Jason where are you that is that a virtual background or oh oh right that's place I I did look architecturally familiar to me it is architecturally significant we bleep out the beep's house but yes I am you know this is like top three or four of places I like to be a house guest you know like I'm in rotation right now my house guest
you're K kining through our friend group basically you know I'm just a great house guest people like to have breakfast with me people like having me around so I just find myself in I around the world hey Nick do you have an updated picture of K kin is he still alive and kicking he's alive for sure he's got to be 70 or something right
he's gotta be he was on one of those reality TV shows with Dr Drew I think a couple years ago what does k o kin do he's a good hang he's yeah there's a lot of these people in La you know like just they just hang they kind of hang they set things up oh my God is that current k k man he's 64 now wow God Almighty that's incredible how
did he survive he's got an Instagram account I'll tell you how he survived see no evil you're no evil exactly I didn't see nothing all I know is Hey listen man you gave you a pool house snitches get stitches I didn't see anything what did you see nothing let your winners ride Rainman David and in said we open sources it to
the fans and they've just gone crazy with love [Music] youen all right everybody welcome to your favorite podcast the Allin podcast episode 168 David saaks can you believe it we've made it to 168 episodes with me again the Rainman David Sachs how you doing buddy good yeah I heard you got a big talk coming up another speech yeah
yes a talk yes I'm giving a talk all right get ready for that all of the GOP fans out there all your saxs fans you got a big keynote coming from saaks next week also with me of course the Sultan of science formerly known as the queen of quinoa he's got another crop he's uh growing David freeberg how are you doing how's the crops how's the fields
how's life in the fields worth cold open not a cold do these are intros oh intro I'm glad you're not producing there's a reason why I'm the executive producer go ahead free how's your um how's your crops how's the how's life in the fields it's great got a great team making progress Tech is awesome having a lot of fun it's great back in the CEO seat
huh and of course the chairman dictator who's becoming completely insufferable because he invested in a company seven years ago that is absolutely crushing right now called grock we talked about it last week you're back you're back chth everybody's talking about Gro you're you're on uh Cloud 9 seem gr gr gr Bitcoin Bitcoin Bitcoin groc
gr I mean it is interesting how your book just literally whatever chat's book is that's his mood it's just Bitcoin 60 grock well the honesty level is going to be through the roof now oh right he going to be running for governor and buying the Hamptons again the truth bombs that jamath is going to drop now there is nothing like Peak Zer jth I
mean are we going back is are we back right now I on paper what is your stake and grock already worth let we're not talking we're not we're not we're not talking that's so un it's so UNC but he's buying the Hamptons and he's probably gonna buy stop what has it been uncouth on this podcast to talk about about wins or wins or
assets these are not I agree with that it's not a win you can never count you can never count your chickens before they hatch that's absolutely right I am not counting any chickens don't book The win yes there's a lot of hard work to do there's a lot more people to sell products to to build products by the way developers by the way on Gro just this
past week in the queue the weight list tripled now there's almost 10,000 developers that's a big deal well that's crazy that's a great sign I think the most important Northstar metric for these developer platforms is basically that as goes the developers so goes the platform you can kind of count on some amount of pull through because some of
those developers just statistically will land really important products they'll consume more apis they'll just consume more stuff it's just all goodness because if you have 9,000 or 10,000 people just again waiting in line once those guys get in somebody's going to create something magical that's the great part of having
a platform people just take it and they build on it while you're sleeping something amazing can just get built and you get some amount of the uh credit for that the thing that's really interesting is the number of developers is increasing I've seen two or three founders recently just the last couple of weeks who were previously idea
Founders who are now have taught themselves to code so you know this there's 1% of the you whatever number of millions of delers in the world I think it's going to like double or triple so the the pool of people who are writing code I think is about to grow very meaningfully I mean you guys you guys saw the release from the White House so
they were like we we don't want you to code and C at C++ anymore yeah that was very interesting I mean they were talking about memory leaks and like this is I guess the source of most memory leaks therefore the White House wants you to learn to develop in memory safe languages oh great awesome yeah so why are they involving themselves like they got
nothing better to do yeah I mean they have an opinion on uh you know preventing security leads all right listen the top issue this week is the same issue as last week Google's Gemini I Dei black eye continues we covered this woke AI disaster last week was kind of funny I was watching CNBC and they had a hard time describing the problem
