IPO is a mechanical decision. Um to me the output is quality of business and you know that's ultimately what wins out. ## Amazon's "kingmaker" position, job displacement [01:25:40] Okay I want to end on this. Uh you just shared a chart of applovin and the massive revenue per employee. This is just astounding Thomas. Apploven as we can see here had 3.6 million revenue per employee in 21 now up to 7.6 million. They peaked at a,000 employees now down to 750ish it looks like. In related news, obviously Microsoft we talked about the other week let go of 3%. They're planning on massive cuts again for sales. These are organizations that are at record cash, record revenue in an industry where we had a tradition of not firing the gray beards and people had been at the company for more than 10 years. Andy Jasse didn't come up as like one of the companies we think is going to win at AI, but it might be the company most impacted by deploying AI inside their enterprise. He launched Amissive. Here it is. I suggest everybody read it. When you send a missive like this to your employees, you're trying to communicate something to them and to the public markets. So, he published it on his website. He talks about dozens of AI projects, AI tools for advertisers, obviously, Geni for sellers, you know, their product detail page. He's talking about Alexa coming back with a brand new version, shopping assistance, everything. But then he started talking about the work force size. He says in this manifesto in the next few years we expect this will reduce our total corporate workforce as we get efficiency gains from using AI extensively across the company. So my question to you Thomas is when you hear public CEOs talking about lowering the number of employees while they're growing 10 20% per year this is obviously awesome for earnings the share price but there's going to be massive job displacement. Any thoughts on the job displacement. job replacement and society navigating that and just as well Andy Jasse specifically and what you think of Amazon as a business and them being a player in AI and AI being a player in their business. You know, I think it's a it's an important question and I'll defer to what Jensen answered on this topic because in my view it's still the most credible and cohesive answer I've kind of heard, right. And Jensen is known uh the CEO of Nvidia an an incredibly long-term thinker and in his view is he looks at a population that's getting older and he wonders who are going to be all the young people that are going to take care of all the old people whether it's nurses or doctors or other things like that and in his view we better get a lot more productive right to deal with our inverted demographic table. So I ultimately think this is going to enable more young people to take care of more old people, right. And it's just going to create I think knowledge workers are incredibly flexible. They can take their tools from, you know, one particular skill set to another. So I think this is going to unleash incredible opportunities for the economy. I think it is going to make us more productive and wealthier. So I'm definitely on the more optimistic side of the scenario. Shimoth, any thoughts on Amazon. They didn't come up, but obviously AWS crushing it and they're a major player and they have their own silicon they're making. You mentioned that being an important part of the stack. And then you have Optimus and robots figure that are going to be in their factories. That's a lot of jobs. Delivery robots. They're doing drones like Zipline. They have their own version of it obviously and they're doing zuks. So if you just look at their behavior and you look at their investments, they're massively massively investing in robotics, self-driving, and chips. So they're pretty hardware focused. Yeah. For physical AI, they're a kingmaker in parts because they're a a sync for demand. So they'll just generate so much demand for robots. So if Figure lands the BMW or the UPS robot successfully, Amazon will buy a gajillion of them. If Optimus lands a successful robot that they tune inside the Tesla factory and then are ready to sell, Amazon will buy a gajillion of them. If there are drones that are delivering things, Amazon will buy a gajillion of them. So on the one side, there's a lot of typical opex lift that Amazon will get. I think the problem is more with AWS, which is that their success is actually their biggest bottleneck. The success is that they're not necessarily kingmaking. They're about being a purveyor of many, many, many different things that you can find inside of AWS marketplace. And so, you know, the the thing that they'll have to embrace is well, do I differentiate my own hardware from Nvidia's at some point, do I actually make a real bet on models and try to frankly buy anthropic, which is probably their only solution and tightly couple it in and say that, you know, if you want to have next generation codegen experiences, they need to run inside of AWS. These are the difficult decisions that I think that Andy will have to face and he's going to have to spend hundreds of billions of dollars. But yeah, the the Amazon retail side is going to be a kingmaker for all of these physical AI things. Freeberg, any thoughts on Amazon just as a company broadly. Chamat saying, "Hey, they're a kingmaker." That seems like a really interesting insight. You have any insights there on Amazon and they're playing a part here in the future of AI. I don't. Thomas, any closing thoughts here on, you know, the sort of old old guard, Microsoft, Amazon, and their employee count and the cuts we're seeing there, uh, and what these companies will look like in the future in terms of revenue per employee. They're not hiring young people. They're getting rid of the