check out what uh what time is it over there well we started at 8 A.M so now it's 8 28. it's 8 28 I'm going to be on the slopes at 11. yeah so I'll be out there skiing I'm in niseko uh in Japan to take a quick flight to sappora saboro and then you drive two hours into the mountains yesterday cat skied there's an abandoned section by the way in honor of you I
grabbed a Sapporo from the fridge today wow very nice this week's episode brought to you by so they drive the catski up and then you ski down and it's all fresh track so it's literally an abandoned ski resort you know during the financial crisis here I I just asked you what time it was that's all I asked you it's called small talk it's called banter I thought you might be interested
in your bestie's life but apparently not [Music] [ __ ] man David said we open source it to the fans and they've just gone crazy with it [Music] let's get to the show everybody wants to hear the show a lot of news going on and I you know in our industry there's been a big discussion about rsus and stock options both the cost of these things
and then there's another issue of people staying private for too long if you remember for folks listening Airbnb Uber famously took over 10 years to go public people like uh Bill Gurley wrote about this hey you should get public when the window is open obviously the window is closed right now or largely closed stripe now people are speculating they missed their window they have a
four billion dollar tax bill due to cover expiring employee rsus those are restricted stock units and at the same time Foursquare a company from the Web 2.0 ERA this is you know 10 15 years ago when they were very popular check-in software Mobile location app they are going to let their previous employees stock option grants expire according to the information they issue
these options in 2016 seven year window before expiration more than 100 form employees will be impacted and some of them are the very early team members and this employee stock option problem is becoming acute because hey you people waited to go public basically what happens is you grant an RSU which is effectively W-2 income when it's realized with an
expiration date but that expiration date forces you to be public so that that RSU can be exchanged for value and that's like a 10-year window so then these guys have to go in and modify that date and push it out by another four five six years or whatever that is a deemed event by the IRS that then creates withholding tax issues right so you then have to you then have
to withhold tax on behalf of the employees and so that Collective number is the 4 billion that stripe is trying to raise according to a leaked pitch deck uh stripe implied they needed 2.3 billion in capital by the end of queue on 2023. they're working with Goldman Sachs to raise a few billion at a 55 billion dollar valuation that's down 42
from the peak of 95 billion in 2021 one wonders if they had gone public what their valuation would be right now can we just say real quick why this matters Jacob like yes so anyway why does it matter yeah why does this why does this all matter why do we care thank you that's where we're getting to I posted a link this is a 2013 interview that Zuck did with Michael Arrington of TechCrunch
and if you go all the way back the apprehension to go public was one thing that we really anchored to a lot at Facebook in the early days and at the time I don't know if you guys remember but there was these Arcane laws around the number of shareholders that you could have and I think the issue specifically was that after 500 shareholders you have to
publicly release your financials and so we did all kinds of things to make sure we never hit the 500 cap and we tried to push the IPO data as far out as possible because we thought that it would keep people more focused and then in 2010 or 11 I told this story a couple times one of the things that I was advocating for pretty aggressively was trying to Launch
a mobile operating system to compete with IOS and Android and we had put together all this work and brought in Intel and ATT and all these people and it came down to the fact that we needed a couple billion dollars to float this thing and we didn't have that money so the only solution to that would have been to go public but it wasn't the right moment
in time and Zach was uncomfortable with it a year after going public one of the things that he said publicly in this TechCrunch thing was wow I should have just gone public sooner it wasn't nearly the bad thing that I thought it was going to be and when you look subsequently at how much money they've spent in AR and VR spending half a quarters of that cash
could have given them the chance to disrupt Android and iOS in 2010 and 11 which in hindsight is obviously a no-brainer BET right so even though I think we at Facebook were the ones to really put this in the water table about not going public I think a lot of startups should have gone back to First principles to really question whether waiting as long as
possible actually makes sense so I was curious about the stripe situation so I asked my team to do a little bit of work on how would you value this thing if it were going public and the interesting thing about stripe is that it operates in a really transparent middleman business so what's interesting about stripe is that so many of the people in the ecosystem are
public and so what that means is you can build a pretty accurate mosaic of how well or not well that business is doing by interpolating all the other data from all of these other companies that are public and are forced to report and so there's like a couple of really interesting things that jump off this page and so the first thing that we did was
we looked at what is the future profitability look like acts of growth and what's interesting is that you look at companies like visa and MasterCard that are doing quite well and have done really well for a long time but you look at this outlier in Adian and adyan is probably the most obvious competitor to strike and the thing that is demonstrated here is how incredibly
profitable this business is and how much operating leverage they have which means that their Opex is relatively constrained because it turns out in the X and Y axis here just so people who are listening can understand the chart sure so if you take the market cap on the x-axis and divide it by their sales estimate you get a multiple of the Enterprise Value
to their sales got it and if you look at the 2024 estimated ebit to margin that they're forecasting X of their long-term sales kicker what you start to get a sense of is the operating leverage that this business has and so all of this basically Nets out to three interesting takeaways when stripe got underwritten at 96 billion dollars
it's this data point right here where you know you see a stripe previous round 5x Enterprise Value to divided by 2024 divided over there they're long-term their long-term ebitda exactly by their sales assistant and then if you look at the 55 billion valuation it's down so what it looks like is happening is appropriately so people are doing the right thing which
is they're re-rating the stock right by approximately 50 60 percent but what's interesting is not where they are in terms of where they used to be but the interesting thing is where they are relative to their most obvious competitor ajin so Nick please bring up the next one so this is where things get really interesting because we looked at what was adyan
and what was Stripes gmv per employee a couple of years ago before all hell broke loose in the private funding markets and what you see is they were pretty equivalent businesses and they had roughly the same amount of employees but this crazy thing happened which is that if you look at the gray bar this is the number of employees at stripe has it went crazy
from a little over 2000 to almost 8 000 so a four action of employees X in 24 months they added 6 000 people just pause for a second on that six thousand people in 24 months in 700 days or so right three people a day and if you do the same calculation for Auden it shows that they a little bit less than Group by about 75 percent and then if you look at the growth of
gmv and you impute how productive is each employee basically this is the the story of what's happened to stripe and audience which is that ajin has found operating leverage that's right so they've found and maintained incredible profitability and stripe has added an enormous number of employees now the question is why right so it turns out that these guys at the Top Line are growing
roughly the same except adien actually takes meaningfully less on a per transaction basis than stripe does and the reason is that audience Services these large head customers I think big bulky folks that have huge amounts of transactions and so as a result have pricing power and stripe has some of those customers as well in fact they just announced that
they're going to process a large portion of Amazon's payment volume but what's happened at the same time is that those kinds of deals aren't necessarily that profitable and so you have to hire a lot more people to build a lot more features so that you can generate revenue from the long tail of customers all of these smbs and this is the tale of these two companies which is
that stripe has some head customers but many many tail customers ajian has mostly had customers fewer tail customers and so the leverage in the business is that audience has most of these employees in Europe where the cost of these folks is much much cheaper and they have less than half the number and so as both of these companies continue to grow you have one that has
maintained and frankly raised their long-term profit projections because they see it in the business even at lower transaction costs and stripe which is having a little bit more trouble so I thought it was a really interesting expose the the takeaway for me is that if you were sitting inside the company and obviously hindsight is 2020. the most profitable thing they could
have done from an Enterprise Value perspective would probably have been to go public in 2018 2019. because they could have raised max value at Max valuation cleaned out all these options issues and have a huge balance sheet of cash with which to do stuff whether it's Acquisitions or other things because the thing that I struggle with is is there going to be long-term
profitability in all of these tail products because if you look in the SAS ecosystem in stocks I'll hand the ball to you there's companies building all this other stuff and these Point products are probably pretty good too sax what do you think about ad gen going after the fat part of the long tail and then stripe going after the long tail
having many more customers well I think they're both viable strategies and I mean I've actually written about this I wrote a Blog some time ago called Enterprises versus smbs who's the better customer for B2B SAS companies and I think the sort of old school traditional view is that Enterprises were always the best customers because they have the biggest budgets that translates into the
biggest annual contract values or acvs this provides the highest Roi on sales effort so now you can make a sales driven distribution strategy pencil in the first place the prospects are easy to identify you know after all if you're going after the Fortune 500 you can just make a list of the 500 companies so I think the traditional gold standard was