the woman just I guess didn't want to call it what it is it's a racist AI you type in text and it gives you the opposite or just culturally insane responses so if you put in you want a picture of George Washington from Google's gemini or Sergey Bren you might get back like a beniton style diversity with like George Washington being black
or Sergey Bren being Asian Etc and so this has caused um a bit of a gr fluffle here in the industry to say the least the stock is down 5% since we talked about it last week and uh Sundar sent a memo to the Gemini team of course when they write these memos to a team it's written to the entire world because you know it's going to get leaked and so
you're writing as a such it might as well be a press release I'll give uh two quick quotes here and then I'll throw it to the besties because there's so many questions that we have to address quote number one I know that some of its responses referring to Gemini have offended our users and shown bias to be clear that's completely unacceptable and
we got it wrong and to be clear it wouldn't show white people especially ones like George Washington or just somebody who is obviously a Caucasian and so the next quote will be driving a clear set of actions including structural changes to me structural changes means we're going to lay off a bunch of people and we're going to get
rid of the Dei group that's that's a new ma that's a new found motivational riff quote in my mind freeberg will Sundar survive and is Google too broken to fix I'm just going to ask you since you work there I don't want mean to make it uncomfortable but what are the chances Sundar survives this and what are the chances that Google can be fixed and
produce great products quickly that to light users I don't know how answer the sunart Will Survive because it's kind of an idiosyncratic organization there are a couple of Founders who have super voting shares um and ultimately comes down to their decision and the direction they want to take the company and I have
no insights into what they individually think so um frankly I've spoken to a lot of folks who are investors in Google over the last week and a lot of folks are just deeply frustrated and angry um uh on a number of fronts the business really there's you know three businesses inside of Google there's you know search and ads there's YouTube and
there's cloud and the rest of it is kind of noise and to give you a sense of how big these businesses are right YouTube did 10 billion a quarter roughly Cloud did 10 billion a quarter they have this devices business and subscriptions business does about 10 billion a quarter and then search does about 50 billion a quarter and the margin on search is much
higher than any of those other businesses and so the search margin the ad revenue on search is you know probably 100% of the true operating profit of the business so the real threat to Google is more are they in a position to maintain their search Monopoly or maintain the chunk of profits that that drive the business
under the threat of AI are they adapting and less so about the anger around woke and Dei because most of the investors I spoke with aren't angry about the woke Dei search engine they're angry about the fact that such a blunder happened and that it indicates that Google may not be able to compete effectively and isn't organized to compete effectively
in AI just from a consumer competitiveness perspective so you know investors are banging the table and in the past we saw this with meta I think it was towards the end of 22 if you guys remember and it was a similar situation investors were like why are you investing in VR and AR this is crazy why do you have all the these people that
are getting overpaid and everyone started to write off the stock and the stock took a big nose dive for a period of time just like Google's is right now and then the changes came and much like Google there's an individual with super voting shares who basically said you know what I am going to step in and we're going to make these changes and
we're going to fix this organization and we're going to right siiz and we're going to focus on the product winning and since then meta stock is up a tremendous amount 5x since then Google Shares are down about 10% over the past two weeks by the way I was one of the stupid people to sell meta around that time and your thinking was that they
just can't get out of their own way and the god king is it's it's another yeah it's exactly it's another one of these idiosyncratic problems you don't know what this individual is thinking and what he is individually going to do the point I'm making is that at Google Now something has to give because the noise
is so loud the board is hearing this left and right investors are banging the table analysts are banging the table and I I'll tell you a couple anecdotes internally employees are now banging the table a story I a story I heard this week was that someone stood up in a meeting and said a couple of weeks ago if I had stood up in this meeting and
said we can't show black people in the image generation at the rate that we're showing I would have been cast a racist and I didn't have permission to do that inside of the organization but today and everyone's like you're right you would not have been able to stand up in the organization and say that but the tenor
has changed inside of Google with a lot of the employ that I've spoken with who are now saying I can stand up and I can say that this group called responsible AI has too much power and it's a one-sided asynchronous problem where they get to come in and say we need to change this and if you step up and disagree with them you are deemed a