old folks. They're just advancing, it seems, at a at a they're adopting AI pretty uh, severely at these companies. What are your thoughts there. I'm going to play I'm going to play the role of JCAL and I'm going to ask a question to all three of you guys. Oh, here we go. So, Microsoft's employee count peaked at about 250,000, you know, call it about a year ago. Who here believes that in 5 years Microsoft will have more employees than it does today. More. I'm going to say the same. I think they'll have just about 250 plus or minus 10%. I don't think if I if I could pick push as the answer, I would pick push, which is they're going to get 10% better every year with AI, 20% more efficient. Therefore, they don't need to add people. But I also don't think they atrophy much more. So maybe they have 225 250. Why Why' you say more so quickly. I'm curious. Oh, so this chart, which I think is like a very dangerous vanity metric, is why. So what Microsoft touts is what percentage of code is generated by AI without answering the more important question which is is that code useful and good and if you ask that second layer Nick I sent you this tweet from Yan Lun and I'll tell you that this is my lived experience as well is most code generated by AI is crap and most of the tools that we use you know the reason we call these tools app crappers is because most of The code that it generates is crap. So, it's great in a single player mode, but transitioning from single player mode to a complex enterprise environment is not possible today. So, I think that Microsoft puts these metrics out because they want to seem that they're on the front line of it, but I suspect that this is just like, you know, how you used to hire Mackenzie consultants to fire people because it was good air cover. It's probably just air cover to fire a bunch of folks that they probably wanted to get rid of anyways, but it's not related to that chart. And the reason is that Yan Lun's tweet is true. When you allow these models to run over complicated tasks over long periods of time, the error rates compound to such a degree that the that the resulting output is not worthwhile. And so until that problem is fixed, which I'm sure it will be, and I and I and I'm going to bet that it will be, the idea that all of a sudden it's because of coding agents that people are getting laid off, I think is a fallacy. So I suspect that Microsoft business on the margin grows. Back to Dave's point, some of the 493 shrink and go away. It'll be cheaper for Microsoft to bundle together a bunch of other products that are point features today. And so they'll have more people. They'll indeed more. The people will be different. They'll have different skill sets. But I suspect Microsoft's employee base grows. Freeberg, what say you. I think shrink. Wow. So, by the way, pretty interesting to think about. We have one decisively more, one median about the same a push and a and a less. I only say that because I do think that there's a real probability of revenue decline in the next 5 years. So, if you look at the enterprise install base, I think that cloud gets competed away. So I do think like on this on the application software layer, they're going to have a really hard time in this new world because the old school customers that buy Microsoft are going to die. They're more likely to die in their marketplace compared to the folks that are going to build native software, native workflows. And I'm not really where Chimath is. I think you may be right about where AI written code is today. I I don't think that that's true 3 years from now, four years from now given the pace of improvement. And so in a world where you have software written workflows built for you through agentic tools, I think that Microsoft's core business for the is going to decline. The the losers are their biggest customers and the winners are not going to use them. So I I you know that that would be where you at Thomas maybe you're the tiebreaker. I I'm in Chamas camp where I actually think the Microsoft business will be bigger if anything on on kind of alone and that at the end of the day uh we'll just need more people to support it. I just think they'll be they'll be more relevant. They'll have more productive employees, but they'll still be more of them. I'm predicting incredible growth and the same number of employees. So you guys are predicting incredible growth and employee growth. I think that that's interesting. So So sorry. Less revenue, less employees. Interesting. So the thesis as as your grows um is basically where the the application dollars go effectively is one way to think about this, right. So application dollars go there and that more than makes up for the decline in in that business over time, right. And there's multiple clouds. By the way, I went to the Google Next event last year and so I I ended up going to these like special dinners or whatever, a couple cocktail dinner thing because I spoke there and I saw they put me with a bunch of these people and I CIOS of you know whatever Fortune50 companies and all of them said that they're multicloud like they're not no one's going to standardize on one cloud so everyone has to be on Microsoft and Google and I had never really recognized this or thought about this as being a a fact that it's not necessarily the best or the lowest price. At the end of the day, these guys are going to distribute their exposure. And so, I think that maybe supports your case. I'm very easily con I'm very easily able to see other arguments today. I'm very convinced. Here's the revenue. What a spectacular revenue run. Uh just I think all four of us would agree that if we could synthetically own AWS, Azure, and GCP, if I could somehow automatically create an index of all three of those