sort of the head like you're saying Jason the Enterprises however I think in recent years has become more popular to pursue the stripe strategy of the sort of more SMB why is that more popular well because first of all startups are the smbs are more early adopters so when you're a startup and it's way easier to satisfy their standards to satisfy their needs
their needs are less complicated you don't have to have sock 2 compliance and everything else if you're more risk-taking right yeah if you solve an immediate pain point for them they'll just buy it okay whereas Enterprises are more late adopters they tend to be more skeptical of new software categories yeah I think in addition to that the SMB sales cycle is really quick I mean I'd
say typically one to two months you can close a deal the sale itself is simpler like I said the product requirements are simpler and the low end of the market tends to be the most underserved part so it's great to play where the incumbents are not that's a traditional strategy as you go after the low end of the market that's been kind of overlooked or
ignored and that's kind of what stripe has done here too is no one was really surveying these these uh developers so I tend to think it's a good strategy too and and the truth is it's not one or the other I think you just have to pick you know what's your battles that you want to fight and some starts to go after Enterprises and some will go after smbs
and it really comes down I think to founder market fit I think Founders who are better at sales can probably skew more towards an Enterprise got it strategy whereas if you're more of a product founder you go after smbs brilliant summary overtime sax for a company to thrive over long periods of time do you have to service both or do you think you can stay in one of those
things and grow indefinitely well what I've seen is that if you start the low end of the market with smbs over time you can move up Market because what happens is that as your product gets more and more sophisticated and your company and your ability to execute and deliver gets more sophisticated you can start satisfying the needs of bigger and
bigger companies so you Start SMB then you go mid market then you eventually get to Enterprises I think if you start with Enterprises it's very hard to go down Market because it's a lot easier to add requirements to your product than to actually strip complexity of a product that's actually surprisingly difficult to do so I I think it's I think either
strategy can work either you start the low end and move up Market that's the classic Christensen innovators dilemma type thing or you you just start the top and you stay at the top it makes sense it's just I mean adding 10 people a day over two years that's a large number of people to add to a company well In fairness the stripe they were very honest about this and they were like we
overestimated got confident and we over hired and they found that all the coordination costs this access point became too high that's exactly what the Collison said in their memos so I think that they're trying to course correct and get back to this I think the point that I'm making unemotionally I don't own stripe nor adjun I don't have a
horse in this race is more that in this market specifically in these middlemen highly transparent middlemen markets it's very difficult to hide the cheese meaning the ability to get to an extremely precise valuation model is pretty easy you know this was half a day's work that we did and the point is all this data is out there and so it means that if you're going to go
public as a company like this you have to be quite thoughtful about how outside and folks will value you because the terminal buyer is very very sophisticated and pretty smart about how to think about spaces like this Freeburg when you look at this it kind of dovetails with the get fit Brad gerstner Ilana Twitter doing more with less employees Zuckerberg again says he is
getting rid of managers he's asking managers to sax his discussion about you know the layers of management that got added and added where high performance would be would have five people put under them 10 people put under them is it going to be are you impressed with how quickly the industry is responding to this new environment or are they not responding fast enough
in terms of head count Revenue because now we're looking at Revenue per employee this really never looked at that it's been a decade since we looked at that this is a little bit of a different situation where it's about the scalability of a business like when I look at like the value that a business has created you start first with like can you make a product can you
sell the product do people want to buy the product and then you know can you make money selling it and then there's this metric that a lot of people use which is LTV to CAC which is the lifetime value of acquiring a new customer divided by the cost to acquire that customer but I think you can generalize that ratio to talk about business performance more broadly which
is you know Capital deployed which is typically what CAC is used in terms of growth on the denominator and then Capital returned over time which can be the numerator and so you know you can kind of think about that LTV to CAC ratio being something more broadly defined as something like roic or what have you the the question for the scalability of any
business is does that ratio whether it's LTV to CAC or roic return on invested Capital does it get bigger or smaller does it increase or decrease does that ratio increase or decrease as you get bigger as you spend more money as you deploy more money if it's getting smaller then mathematically you can resolve pretty quickly to the asymptotic valuation that that business
will achieve or the asymptotic revenue that that business will achieve and that's a very scary kind of circumstance when a business that's tracking that metric starts to see that metric shrink if that metric is growing then you have an you know a hyperbolic kind of moment then you can build platforms and add products and invest very heavily
and take lots of risk and take lots of bets when it's going the wrong way you have two options number one is you have to make a change or a pivot in the business to get it to go the other way or number two is you have to take advantage of that moment before the market finds out about that moment because as soon as the market realizes that that ratio is going the wrong way
your valuation multiple what you're worth as a multiple of Revenue or profit shrinks dramatically because then the market can also see that asymptote and outcome so I think it's very often the case that one should you know as a board member as an investor urge entrepreneurs CEOs Founders managers to think really clearly about that metric what's the
right way to to find the denominator and Define the numerator in our business and Define that ratio over time and as soon as it starts tracking the wrong way you have a moment you can either fix it or you got to go sell the business or go public and raise capital before the market catches on and your valuation shrinks so I think what just said yeah so when I see what Jamal's
showing in this data and talking about this the shrinking valuation issue for stripe it really I think highlights this important point this broad point which is did they miss the window did they miss the moment where suddenly you know the shrinkage is causing you know an asymptotic outcome for this business that it makes investors a little bit
like well I'm not as excited about that because it's not there's no there's no longer as much upside and it might be time to kind of devalue the company and did they miss the moment to go public raise a bunch of capital you know to to go and try new things and hopefully pivot into a way so I don't know enough about the business but that's my broad kind of assessment of
this this morning the interesting thing about that space we talked to one of our friends at our poker game who runs a large consumer-facing business and I don't know if you were there for that conversation on Freeburg but I was you were there yeah and one of the interesting things he said is we are at a level of scale where we just bit these guys against each other and
these things tend to now be lost leaders for them which is to say effectively that cost structure becomes really important so your CAC becomes very important because your ltvs are capped right and the ltvs are capped because these companies have enough negotiating leverage to say well if you want my business here's the cost of doing this business which
makes a ton of sense if you're any large purveyor of services that require Payment Processing infrastructure so one of the interesting Dynamics I think we're learning in this market is how it's really not a market right there are segments and there's embedded profitability in each segment so to your point free bird this is the sum of at least three or four different LTV to CAC
ratios right right looks very different which is why you have to build a ton of features and the head just wants Pure Play and it's all about cost First because all of these guys want to pick up every nickel and dime that's on the floor because for them on billions of transactions is Meaningful to them it's an it's an it's an EPS miss or or beat
right for them which has huge implications to their stock this is a market that I think is going to be really fascinating to uncover and peel back the layers of over the next few by the way we haven't even talked about what stripe does as a business I know we have a diverse audience that doesn't all come from text yeah so stripe is will process your transactions but they were
the first people to make it as simple as putting a snippet of code into your app to process a payment they can be with Visa Mastercard in those other places they charge you a percentage of each transaction so to tremont's point these larger and so devs developers five ten years ago love this because they could instantly get payments right it's
abstracted the whole thing just the same way cloud computing does Right storage at S3 Etc so you can kind of think about it that way but a large whale in the system of which you said adyan has a lot of whales not a lot of long tail stripe because it's developer friendly and a snippet of code they have this huge long tail anybody can do stripe in fact people who
are using things like sub stack or patreon I believe they can just drop in their stripe account so people now businesses of one have a stripe account they just drop it in there so for me that seems like a huge potential in the future because some of those could be and it gives whales in the system and the long tail gives stripe a lot of pricing power because there's there's no
way for any one of those entities to have enough leverage to tell stripe hate I don't want to pay 2.9 Plus 20 or 30 cents a transaction right whereas if you go to the head I think adyan is charging like 1.3 or four percent so yeah it's a wholly different Market and the pricing as a result is totally different yeah it's interesting to me sax that we now are getting down to you
know brass tax here we're analyzing these money printing businesses and saying what is the ultimate value of this 10 20 years from now tremath and I got a front row seat to that because there's a natural audience to every single service for AOL it was 30 million paid Subs a month at I think the peak was 30 bucks a month people were paying per month so at