racist you were deemed you know culturally inappropriate easier to keep your head down it's easier to keep head circum understand and and keep collecting your RS all of a sudden you wake up one day and you see the blunder that happened last week yeah and so now internally people are waking up and saying we need to change this and I
heard that that's made its way up to the higher ranks at Google and they're very actively you know so there may be a moment here where Google stock which currently is trading at just 17 times 2025 consensus earnings which is cheaper than all the other big tech companies by far and it's still growing Core Business is growing cloud is growing 20% search
is growing 15% all these other businesses YouTube's growing 20% a year it's a growth business that's very profitable and um it's trading at a very cheap discount so there's you know the bull case is now's a great time to buy because it's so cheap and there could be this moment where you know you see some of the changes that are needed
internally to get the AI products to where they need to be to maintain the lead that is inherent because of C so that would mean Sachs it would require because we're using Zuckerberg as an example we could also bring Twitter and X into this it would require founder authority to come in there and make these changes it would require larryan
Sur who have the super voting chairs to come in there and say hey this is all changing enough of this do you think there's any chance of that happening or is Google just too broken to fix and they're going to just lose this opportunity and it's Microsoft under Steve bomber missing mobile and Cloud well to quote Jefferson the tree
of Liberty must be refreshed from time to time with the blood of patriots and Tyrant and I think there's something analogous here I mean you have to if you're going to refresh this company you have to go in and you got to go in and make major Cuts not just to rank and file but to leadership who doesn't get it and that's the only way it's going to
get fixed do I think that Larry and Sergey are going to come in and pull an Elon and go deep and figure out which 50% or 20% of the company's actually good and doing their jobs probably not but is it possible that they could make a leadership change yeah it's possible probable I don't know I mean I've heard that the company is the way it is because
they like the way it is I mean that they're part of the problem in effect they don't see they don't see the problem or at least they haven't until now maybe they'll get the wakeup call what do you think shimar watching while this happen I think it's basically a small Cadre of a thousand people that have built literally the most singular
best business model and Monopoly ever to be created on the internet and a whole bunch of other people that have totally transformed this organization as sack said into ability and a platform to reflect their views and so I don't not a shareholder of Google and outside of the tools I use I don't think I really have much voting
power so I don't and and I have so many Alternatives now so I actually think like the I don't really care that much I guess is the point I think that the employees should care and the shareholders should care and they should come together and vote and I think saak is right I think the company is the way it is because they've chosen to be that
way and I think freeberg is right which is that there's a small group of people who have been protecting and breathing life into the single greatest business ever built ever in the history of business but now we need to have a confrontation amongst all of these three different groups of people and they need to make some decisions let me put a few
data points in in play here jcal and this all this all speaks to the problems being let's say deliberate as opposed to a glitch or an accident so first you have sundar's letter to the company which there was a very interesting tweet by Lulu Chang misseri who does coms at Activision and she writes a Blog called Flack she said
quote the OB she a com's expert just for the audience she's a comms expert yeah so she kind of red sundar's letter and it was scorching she said the ausc lack of clarity and fundamental failure to grasp the problem are due to a failure of leadership a poorly written email is just the means through which that failure is revealed so that was one
reaction Mark andrees had a series of posts indicating that the AI was programmed to be this way again it's not like a bug it's more of a feature and that it's not an accident this is this is happening because because companies wanted to be that they chose to be this way and in fact he goes further and says that these companies are lobbying as a
group with great intensity to establish a government protected cartel to lock in their shared agenda and corrupt products for decades to come wow I mean again that's a really scorching critique here and then you know the the question I would ask is who's been fired for this I mean imagine if I don't know one of elon's products had a launch that went
this badly do you think no heads would roll no heads have rolled and so you have to kind of Wonder well what if it's a structural issue sex I mean I I I the point does resonate with me that there is a group internally and I think it's called the responsible AI team at Google and this team's job is to enforce those
principles remember that we brought up last week that they've defined and so they go in and they're like well you know if you just render an image of a software engineer and all the images are just white guys in hoods that's inappropriate because there are plenty of non-white people you need to introduce diversity so then the programmers say okay we'll go ahead and