businesses, right, over the next five years. Yeah. Yeah, you wouldn't need to own anything else. You wouldn't need own anything else. I wish Elon would take that. So, why don't you put up with the shitty part of the rest of their businesses and just own all three and that's it. Call it a day cuz you've got to assume that if one of them wins over the other two or accelerates ahead of the other two, it's going to more than make up for the losses that the other two might experience in their other businesses. The multiples aren't crazy on those three companies, by the way. Correct. Quite reasonable. Yeah. I think if Elon took what he did with Colossus and he had an AWS competitor, he would be a serious competitor in the space. But this is like this the velocity at which he can build out data centers is extraordinary. This is where Elon does better because he can actually get a better like um fundraising uh in the private market with XAI than what he has to deal with. Yeah, he's really he's really struggling with that. That's what I'm saying. Yeah. No, no, I'm saying it's better for him, right. ## Sacks joins to discuss the GENIUS Act passing the Senate [01:37:47] Hey guys, look who's here. Couldn't stay away. David Sachs, look at here. You can't get away from it. 11 o'clock happens on a Thursday and you start jonesing for your besties. Welcome to the ZAR, David S. Good to be back, Jacob, where are you. You in LA. Mhm. I'm in LA. This is You're at someone's guest house. Yeah, actually, this is one of your guest houses. You You just lost track. I still have I still have the key code. It's a J Cal Kalen. Jay Calen is at your guest house. Jalen. Jalen. Here. I'm here. come down the hill. He'll still get that reference. It's getting kind of dated now. Oh god. KO Kalan is ride or die. I mean, he would jump on a a vente or a grande for you for sure. Let's talk a little bit here. Since I got you, Sachs, would you be willing to talk a little bit about the Genius Act. We just passed the Senate. I think you have your fingerprints on this. Is that true. Yeah. Tell us everything. Well, it's definitely something we supported and this is, I think, a huge milestone. I mean just uh you know what basically happened is we had this genius act which is the stable coin bill passed the senate with 68 votes got 18 democrats they came on board we had to hit that key threshold of 60 votes in the senate that's the threshold you need in the senate unless you know it's it's um a narrow exception for reconciliation so it's very very hard to pass any bill out of the Senate and you need a significant amount of bipartisan support and we got that now when you consider Consider where we were a year ago. You know, you realize what huge progress this is for the crypto industry. A year ago, you had crypto companies being prosecuted. You had this whole regulation through prosecution approach where Gary Gendler, who was the chair of the SEC then, he wouldn't tell startups what the rules were, but they would just announce prosecutions. And this was driving all the crypto innovation offshore. And I think we were basically poised to lose the crypto industry in the United States. What happened then is President Trump adopted this cause. He announced that he wanted to make uh the United States the crypto capital of the planet. He really campaigned on this and as part of his administration. He in the very first week signed a new executive order making it clear that his administration supported crypto. We've been rooting out all the Biden war on crypto rules and regulations at the agency level. And now we have this first major legislative win. And I would expect the House will act in the next few weeks on this and then the president will have a bill he can sign. This is uh great work and it's really important because to your point, Gary Gensler's concept was, hey, there's an existing playbook. There's existing rules. Just follow those. But none of these things actually match the existing rules perfectly. So you need some new rules. They need to evolve. It was much worse than that because he would say things like, "Well, just come into the SEC and talk to us." You know, so in other words, you got to come in and talk to us and get our approval. But then when startups would go in there and talk to them, there'd be enforcement people there writing down everything they said and the next day they get a wells notice and they would get investigated honey. Yeah. They were honeypotted basically. Yeah. And so the the response the industry was okay we're just going to leave the United States. And that that was what was in the process of happening until President Trump won the election and then changed the tone in Washington. I think there was one other really significant thing that that happened because, you know, obviously President Trump has gotten Republicans on board with this cause, but the question is why are Democrats on board with it. During the Biden administration, Elizabeth Warren really called the shots on crypto and it was well reported that Gendler was was sort of her ally and her pick. I've kind of joked that Warren controlled the Biden autopen on on crypto because she really did exert that kind of influence. So the question is, well, what changed. And I think one of the big things is that in this last election, Sherid Brown, who was the chair of the banking committee for the Democrats in the Senate, lost his seat in a close election against Bernie Moreno. And I think there were many reasons for him to lose that seat. He was far to the left of voters in Ohio. Nonetheless, he had been a successful politician there for a long time. And one of the reasons why he lost is because the crypto industry really got behind Bernie Mareno because Sher Brown was just a a total blocker to