the time 24.99 yeah so you know you start looking at those numbers you know a billion dollars a month almost in just and it was a fixed cost business but then boom it just hit a ceiling and competition emerged emerged in the in the um case of uh broadband and then that business just slowly deprecated over time so sex what does this moment tell you for Founders a lot of the
listeners here and capital allocators in terms of assessing businesses for the last and this will pivot into our next Story the last couple years you know if you were a first-time fund manager you were investing in 19 2019 to 2021 High valuations those those funds are they ever going to be able to throw a profit and then people were investing in those
based on momentum logo chasing this is now back to you know sharpening your pencils build Gurley style investing yeah yeah I mean we've talked about it before there's nothing new here when you're in a boom the only three things that matter are growth growth and growth and when you're in a downturn the three things that matter are growth
burn and margins it's not that growth stops mattering it's just that people also care about burn and margins and you know the companies that share the worst are the ones that have inefficient growth that basically have burned a lot of money to grow they have you know low or negative gross margins they are burning way too much money the burn multiple doesn't make
sense basically the ratio of money burnt to net new ARR that they're adding those companies get called out when all of a sudden you have a regime change like we're seeing now CAC is one of the early signs of this uh tremap you and I saw that remember AOL was sending DVDs everywhere and CAC became two or three hundred dollars for every AOL subscriber and then they were
playing this funny accounting game I don't remember this chamoth where they were saying hey the LTV is like five years for an AOL they were looking back at that number not forward with Broadband coming and so like we could totally spend 300 on TV ads to get a dial-up customer at 24 a month and boy did that whips on them so I listening to
everybody talk here I'm just like wow keep your eye on the CAC folks the customer acquisition cost how much you get you spend to get a new AOL Netflix or SAS product or a stripe customer is critically important we look really closely at [ __ ] payback you know how many months does it take to to pay back the cost of acquiring a customer we don't look at that exclusively though
because you know what expenses go into CAC is highly dependent on your accounting unpack that for a second because there's the money you spend on a Facebook ad or a LinkedIn ad or any other great platform for driving you know customers to sign up for it yeah yeah spend money on an ad or you spend money on a sales person obviously that goes into CAC but then what about
sales operation head count does that go in is that op site count or is that sales ad count is that customer acquisition or something else so there's a lot of like subtle accounting decisions that have a big impact fun with numbers that number well this is why this is why I've always recommended just looking at burn multiple what I really want to know is how much money is
this startup burning in relation to how much revenue it's adding just like the ratio of those two things I burned 100 yeah so yeah you spend three hundred thousand dollars and we burned a hundred thousand dollars and then we added a hundred thousand dollars in new customers ARR uh so that's 1X so that you have on your chart here burn
multiple of 1 to 1.5 or under one is amazing or great but if you burn two hundred thousand and added a hundred thousand yeah I warn Founders going into this year do not have a burn multiple greater than two because there's just so many headwinds right now that what happens is if you end up missing your revenue forecast your burn multiple is going to look
terrible it could shoot up to three four five and up so it's better to have some cushion by going into the year being super efficient on the converse side Friedberg if you're a lifetime value of a customer is incorrect which we're seeing now with people canceling SAS products or reducing the number of seats or in cloud computing people are now saying hey maybe I should
take myself out of the cloud and host my own servers or some of my own servers and reducing their Cloud Bill Cloud uh growth is slowing at azure across the board Amazon web services Etc the the it's still growing but it's slowing the growth so that LTV if you get that wrong that can whip saw you as well yeah yeah I mean LTV which is like what do you make over time from a customer or
however you want to assess it a market deployment it should be on kind of net cash meaning like how much profit do I pull back into my bank accounts at the end of the day after paying third parties and internal people and where a lot of people I think in models I've seen on you know what's the lifetime value of a customer they kind of take either revenue or just
the simplified gross profit number but the reality is if you're scaling the number of Engineers you need because you have many more customers and you've got customer service calls and you know you've got to do custom deployments with your customers all of that kind of adds up to additional cost and some of these businesses you see that the SAS
companies for example that all have gotten their multiples hammered it's because the kind of microscope has come out at this point to some degree set aside General macro economic factors that are driving some of the multiple compression but as the microscope has come out it turns out that the efficiency of the business is not what everyone hoped and dreamed a SAS
business might be that the efficiency of the business maybe looks a little bit more like either a Services business or there's a big kind of scaling Hardware component that the margin that you actually make for every dollar of Revenue you generate fundamentally is smaller than you know what you think it is you have to add people to support and Ops and new servers and all the stuff
you're highlighting and a lot of that's excluded and then it doesn't take like you don't realize all that when you're small or when you're medium and growing you realize that when you're bigger when you're bigger you're like oh wow how do we get these costs out well if we cut these costs customer quality would decline customers would churn all this
bad stuff would happen so yeah that LTV number is generally not right and that's why I say it's much more about kind of a true roic calculation which is how much Capital am I deploying and it's not just being deployed in Market installers it's being deployed in other ways and then how much Capital am I making back net profit over time and I think that's the right way to
always analyze a business generally but like particularly in businesses where it's easy to obfuscate either of those numbers and they could seem like it's an extraordinary business you can get hurt when you get bigger or when you're scaling and in a market like this where you're trying to go public it's like whoa that really hurts you know so I think
that's a lot of what we're seeing let's talk about the other side of the tablet we've been living through a zerist zero interest rate hallucination basically people were growth growth growth logo logo logo whatever when they're making these bats Capital allocators now we're back to breast hacks okay what's the margin what's the lifetime value and is this actually real
is there a real business here or is this just a grand hallucination that hallucination exists not on only on the founder side but on the capital allocator side this week we had a uh interesting semi-viral thread on Twitter somebody named Tyler tringus he's an early stage investor don't know who that is but he did a thread predicting a16z just to pick out one firm
was a zero interest rate phenomenon and an incredible machine to accumulate AUM assets under management and so what were your thoughts just writ large on the capital allocator side of this Grand hallucination of zero interest rates I mean I think it's a little unfair I think this is written more just to try to generate views and clicks because
okay you have to see the underlying return data to really have a sense of knowing is it I think it's fair to say a couple of things that there was probably two and a half or three years of capital raised in the industry that's going to get really put under pressure and the reason is that there is not a lot of time diversity in that money meaning people got it and they put it
into the ground right away and one of the principles of having a more predictable return set of returns over time is that you leverage time right so if you had a hundred dollars and you wanted to have a diversified stream of returns you're much better off spending a dollar a month for a hundred months versus ten dollars a month for 10 months
so just that thing will cause a lot of impact in headwinds for a lot of the capital in 2021 and 2022. then the other thing you have to keep in mind is that over many cycles where we've had high rates and low rates and medium rates our industry typically returns a dollar sixty for every dollar it raises and that's over many cycles and so if you believe that we're going to revert
to the mean out of the trillion dollars we've raised maybe we'll return 1.6 trillion now that sounds good except the problem is that 1.6 trillion is marked at five and a half truly so you could have to give back so there's a lot of pain you're gonna have to give back a lot of paper profits in order to get back to that 1.6 and be okay with it and the question is what
has happened in decision making in the meantime meaning how many people did you hire how many deals did you do that you regret and then how does it change your psychology and how you treat the next investment that comes over the desk can you separate yourself from these bad losses and not be on tilt and make a good decision hmm so you had a terrible two-day
session like Phil Hellmuth did last week losing 350 000 can you play the next week and not be on tilt and start to build back your stack and make 30 000 a night for 10 nights or 10 of the next 20 15 sessions or whatever it is it's actually had a rebuttal or something you wanted to add to this no not really rebuttal I mean look I think if you're going to be intellectually honest about
it I think that 2021 is gonna be is gonna likely be not a great vintage for VC why because we're just yeah the valuations were just really high they've come down by what at least 50 percent on average maybe more more maybe 50 now but you still have more medicine to take I think when you look at some of the things you know a lot of these companies
are growing into their valuation look I think for any given set of companies for any portfolio the most important thing is what's in the portfolio so if in 2021 you had the founding of the next Google or whatever that effect is going to swamp the effect of price levels in that year because of the power law again the number one most important thing is just
what's in that portfolio what's in that basket the second most important thing is the entry prices and obviously if the entry prices are twice as high in a given year than they are and every other year and twice as high as what the exit multiples are going to be in 10 years when that portfolio becomes liquid that's going to hurt the returns but we
won't know which of these effects predominates until five years from now when we see more you know I mean when I saw that tweet thread I thought maybe this is an issue for some Venture firms but we're not going to see even the inklings of it for another five or seven years takes a while you know that's a problem that may manifest itself in year
10 and between now and then any firm that has a good track record of returning capital or frankly has a good brand and good marks will still raise an inordinate amount of money because this is an asset class that I still think on the margins is a more of a must-have asset allocation than a on the margins I'd just rather ignore it because you know it is the future of how
GDP will get created and so everybody kind of has to pay attention imagine if in 2021 the you know the next great Mega outcomes in AI were created right because those Founders were just slightly ahead of the curves you know they were like a couple years out of the Curve if those create you know the next whatever trillion dollar companies Google Apple then the fact that price
levels were 2x what they should have been won't matter what will really matter is the distribution there'll be a bunch of bad portfolios there'll be some really incredible ones and that's the way it always is with Venture the thing to keep in mind is in 21 and 22 rates were still effectively too low and I think we did this analysis Nick you can
throw up that thing but it's not correlated with big outcomes those vintage years 2023 is the is the first vintage year where we're actually starting to see high enough rates that have historically generated that kind of return and so I do agree with you David I just think it's shifted out by a couple years 23 24 25 those can be some real power law years I think because
we're going to have just based on what the FED is saying five and a half percent interest rates for the foreseeable future which is it's a huge it's a huge number the risk that's a huge I'll tell you what that is you know what it is though chamoth I think to build on your point and Freiburg I'll bring you in on the air for this creates an environment in which
discipline on all sides of the table boards management teams investors Rank and file everybody has to be focused everybody has to have sharpened swords and that little bit of headwind is and the the ability to raise Capital being harder is building more reserve and more resilience and grit in this set of Founders it's kind of like parenting in
a way like if you are too permissive you give too many options kids aren't disciplined and now this group of entrepreneurs I'm seeing who haven't given up my Lord are they becoming animals in terms of like pure Samurai in terms of how they're running these businesses anything that's not efficient projects that were the third or fourth most important project cut cut cut now
it's taking them 18 months Freeburg to maybe get discipline but maybe you could speak to the next three years and the opportunity for investing in this cohort because man that last cohort is going to be really really challenged and they'll probably do six percent returns just like your money market account can do right now five or six or what bonds can do but this next
group man we're seeing dogged entrepreneurs who are focused on reality and there's no hallucination now that this is going to be easy there is no Grand Illusion here uh what are you seeing in the marketplace about if if the market average return inventor in early stage investing is going to be six percent remember it's it's not evenly distributed
so you know 80 percent of funds could end up having net negative real returns and 20 make money and then those there'll be a very few that will make real money and you know that's the the nature of having you know a very kind of low average return on the industry is there may be a lot of wipeouts on the investor class folks that have only had one or two
funds and then just got blown up in the cycle um I think there's two groups of companies out there one is companies that obviously have been funded and are doing stuff and are active businesses and they've raised money in the past and that's where there's going to be really ugly times I've mentioned this in the past but I do think that there's a significant number of these companies
that if they were to be truly valued on first principles in private markets today they'll get valued as at a value that's less than their preferred equity which means that there's a difficult restructuring needed in the company and not everyone's going to be willing to embrace that so that's what's going to trigger a lot of the wipeouts in the market it's not like the
businesses are valueless it's at the capital structure makes it difficult to refund them to fund them and continue their their operations now for all the new businesses as you highlight man there's so much extraordinary leverage out there you know left and right I think we talked about this maybe a year ago that there was a big bubble coming in AI but
I mean left and right in nearly every Market every segment you won't see a pitch deck that doesn't have those two letters in it right uh I mean I'm sure you you guys find me yeah it does feel it is it is hard not to feel like you're a little bit of a lemming if you buy into the AI stuff but I will say that the use cases we're seeing are really really
incredible totally I didn't feel this way with the last couple of waves like the whole web 3 thing never totally made sense and crypto always felt a little bit speculative like kind of unsure but the AI thing seems like it's going to deliver real value and I'm seeing like already three major Enterprise use cases number one is just Auto summaries like being able to summarize very quickly a
thousand articles or a meeting you know spitting out a like a summary of what just happened in a meeting and it could break it down between a recap and action items it just does all the work for you second thing is like in-app customer service kind of like a co-pilot but there's no reason to contact customer support anymore because you can just ask the AI inside the app and like
application right and they'll be faster right that sounds like a power narrow sacks yeah they'll get it right it's like a power user who's sitting next to you it's your co-pilot and is making you much more effective in the app and then the third thing we're already seeing is autocomplete for everything I mean it is like Bonkers how you know how you get
like little types suggestions in email yeah but it's like two or three words the AI is going to be able to do type ahead for any content type to-do lists tables it's so it's Bonkers you see it in Google you see it in Google Sheets now like if you type you know equal sum it's like oh here's what the seven most likely things to happen next are in which case it's kind of like
you use the chess.com app I don't know if you've used it with like the heads up display where it's showing you the different moves and this is a book Move versus this is not a book let me make a prediction all of the things that you guys said I think are incredible consumer surplus business opportunities which means that the ultimate Winner Is
Us incredibly incredibly productive and more leveraged in how we spend our time which will allow us to do all kinds of other interesting things with all the time that we save that I think is almost now a certainty the problem with consumer surplus businesses is oftentimes there is no money made in the funding of them and really where the money is made isn't
enabling it so for example so far what I would say is there's very little money that has been made in AI there's been an enormous amount of money that's been made by Nvidia and the reason is because they are the pick and shovel provider in the into the industry and so that's an example AMD I think can also benefit so the Silicon players seem pretty obvious here
maybe some of the cloud players um the problem is the cloud players are trapped inside of other big companies with many other business models but I just want to put out there that I think David you're right that the consumer a hundred percent wins but economically it's not clear to me that there is a winner that is Venture fundable well hold on a second
yeah the Levi strausses of the world right in the Gold Rush the people that made the picks and shovels and the jeans are sure to make money yeah and the people that pan for gold is much more speculative and harder to see right now yeah so I think you have a point that so I mentioned three use cases I think are killer use cases I've already seen demos
of today and when you look at them you're like okay this has real applicability I mean the AI is going to be it's going to powerfully change our work lives I'm just focused on Enterprise so now I don't know who benefits economically from that that functionality that I mentioned I think is likely to be pretty commoditized pretty soon but it's going to be
incorporated into lots of different apps and ways that are hard to predict right now I think that this AI Revolution is going to do for SAS what mobile did for you know a lot of the web 1.0 companies where like for a lot of these web one companies they were either disrupted by mobile or they are turbocharged by mobile so you think about Facebook it successfully made the transition and
mobile made its business so much better because people were just using it a lot more on their mobile devices there are a lot of other businesses that just kind of fell by the wayside because they just couldn't make the adaptation from desktop to mobile Computing I think AI is going to be like that for SAS where there's going to be a lot of SAS product service
right yeah you're a hundred percent if you can incorporate the AI into your SAS product put in a co-pilot put in autocomplete and all sorts of other forms of value that we're just scratching the surface of you're going to be able to deliver so much more business value but if you're not able to do that and somebody else can then you're gonna get disrupted look at some
of these Enterprise spaces like take something like APM right like application Performance Management that's an entire ecosystem of Enterprise companies it's probably 10 15 20 billion dollars of collective market cap and I'm just going to say something not to not defend anybody but like that can mostly be automated by AI those are simple heuristics that can be
embedded in a way that's completely novel where this code Library just gets dropped in and all of this stuff happens relatively automatically now so there are all kinds of other sectors to your point that get crushed then the question is who provides that layer now for free in their existing SAS toolkit or their product that now all of a
sudden captures more value as a result and they can sell it for pennies because it's incremental to them in terms of their margin and revenue I think you're right Hardware wins I think cloud wins Big because if you keep adding to these you know uh models and ones 10 20 better people are going to be willing to pay for that but then when you think about
consumers whether they're Enterprise or actual consumers I believe this stuff is going to provide so much value that people are going to take their wallets out and be more than willing to spend for it it's more valuable than Netflix description okay I'm gonna take this side of it imagine you take your videos of you learning to ski and you put it into an AI coach and it's like here's