any crypto legislation in the mold of Elizabeth Warren. And I think that a lot of smart Democrats looked at that and said, "Why are we dying on this hill again?" You know. Yeah. And I think it's also extraordinarily popular sachs with consumers and businesses. So there is a demand here. and Korea, we've got you've got something like 50 million wallet holders in the US and their their their voters. So that's one out of five Americans adult, right. So I think a lot of Democrats said, "Well, wait a second. Why are we just blindly following Elizabeth Warren on this. What exactly is so harmful about this?" Particularly when what we're talking about here is creating a regulatory regime. You know, it shouldn't be hard to sell Democrats on new regulations. Uh but in this case, the reason why there's broad bipartisan support is because the crypto industry itself is calling for those regulations because having regulatory certainty is better for them than the possibility of the return of a Gary Gendzer-L like figure who just prosecutes them without telling them what the rules are. So this is why I think you're getting some significant bipartisan support and and as you said bringing this on shore is such a great portion of it. There are tons of actors who some people might describe as bad or gray or dark tether comes to mind with a lot of regulation against it. And now those folks who are running away with the industry Thomas now they have to compete with people like Jeremy Circle which are totally buttoned up here in the United States and it levels the playing field. So it's an example of actually good regulation bringing this opportunity back on shore and taking it out of the gray area just on the whole offshore versus onshore. So it is true that the number one stable coin issuer on the planet right now is an offshore company and that is partly because there has not been a regulatory framework in the US and there's been hostility towards the crypto space and so the logical reaction to that is to either not get involved in the crypto space which is what the banks have done until now or you go offshore. Neither one is good. And you know, you can see in the wake of this Genius Act, the stable coin bill that the banks have now talked about getting into stable coins. They're going to issue one. And then also Tether will under this act will have three years to come on shore. But the bottom line is they will have to operate in the United States. And that's a good thing for consumers. It's a good thing for they three years to get compliance. They have three years, but they have to move on shore. Now all stable coin issuers under this bill will have to be audited quarterly and by a real audit not this attestation nonsense like real audits by American real audits and it will verify that every stable coin that's been issued is backed or fully reserved on a onetoone basis with real dollars in an American bank accounts that are in US T bills or money market accounts. And so it what it does is by the way I'm not saying there's anything wrong with Tether, but this does provide additional certainty and confidence because you know that all the companies are onshore and they've been fully audited and we know that they're fully reserved so that when you want to redeem and cash out your stable coin tokens, there's a real dollar waiting there to cash out. You prevent the undercolateralization issue. Yeah. And and by the way, I'm not saying that there is but but what I'm saying is now we create total certainty and confidence which is good for the market. What happens if a stable coin issuer does not like can you issue US dollar stable coins and not be governed under this system or no. You're saying because the US dollar is a US government instrument then no matter where you are or no matter where you issue from. Yeah. All the issuers will be governed by this. And if you're a legacy offshore issuer, you're given this time period to bring yourself into conformity. But yeah, otherwise what happens if if they don't Well, it's a good question. I mean, I guess the exchanges won't be able to carry their their tokens and they won't be able to set foot in the US. They'll be in violation of US law. It's just not a good place to be. Yeah. I mean, you don't have to guess. Um, there have been dozens of actions and accusations, like legitimate ones, against Heather. New York's Attorney General did a major settlement with him in 2021. They've been banned from many jurisdictions and uh in Senate hearings. Tether should just Tether should just go public in America and be done with it. Well, and the issue was there was deep concerns that they didn't have the deposits and now they're they're really trumpeting the fact that they're massively profitable obviously. So, there's been tons of uh you can just search Tether and allegations and you'll find all that stuff. I should hear tether founders Italian Saxs. I got to give you a lot of credit. We knew that you would bring an efficiency level and some expertise to this administration, but I got to give you your flowers. We're 5 months into this administration. Can disagree about many things. One thing we can't disagree about is that this piece of legislation uh is here and we're we're only 5 months in. So maybe you could speak to the velocity at which things are getting done and then uh any other clothing closing thoughts. I know you got to get back to your day job. Jake how a lot of people deserve credit for this. I just want to give out a couple of shout outs. So, Senator Bill Hagerty from Tennessee was the principal author of the legislation. He did an amazing job getting Democrat votes and also bringing the Senate bill into greater alignment with the House bill. So, hopefully this can pass the House very quickly. Chairman Tim