how to and it just draws on it here's how to be a better steer this is going to blow people's minds and you'll be more than willing to spend 25 bucks a month I disagree with that and the reason is because we've spent now two decades in that's a lot of muscle memory to unwind of people that have been consistently given More For Less and I think that we shouldn't
underestimate the expectations we've all collectively created by building software tools that have that inherent deflationary aspect to them and so I just think that it's gonna it's a very high high bar I still think there are subscription services to be built I don't disagree with you there Jason I just think that in general though the de
facto business model that we've created in Tech is more for Less and we've used technology to give us operating leverage to create margin structures that other companies couldn't copy and I still don't and I think that AI accelerates that not changes it I think it's going to be the opposite if you look at Netflix if you look at Disney they've been raising prices
providing more value I think that this is going to provide so much value that the incremental 10 bucks a month five bucks a month per employee is going to pay off so much that this could be of slack or like some presentation software there are a lot of people who are making PowerPoint AI PowerPoints where it makes you a new deck or a figma with AI these things are
going to be so powerful people are like it's totally worth an extra 100 bucks a month because I can get rid of another employee this one employee can now do the work of three [ __ ] it man I'll give you a thousand dollars deflation a really good a model if you just added the LTV event the software company is going to make more money I'm just saying
it's deflationary that's deflationary okay it's deflationary on the entire economy but that software company that figures out how you can fire two accountants and keep one and make them as good as you know three yeah software right you're selling consumer surplus okay I think we're in agreement Freebird sold them as silence you want to chime in on this
you still with us Southern silence okay technology drives prices down well technology is about doing more with less right it's about doing more with less and the AI helps you do so much more with the same amount of time or less time I think your whole point about Disney and Netflix Etc is because they aren't you know innovating on either side and so in order to drive earnings
growth they're having to raise prices but that doesn't speak to the benefit of Technology they're innovating massively they're adding massive features to their products and massive new shows I mean I think there's pricing power in this AI thing that that's just my belief I could be wrong about leverage yeah I mean look I think I think your point like so my
general rule of thumb tell them on technology is the technology Creator the technology company should generally be capturing about one-third of the value that they deliver to the customer unpack that why where do you come up with that so I mean it's just kind of where and give an example yeah yeah so like let's say that you as a food delivery company you have to
pay a human 10 bucks to deliver food from you now let's say I run a robot my amortized cost of running that robot is uh two bucks so it's eight bucks cheaper or call it one dollar so it's nine dollars cheaper I should charge you four bucks you know because four bucks is super competitive with the existing market and it'll keep me competitive against the
other automation companies that are going to start to emerge it's just kind of how market dynamics end up working out if you charge too much you're going to invite people to come in and compete with you if your Command Technology commoditizes remember all technology commoditizes over time and if you don't charge uh enough you're not going to make enough money to
be able to reinvest in scaling your business and doing more kind of interesting things as a platform so you know generally AI provides more leverage to Sax's point if I can build an application I don't know if you guys have seen these incredible UI apps that are built in AI now where I can say with a prompt hey yeah we talked about it two weeks ago yeah right make me a dog
walking app interface and it builds like the three steps of the dog walking app and gives you a bunch of options and you can pick the one you want I would typically have to pay a design firm fifty thousand dollars to do that work for me so if it'd be AI is doing it automatically you know I should be paying let's say fifteen thousand dollars
for that product for that capability the margin on that is 100 try 50. right whatever it is very low and the margin on that's 100 whereas the margin on paying people to do design work as a design firm is very you know not not a great margin you're having a page you know why we're having that we're working it out in our heads right now one group of us is talking about comparing AI
software and AI services to the existing software stack and then on the other side of the discussion we're comparing it to the humans who are currently doing that work imagine the six percent that two Brokers get you know doing a the sale of a million dollar home and that's sixty thousand and AI could negotiate that and find you a Better Home and sell your
home for the optimal price for less than that sixty thousand what would you be willing to pay for that right and the same thing with the designer of the logo I don't think that's how it's going to play out exactly jaycal because to completely eliminate a job function you have to do you know 100 of it and you have to it you know 100 of the job function as but
as well as or better than the human whereas I think as opposed to a model where you solve the human in the loop but they're much more productive because they're working with an AI they're augmented they're performing The Iron Man like model so that's more effective yeah so I think if there's a job reduction it would be more the case where they've got
a team of five accountants and they go to two or three because now they're just much more productive I don't think they go to zero that's my sense anyway I look at Outsourcing as a possible corollary to this you remember when you moved the accountants to Manila where their knowledge workers there and it knocked out half the price two-thirds of the price whatever it was this just feels
like that on steroids to me if you have a business model like you know Infosys or Tata or one of these things that's lever to utilization rate this is the most obvious way to basically add many potentially percentage points if not tens of percentage points of utilization to your business that's all money free money for you right because now you'll
have fewer people they'll be more utilized and they'll have more leverage because they'll be using a bot or some AI agent to help them write code write unit tests all that typical stuff that right now you Outsource and even if you pay a marginal cost you add the labor Arbitrage to technology Arbitrage now all of a sudden these businesses look really really
interesting yeah customer support definitely gets revolutionized right because the initial it's a no-brainer you know the first line of defense is going to be the AI using you know text to voice and it can choose what language it wants to Output to what accent so you'll never know that you're you'll think you're talking to someone locally literally you'll be in 50 languages with
the right answer and you don't need to build up that entire group I mean this I think we're underestimating in some ways yeah but what's going to happen here but my point is I think that a lot of the customer support inquiries just go away because the help the assistant gets built into the tool directly so you never even get the coaching you as you
go yeah like why did you you know if you can just ask it people do that right now on YouTube if you just type the question into YouTube and you find the video that takes five minutes but you're saying this is gonna take 15 second sex because it's gonna be right there I think what Zach said before is hugely important when you think about how AI touches non-technology businesses
what he said is the boundary condition which I think is right I think he nailed this which is the boundary condition for AI to replace a human is where the threshold error rate of that AI is the same or less than the human right if you look at very complicated markets where does regulatory capture rear its ugly head it's in allowing humans to be
error prone and you can't do anything about it take Health Care if you go into a hospital there's a certain error rate in every surgery right there's a certain error rate in the things that happen but there's probably a whole bunch of ways in which that entire infrastructure can be made much much better with AI right a robot that does laser-guided precision surgery
characterizing tumors 100 with 100 accuracy so you always get 100 of the cancer out when you go and get surgeries done all these things are possible now and all of a sudden you take these error rates that can be high as as high as 20 or 30 so for example breast cancer surgeries the dirty secret of our healthcare industry is that has a 30 error rate you know that can and should
go to zero and now all of a sudden so these highly regulated markets I think can become much much more efficient and and leveraged and at past that consumer surplus onto people in that case it's healthfulness which I think is a is a big deal interesting yeah incredible I mean it I got all the videos I got all the loops I went to the one down on El Camino Real it was like
going to a spot in and out no big deal but I got the results and it's like oh here here's a tiny of little the Lings that are not worth cutting your body open to look at but just so you know your knee your shoulder your kidney there's a little paw up here there's a little polyp here whatever there's a little growth here but let's see in two
or three years just monitor it and I'm like oh my God I'm so grateful if this thing gets down to like 500 bucks which it obviously will or a thousand bucks and everybody's doing it and then all that data's in there and then the AI is looking at it like you're saying I mean the the early detection was the AI able to tell the doctor how full of [ __ ] you were
you know you're not supposed to eat for 24 hours so they they didn't get an accurate reading on BS there's your cold oven everybody yeah I here's a really important clip for Founders uh Play the Steve Jobs clip this is super important when looking at web3 versus AI to Sax's point you've got to start with the customer experience and work backwards to the technology
you can't start with the technology and try to figure out where you're going to try to sell it and I've made this mistake probably more than anybody else in this room and I've got the scar tissue to prove it and I know that it's the case and as we have tried to come up with a strategy and a vision for Apple um it started with what incredible benefits
can we give to the customer where can we take the customer not not starting with let's sit down with the engineers and and figure out what awesome technology we have and then how are we going to Market that um and I think that's the right path to take can I ask you guys a question I sometimes I go down these rabbit holes I'll watch hours and hours of Steve Jobs clips
what do you think makes him so calm doesn't he just strike you as incredibly just like calm and like comfortable with himself and just aware I know what it is he was so much better and aesthetically Building Product than anybody else he when you think of that PC era of no taste beige boxes and everybody having no style and just no Swagger he was studying you know German
design Buddhism tripping on acid and like just understanding the universe at a level that Gates and the other contemporaries weren't they just weren't as Transcendent in understanding product design as he was so it was like when you were saying you were playing poker with a bunch of four-year-olds or something that's the analogy he's just on such a
different level that he's watching people make you know as400 and uh you know IBM PS whatever like just garbage computers garbage operating systems and it's just like the thing is like if you look at any era just the way that he communicates there's just a level of calm I don't know how to describe it you understand what I'm trying to say like he he just seems like he just sees
through all the noise like he's seen through the Matrix like he's unplugged himself tax is unimpressed okay there you have it no I'm very impressed with Steve Jobs I think he understood product development better than anybody else yeah clearly that's it I mean my favorite is Steve Jobs passage is the one where he describes the John Scully disease do you guys
remember this yeah no oh here it is you know one of the things that really hurt Apple was after I left John Scully got a very serious disease it's the disease of thinking that a really great idea is 90 of the work and if you just tell all these other people here's this great idea then of course you can go off and make it happen and the problem with that is
that there is just a tremendous amount of craftsmanship in between a great idea and a great product yeah so true yeah I mean I tell people it's like a Rugby scrum you go you know you got to get a whole team to get the ball down the field it's not like one person put the ball down the field and you know they kind of maybe suggested a play but once you're on the field Everything
Changes and everyone's involved in getting it down the field that quotes where the name for craft Ventures comes from oh really oh a little known fact yeah I didn't know that yeah section 230 we talked about last week the Gonzalez versus Google case the justices heard oral arguments and plaintiffs seem to fare poorly quote from scotus blog Justice
Elena Kagan suggests that it even if section 230 is not well suited to address the current needs of today's internet such as such a task was best left as we predicted last week I think sax you did best left to Congress rather than the Supreme Court quote these are not like the nine greatest experts on the internet Kagan observes actual thoughts yeah I mean
this is just uh I think really a quick update to what we talked about last week the Justice heard oral arguments they seem to be very skeptical of the plaintiff's arguments even Justice Thomas who has written the most skeptically in recent years about the broad immunity that tech companies enjoy under Section 230 seem surprisingly sympathetic to the theory that the ninth
Circuit Court ruled on which is that section 230 protects recommendations as well as a provider's algorithm treats content on its website similarly so even the Justice who I think was most likely to reign in 230 seem to be more comfortable with what the defendant which was Google was saying so it looks to me like Google and big Tech are going
to win this one any thoughts no not really I think I want to know what you guys think about Trump showing up with Big Macs and water in East Palestine I mean he is uh he's a media genius he beat Buddha judge to East Palestine yeah that was um literally pull up my tweet I think this is the power we because Trump has been out of the public disease
he's immediate he is a media safon literally Biden is in Ukraine saber rattling over air Sirens that may or may not be true they were fake who cares who cares anyway well no no it doesn't matter no it doesn't matter no we don't know we do we do actually there okay because I don't need to be hold on a second I don't need to be there because Jake Sullivan participated in a press
conference and he was asked by a CBS news reporter if the U.S gave the Russians any kind of heads up that the president was going to be in Kiev and what Sullivan said and I quote is we did notify the Russians that President Biden will be traveling to Kiev we did so some hours before his departure for deconfliction purposes you know what deep confliction is right it's when the
U.S tries to avoid an accidental conflict and you know Putin's not crazy enough to try and assassinate Biden so the Russians were not attacking Kiev that day in fact they haven't attacked Kiev as far as I know for weeks so these Air Raid Sirens were basically just pure theater but the amazing thing was that if you don't know if you don't know that
Biden orchestrated is my point people come on Jason doesn't mean Biden pressed the button so don't don't also take it to the other extreme who knows who went who who why the siren went off but put it aside this was a joint event between the Biden Administration and the zielinski team they organized it the whole thing was choreographed how did that red carpet
get there Jason was that an accident too okay let's put that aside accidental I mean let me give you your GOP let me give you your GOP win Donald Trump is a savant and he went to America to the place that we were reporting on the under reported story people in East Palestine are being ignored and he comes there to help the people of America I give you
all credit your guy sacks did the most amazing media move in history he went to Middle America where people are suffering as opposed to a war that nobody wants to be in and spend all that money on we won't spend money Palestine but we will go spend billions in you can't go all right you don't know what this reminded me of and you may think this is a weird connection but it
reminded me of the ending to the movie uh boys in the hood do you remember what happens at the end of that movie no I haven't seen it in years ago okay I was 30 years old but Ice Cube you know plays uh this character Doughboy and his brother gets killed yep and at the very end of the movie he gives this speech to Cuba Gooding Jr where he says you know I
turn on the TV and there was all this [ __ ] about violence in a foreign land and there was nothing on my brother getting killed all this stuff about what's happening in our foreign countries nothing about what's happening here and then I think the most memorable line was either they don't know don't show or they don't care what's going on in the hood right so what's going on
here is the people of East Palestine Ohio are being engulfed in a plume of carcinogens and toxins and Biden is off right pursuing this crusade in eastern Ukraine and it's not just him I'll I'll dish out to Mitch McConnell as well Mitch McConnell those are the neocons of or neocons yeah avocado was on TV saying that the number one priority of the
United States right now is defeating Russia in Ukraine it's not helping the people of of Ohio it is not securing the Border it is not solving crime in our cities it is not making our schools better it's running off and basically supporting this war in Ukraine so both these octogenarians Biden and McConnell both they either don't know don't show
or they don't care what has happened to the United States of America he's a genius but it's not even genius I mean it's so obvious that you go there it is so obvious nobody wants to be a judge didn't go there and Biden didn't go there it's not it's not Geniuses didn't go there where's the Sanders yeah he hasn't declared no make a trap I think the most senior Democratic person that
went over there was Josh Shapiro who's the governor of Pennsylvania he got there before Buddha judge what is going on I mean and this it's it's a never-ending war and so you know this is nobody wants to fight a never-ending War this is this is what God bush in trouble right like this was the big critique it's like we're spending all this money over in the Middle East on these conflicts
I think actually it's a good analogy so the with Bush senior Bush actually this is in 1991 he won the Iraq war that was actually a stunning foreign policy success because he actually didn't go too far he didn't go all the way on the road to Baghdad the way that his son George W bush would creating an epic disaster so Bush 41 delivered a victory there and he
still lost election why because he seemed out of touch he wasn't focused on domestic problems the American people want an American president to focus on American problems and even if Biden delivers some sort of victory in Ukraine if he ignores these festering problems at home then he is I think vulnerable for this re-election but I think the
truth of the matter is that this war is going to turn out much worse than the Iraq war did in 1991 because in 91 we showed restraint and we knew what our Vital interest was and we kept our objectives limited and we kept the timetable very short what is Biden doing here Biden won't tell us what the objective is it's just whatever the ukrainians want he won't tell us what
the timetable is it's basically for as long as it takes and then meanwhile this week you had Kamala Harris go to the Munich Summit declaring that the Russians are guilty of crimes against humanity which that's something that we could have assessed after the war think about the incentives you're now giving the Russian leadership before we said that we just wanted them to leave when
you accuse them of war crimes it implies that we're going to go chasing them all the way to Moscow they're not going to want to end this war they can be put on trial at the Hague I mean this is highly inflammatory so you know this thing is not going in the right direction yeah and that was the thing I didn't like about Biden's speech over there is just
he's escalating escalating escalating hey that we have to stop Putin I mean which you do he did invade another country he didn't cause three or four hundred thousand Russians have died according to reports over a hundred thousand ukrainians have died according to votes neither side is given the accurate number because they don't want to demoralize their constituents
but the amount of suffering going on here is extraordinary and I think it should be the West who is going sen macron send somebody from Germany send some you know group of people to then go to Ukraine and work this out but you don't need to go in your saber rattling it was too much saborating for me it is the escalation we need de-escalation in these situations not
saboration but but binders really painted himself into a corner here because before the war he refused to take NATO expansion off the table he refused to recognize the Russian interest in Crimea and we gave no support to the Mystic Accords which would have given some limited autonomy to the Russian speakers in the donbass area if we had just done those
three things there would have been no war Bayan refused to do that he refuses to take the expansion off the table even today so he has nothing to compromise with he is dug in and the problem we have now is that it's a lose-lose scenario if the ukrainians keep doing poorly because right now it looks like they're on the back foot what is the United States