Scott who's the chairman of the banking committee was also incredible. the majority leader uh John Thun and then we had a few co-sponsors of the legislation Cynthia Lemus from Wyoming and then two Democrats actually were really important Kirsten Gillibrand from New York and Angela also Brooks from Maryland all them did a great job and we've got great leaders on the house side as well French Hill who's the chairman of the house financial services committee Tom Emmer who's the whip and Mike Johnson who's the speaker so kudos to all of them because I think that it really is a pretty incredible achievement that they've been able to get this through again just a huge sea change from where we were a year ago where crypto was basically under attack. It was being driven offshore and now we have it as one of the first major piece of legislation by this new Congress. And again, that's all because of President Trump's leadership and prioritization of this issue. So, thank you to all of them for making this happen. Congratulations to you, David. Hey, uh, one, uh, tactical question I forgot to ask you. the float on these. This is like how Tether is making billions of dollars a year and this is how people anticipate they're going to make billions of dollars a year. Are they able to split that with consumers yet. Because I I remember reading in early legislation that you weren't allowed to pass on the interest made from a stable coin to like the consumers, I guess. So you wouldn't it couldn't be an interest bearing account. If you buy stable coins, you can't get interest on it. But the issuer like Circle, that's their main business model. So did that make it into the final and and maybe you can give us some background on that. No. No, it did not. The way the framework works is that the stablecoin issuers cannot pass on interest to the token holders. Why is that. Look, I mean, I don't know if there's a great principled reason. This was a compromise that was necessary to get the support of the banking industry quite frankly. Ah, they see it as competition. I'm betting. Well, there was a lot of concern from community banks that if stable coins were paying 5% interest, it would put them out of business. Personally, I think that that concern, although understandable from them, I don't think that that's what would have happened. But these are the types of compromises, quite frankly, that you need in order to pass legislation. I hope that at some point in the future, we'll revisit that and allow stable coin issuers to kind of just do what they want to do. All right. And that'll be easier once the banks get into the act and they're participating in this industry. Got it. But right now, they're total outsiders and you can understand the fear factor. All right. Sax would want to drop you off, man. I wish we could have you on for the full show, but uh you you're busy. You got a lot of things to do. Love you, dude. Shed a little tear and I miss my bestie. See you soon. Thanks, guys. All right, back. We got two hours of classic Allin. Uh in part two of the show, we're going to do an hour and a half on the Israeli conflict with Iran. We've got 90 more minutes coming up. And uh we've got Ukraine Ukraine Ukraine Mirshimer and uh Jeffrey Saxs joining us in the second in the third and fourth hour of the all-in podcast. How's the all-in summit going Freeberg. How's all-in summit. You know, we might get uh wait wants to come from uh Alibaba. Who's in touch with him. I am. Thanks to Phipe. I just want to do one quick shout out to our friend and fellow bestie Vinnie Lingum. Oh yes, his movies coming out. A friend of ours did a documentary on It's great Freeberg. You're going to love this. Only I denounce I denounce I love Vinnie. I denounce it. So great. Amazing. Anyways, it's called Animal. Oh, it's great, Doc. And uh perfect. Can't wait. Where can Where can people watch it. I think he's got a couple of deals. Come to your local slaughter house and put it on your phone and watch it at the slaughter house while you're there. Here's the idea. You're going to consume a certain number of calories per month. Us humans were designed to eat meat. That's the number one thing we should be doing as a species is eating meat. Nick, can you put the trailer in the show notes so that you can get a little play. Actually, play us out with the trailer. You can play us out with the trailer on the show. We'll do them myself. All right, guys. I got to go eat. I have a photo shoot in two hours. I love Oh, you got a photo shoot. Is it going to be you showing the legs or just the top this time. What are you shooting. What are you shooting. I'm going to do blur out the anaconda. You should do pixelate the anaconda. I hope it's Italian Vogue. What are you shooting. Thomas is in the general neighborhood. I I can't comment, but uh just tell us bleep it out. Nice. Tell us bleep it out. Jam, give me a call. I got to talk to you about this weekend. Okay. Love you guys. Talk to you guys. I'll see you at Are you guys still doing the tequila launch. Yeah, Saturday night. We'll see you Saturday night. Absolutely. See you there. Go to allin.com yada yada to sign up for the all-in summit. Apply there for Thomas Leafant, Shim Popia, Dave Freeberg, and the Zar David Saxs. I am the world's greatest executive producer. We'll see you next time. Jasonallin.com. Bye. Adios. Play the trailer. ## Animal trailer [01:52:13] We're too good of hunters. We came out of the trees not to eat the grass, but to eat the grass eaters. Meat is the most nutrientdense food that human beings can eat. We're carnivores, but we're not living as carnivores. We are just better designed and more efficient at getting nutrition from meat. Got to remember where we came from and what our food should be. It will change your life.