going to do we're going to let them lose this war or are we going to keep giving them more Aid and step in it looks to me like Biden now he has invested in his whole presidency in this and he can't just let them lose which means more escalation from uh and on the Russian side if the Russians lose then they have an incentive to use nuclear weapons to
rescue the situation so it seems to me that both scenarios here are really bad and we don't really have a good way out of this we're looking for some sort of magical Goldilocks scenario where the Russians sort of lose but not enough to use nukes you know the Administration has not given us a clear picture of what victory looks like here that's actually reasonably achievable
in a reasonable time frame at a reasonable cost what do we think uh a freeberg of Xi Jinping making overtures and hey maybe we should work towards peace if you follow the money he wants cheap oil he wants this thing to end and he wants the West to be buying goods from China the West wants to sell a bunch of armaments the military industrial com complex is absolutely in Delight of
replenishing all of these weapons uh perhaps a little cynical to follow the money concept but what was your take on the chessboard of Xi Jinping he's going to visit Putin before Biden does and he wants to build Bridges and we want to say morado what are your thoughts isn't he getting like I mean China buys energy from Russia today they buy oil on
sale at a pretty cheap price so if I'm China I want this to last longer don't I like why would I want to end this and then have Russia's markets open up because if their markets open up the markets normalize to market prices right now they're getting a discount so I think yeah rather they certainly don't want things to escalate the question is how quickly
do they want them to de-escalate so if I'm China I'm kind of probably playing a little bit of a you know middle line here I I just I obviously don't want to see a big hot War China's got its own domestic problems right now that seem pretty significant and existential and having access to cheap energy seems like a benefit obviously if there was significant
conflict and escalation of conflict that would be very bad from an economic perspective for China so they they're probably somewhere in the middle like a slow resolution let's say I don't know I mean this is pure speculation this is just me but you're a sack search moth Europe isn't going to buy Putin's oil anytime soon right they're now gonna but he's able to sell it to China and he's
able to sell to India and the rest of the world there was actually an article in today's New York Times about how the West may be unified about Ukraine but the rest of the world is not the article was saying something that Chris the war said for a while which is we actually don't have the whole world with us at all the brics countries are not with us
the emerging world the whole southern hemisphere basically is not with us they would like the US to play a more constructive role in finding a peace deal not like you said Jason saber rattling or escalating so the rest of the world is not happy with us and this is why the Russian sanctions have not been effective I think the Russian economies had like a three to four
percent hit it is not the collapse that was predicted because there are enough other countries willing to do business with them would this have happened Venture month if Trump was president and how would Trump have handled it do you think just Game Theory here I'm just curious because Trump almost won right I mean if Trump had won what would this
look like would Putin have gone in there if Trump was president and how would Trump have handled it because Trump seems to think I would have just told him don't do this and they wouldn't have done it I mean this is the most obvious compliment I can give him I think that he is exceptionally pragmatic on being anti-war and I think that that is one of the most
positive characteristics that he showed he was really the only President I think in modern history right sassy poo that hasn't gone misembroiled in a new new Wars yeah it is the best part of him yeah he's been incredibly incredibly consistent so I suspect that there would have been some kind of a deal I know that sounds so ridiculous to say but there would have
been a deal with a deal I actually agree he's a deal maker Jason he gave a statement North Korea he went to North Korea and met with he'll shake hands with anybody exactly he would have fired all of the the Deep State blob that started to position anything towards a conflict so I think he would have shut the door so ferociously on Ukraine and NATO and anybody that crossed that line
he would have tarred and feathered publicly and I think the end result would have been that Putin could have found an off-ramp well before he invaded probably totally yes I I agree blame Germany for all this right he called it well Trump very early asked the question why are we spending all this money to defend Germany when Germany has this big
pipeline deal with Russia it doesn't seem like they need our protection they should just pay for it themselves but I think there's a separate point that jamathis made that is a really good point which is Trump's instinctual resistance to what the Deep State wants and he actually said it this week he gave a um a two-minute televised statement that was all over Twitter
where he basically made the argument that listen the reason why we're in this war is because the military-industrial complex and the foreign policy establishment they basically courted this conflict and they are working at odds with the interest of the American people it's actually a fairly radical critique I don't think a major presidential candidate has run against
the military-industrial complex the way that he is now positioning himself and let me tell you this you know I've said it before he's not my preferred candidate but if this war spirals out of control either you know it turns into a even bigger conflict that draws Us in or it turns into a big recession because I don't think we've seen the last of the supply shocks from this war
if we get a recession that Trump can I think lay at the feet of this war he's positioning himself to take advantage of this could be a silver bullet for him I don't think he has any other way of winning but you know if this turns into a big mess you have your tinfoil hat there put it on for a second I want to talk to tin foil sacks Tim foil hat sacks let's put
them the tinfoil hats on here do you think Putin is escalating this as a way to position Trump to where Putin says he could say this during the election like listen you know I would love to talk to Trump and what if Trump goes and talks to Putin or does a phone call with him so wait so so your theory is that Putin Theory so so your theory is that Putin's
escalating this into potentially a nuclear war to get Trump reelected that's your theory and I'm the 10 Trump I'm just tinfoil adding it the reason that this has occurred no no now that this has occurred not that he did he did the elevations you're the one that's in foil hat territory the soil hack corner at the end Putin the reason why not that he started
the war for it that he would end the war to give Trump a win how's he going to end the war for Trump what are you talking about during the election he's he does a call with Trump and he says you know I talked to Trump about this and I'd love to do some negotiations with Trump I've always had appreciation for his ability to help negotiate things I would love I would
feel better about negotiating with Trump who hasn't Sable rattled and told everybody in the world that I have to be that there isn't regime change so I'll see how you come up with these conspiracy theories and then attribute them to me and called me the tin foil hack guy I know you just said this is his silver bullet no it's a silver bullet off the
rails yeah if this war goes off the rails and the economy goes off the rails because of this war Trump right now is positioning himself to take advantage of that fact and um DeSantis is too far some critical things about the war skeptical I would say things about the war this week so it's not just Trump but look the thing you have to understand about this war is is existential for
Putin it's existential at this point yes he cannot back off and it's extracurricular for us yeah yeah and that's why Obama said back in 2014 that the Russians have escalatory dominance they will always climb the escalatory ladder all the way up to nukes if they have to and the sooner we recognize that fact the better off we're going to be I think the good
news is that weird speech that he did where he kind of I didn't see the speech was it good yeah we just talked about it it was two minutes it was fabulous Sox just mentioned it the crazy thing is it sounded a lot like we'll be talking on this podcast which is he talked about all these generals that retired Victoria Newland by name by name by name he he he
really did explain to the audience this because I didn't see this because I'm on a different time zone and it must have broken when I was asleep or it's a two minute video in which he like I said he attacked the military industrial complex and the foreign policy establishment for creating this war and he mentioned Victoria Newland by name let me tell you
something Newland is going to be it's going to be a very popular message it is very popular Newland is the falchi of this situation okay the same way that sounds she was supposed to be protecting us from viruses and then finally ready for some data function research Victoria news now we got a label 19 misinformation Victoria Newland was supposed to be our
Chief Diplomat with respect to Russia and Eastern Europe and what did she do instead she ginned up this conflict how we backed an Insurrection in Ukraine in 2014. Jason if you didn't like the Insurrection of January 6 let me tell you you aren't going to like the Insurrection that she staged in Ukraine because they brought in these Ukrainian far-right nationalists as the muscle and
that is did he bring Big Macs did he bring Big Macs with him did you say he brought Big Macs too he's Palestine he brought food to them yeah you're ignoring what Zach said but no no I got it I I'm not disagreeing with him I think if you want to references nobody wants to be in a Forever War yeah but let me explain why he mentioned Victoria Newland he mentioned her
because she was the state department official who was responsible for backing this Insurrection of a democratically elected leader in Ukraine in 2014 named Yanukovych okay Yanukovych was trying to was doing a balancing act between Ukrainian nationalists and Russia and it was a very delicate Balancing Act and we basically toppled him and ever since
then the relations with the Russians over Ukraine have been headed south if you're wondering why Putin sees Crimea was in direct retaliation for the coup that we backed in Ukraine in 2014. this is the origin of the conflict and you know if you want to understand where this comes from you have to go back to this and the fact that Trump's willing
to talk about is pretty incredible I think that the good news for us is I think that heading into June and the debt Fiasco that's looming I think we're going to and I think this will help a lot get distracted with domestic issues in the sense that it'll take some heat off of escalating all this foreign adventurism you know this it's such a see like this is such a
scene from Wag the Dog every time there's something inside the United States that we should really focus on we have this Wag the Dog moment where we get distracted by some adventurism abroad and we forget and we lose sight so we have this East Palestine thing right now in June we're gonna have to come back to terms with this debt ceiling issue which is a huge
one how we're going to resolve it it's not clear just this week the Federal Reserve basically said hey folks we're taking rates to five and a half plus and they're going to stay there that seems like no news people just seem to digest it and move on it's really incredible how we just find we're we are like uh what is it Jason the dog that chased the bumper and
caught the car or whatever yeah you caught the bumper room we've got plenty of big problems here in the United States plenty of big problems and I don't know that Wag the Dog Works anymore because I think the American people want like I said they want an American president to focus first and foremost on American problems and even remember Bush senior in 91 won that war
and still lost re-election still lost so I don't think wagging the dog works anymore it works for some short period of time especially while the media are portraying this year the air raid theater essentially the people smarten up you're so right so that issue think about bush bush came off of the Persian Gulf War with like a 91 or two percent
approval rating I mean we've never seen anything like it but he violated a simple tenet of his domestic policy which is read my lips no new taxes boom lost and it was not even close in the end so I think you're right I think people really care about the economy go Nikki Haley and do how much do how much debt do we want to go into over Foreign Wars the only thing I ever liked
about Trump was his policy of not starting Wars and not getting into them and Americans want to focus yeah I'm a balance sheet voter right now I'm voting based on who is going to be fiscally responsible me and freeburger are in the same boat here I think we've got to be real careful in how we handle China because you had blinken on all the
Sunday shows basically denouncing them expressing outrage that they might support the Russians acting shocked shocked that they could do that we don't even have the ability anymore to understand that other countries do things in their own interest and we can't accept that and instead we act as if foreign policy should be conducted according to this morality play that
we've created and if you don't do what we think is right then we're going to express all this outrage and condemnation at you and somehow that's going to get you to violate your own interests that's not the way the world works and what we're doing right now what we're doing right now is pushing China and Russia together into a new axis block this is very foolish very foolish even
during the Cold War okay we work to keep Russia and China apart and and whatever you think of those regimes today they were much worse back then remember the Soviets you had a stalinist regime the Chinese had Mao those were two of the three biggest Mass murderers of the 20th century and Nixon and Kissinger still went to China and shook Mal's hand and
toasted to him because it's important to keep China and the Soviet Union divided and what are we doing today we are basically pushing them together with all this condemnation and outrage it is not a smart strategy can't disagree we need to be building bridges with India that's a key key relationship and China I don't know why we're not figuring out yeah
this is poisoning our relationship with India India is the biggest democracy in the world and our relations with them have gone South since this war because they have a friendship with Russia that goes I mean I would rather see Biden go to India and start building some bridges there yeah I agree I can't disagree Jacob how's your fundraising going for
lunch run four oh thanks that's a great question you know we're doing that Public 506c public fundraising thing and so I did a bunch of webinars and without doing a single in-person meeting 51 million dollars in requests came in just you know to a type form basically a form online and now we're going to be starting in the next month after I get back from Japan actually meeting with
the you know big LPS in the world and I want to make a trip to the Middle East and just go all around the world and meet all the big funds so thanks for asking yeah I think it's gonna change everything yeah good for you can you imagine 52 million dollars in commitments before actually doing the actual tour that's awesome just out of the gate and my last
one was 44 and so I think this 506c like I can be public about the fact that we're raising a fund and so it's just absolutely amazing well congrats and I have one question for you yes go ahead can you be replaced with an AI the world's greatest moderator I mean it's not going to make great jokes not for not for now and uh oh you know what I had an interesting point about
management fees and these funds um just to Circle back did you know this is what I heard that Benchmark during that worst vintage you know after I think the great financial crisis or maybe it was the.com it was either of those they took their management fees because that fund was so you know challenged they deployed the management fees into primary investing or I'm sorry to
follow on investing on their winners to regain the results can you imagine in this market a VC who deployed capital in 2020 2021 saying you know what we've got these management fees millions of dollars in the future to pay for managing these instead of taking that money I'm going to put that into your into the companies for my launch fund for each
month I had a couple of opportunities and I was like you know what I'm going to take some of the management fees and invest in some of those existing companies to try to Goose the returns for my LPS and so we're at 104 or 103 invested in the capital just by just taking a couple hundred grand off of the management fees and I'm like well this is a really interesting track of you
like why am I playing for the management fees or am I playing for the moike I'm paying for the moink right I mean you should be Jason by the way it's not true that the AI can't tell jokes our friends uh Bill Lee tweeted how the AI told a joke in this the style of Jerry Seinfeld then he asked us to tell a joke in the style of Dave Chappelle and it refused
so the AI can tell a joke if it wants to it's racist but no only clean jokes oh I see it doesn't work blue I guess I don't think every I don't think Dave Chappelle has to be blue but it would not tell us a joke wow I mean we gotta get Sam he's an iconoclastic like he would be it Sam would be in the uh par all in 52. well by the way actually
he's got a shot there after our last episode in which we were raising concerns about the AI bias they published a blog post saying that yes the day after if bias has occurred it is a bug not a feature and they are trying to be even-handed so I'm glad they have announced that and that's their standard and we're going to hold them to that standard but I'm glad
well they have to be public like this yeah yeah I mean I read the blog post it seemed reasonable it's great they're addressing it and I also think they're now doing embedded citations so somebody tweeted at me after we had the whole discussion about credit and when they were doing facts they're now saying and they haven't made an announcement about this yet but they were saying
according to this Source the following according to this source so they're starting to Source in the copy that's being written so that's a big step and then I was talking to Adam D'Angelo about Poe which is an amazing app you should try it I think it's the best one out there right now of all the chats Poe is an app based on the core data set and
I asked the questions about the trip to Japan and the Secco and this and that and it was extraordinary how well done the answer was with bullets and then I asked them online hey what about citations back to the original quora questions and he said yes we're going to be adding that so and then I was thinking wow if you add to the Cora Corpus and then they link back to your
answer that's awesome for me as a person who's answered hundreds of questions on core to build my reputation so I think Cora is for me I think Cora is the could be the Google I think chorus got a better data set and if they play that right I think they could be better than chat GPT and they said you have the same publishes based on the quora data set
data set poet it will answer questions like the best answers on quora is that where is that you're what you're saying yeah that's kind of interesting is using quora as the primary data set I'm sure it's using the rest of the web too and Wikipedia and everything I think I don't know why they're calling it po I think they should just do quora chatbot or
whatever yeah but just try it it's called po download it you can use it today you want to know why I'm excited about that because you got a little tasty pool you got a little slice I got a little slice of Cora oh good for you well I mean Cora was always like are they ever gonna make money or are they just going to build this incredible data set and do nothing with it yeah what did
I say I said I said AI is gonna be to the to basically SAS what mobile was to web 1.0 you'll either get disrupted to get turbocharged by it it's gonna be I I think quora is the number one player in AI going for it I know that sounds crazy but the fact that and I think Reddit also has this insane potential if Reddit had a chat bot because think about how
many times people do a search and YouTube is the other one where they say what's the best sci-fi movie of the year or which directors make the best screenplays or whatever and then they put the word Reddit at the end where they put the word core at the end where they put the word YouTube at the end to just narrow down the Corpus of where to find the answer go I've worked with yeah
I've known D'Angelo for 17 years now smart cat he was the CTO of Facebook when I worked there the single smartest and best single smartest person I work with and then separately one of the most absolute genuinely best human beings in the world can we get him out he does he doesn't is he not a good public speaker or something because I never hear him talk
I'd like to get him at all in Summit maybe D'Angelo is just so superb on every Dimension we should get him on actually just because I didn't know he was working in the AI he has a lot of interesting thoughts about you know social networking platforms and and he's on the board of opening oh okay oh get him on the pot or maybe you own Summit 2023 all right everybody it'll
definitely make the anti-establishment list definitely anti-establishment yeah okay so for the Sultan of sneaking out uh he left and the dictator and what do you want to be referred to now passages the peaceful pacifist The Peacemaker yeah you are the saxophist I'm the world's Undisputed greatest moderator on the number one podcast in the world for now until the AI replaces
you yeah I I train the AI to replace your sacks Ukraine UK and Ukraine fight and binding Biden no Nikki Haley known stop making Nikki Haley happen Dan the data set has been done all right we're gonna see you next time Rain Man David's side we open source it to the fans and they've just gone crazy with it [Music] besties [Music] foreign [Music]