overweight the model and make sure that there's diversity and you can't say no because otherwise you are deemed a racist so who is the individual that's responsible given that structural circumstance that exists within the organization it's more of a cultural and structural problem to me than you know one I guess ultimately there's
leadership that's lacking but actually I I I agree with that to some degree let me describe how I think it it works mhm so what what I've heard about Google is that every meeting above a certain size has a Dei person in it I mean literally so it's kind of like in the days of the Soviet Union their military the Red Army
would have in every division or unit there would be you know a commander or lieutenant and there'd be a commissar okay and the commander reported up the chain and the commissar reported to the party and the commissar would just quietly take notes in all the meetings of the unit and if the commissar didn't like what the lieutenant was doing
Lieutenant would be taken out and shot okay now that's kind of a dramatic example but the point is that in every large meeting at Google you've got this Dei commissar who's like quietly taking notes I'll point out that at Google the only person we can ever remember to get fired was James Dore who was an engineer who complained about the political bias
at Google in other words he was a whistleblower about the very problem that's now manifested he's the only person you can think think of to get fired at Google Google was mocked on the show Silicon Valley it was called hulie but remember this yeah they the the nobody ever got fired because it's a company where it's impossible to get
fired unless you blow the whistle on the political problem and I think that if you're sitting in those meetings W with a Dei commissar present and you know or you have suspicions that the AI product is not working right are you really going to speak up and risk the fate of a James Dore of course you're not right so you're right freeberg that it's
a structural problem that there's probably a lowgrade fear that's pervasive through the organization and no one's willing to say the emperor wears no clothes the woke Emperor knows wears no clothes because they don't want to why stick your neck out you may not know you're going to get fired but you know you're a chance three years ago on
Twitter nobody would talk about certain topics related to Dei because it was in the aftermath of George Floyd and people just did not feel comfortable even calling out something minor that was unfair no I would say they didn't feel comfortable until Bill Amman broke the seal on this just uh like a month ago
where he really went after Dei I mean because remember the part of the reaction to bill akman was like wow he's really going there even though everyone's saying that like basically agreed with him and knew that he was making a correct point but people were still afraid to like again call out this this woke Emperor yeah and the way this works for
people who are not super aware you have a language model and you know you write a bunch of code but then there are guard rails put in and then there are red teams and people who test it and so at the very least even if you were trying to do something with great intent as you pointed out Friedberg hey you know if we
pull up a doctor it doesn't shouldn't necessarily always be a white guy there are other people who are doctors in the world somebody should have caught it in testing they probably did Jason and they didn't report it who wants to report that problem that's an interesting rub yeah how guts they didn't miss it they didn't miss it didn't have the guts to
you have to build a somebody built a reward model or people a reward model was built for the reinforcement learning from all the humans and their feedback so these decisions were explicit the question that is that you guys are framing is was this though a case where it was explicitly imposed on people and people felt a fear of pushing back or did they
just agree and say this is a great decision and these rewards make ton of sense and the whole point is that I think what this is highlighted is that's the truth that Google needs to figure out and they need to figure it out quickly because what is going to happen now is it's we I know I think we talked about this a year ago all Google needs
to see is 300 500 basis points of change and the market cap of this company is going to get cut in half okay because there is only one way to go when you have 92% share of a market and that is down and so the setup for the stock is now that people are looking at this saying okay if I see 92% go to 91 or 90 or 89 that's all that has to happen and
people will say the trend is to 50% and you will price this company at a fraction of what it's worth today so I think it's really critical this is the moment that the senior leadership that really understands business can separate it from politics and decide is this a thing of fear where there's one Rog group that's run a muck or is this what
we believe because if it's the ladder you just got to go with it there's nothing you can do because you're not going to replace 300,000 employees or however many Google has but if it's the former sax is right you're going to have to some heads need to roll and they need to tell the marketplace that this was a mistake
where a group of Rogue employees got way out way too much power we were asleep at the job but now we're awake they're fired and this is so they have two choices but in in all of these choices what I'm telling you on the the dispassionate Market side is if you see perplexity or anybody else clip off 50 basis points or 100 basis points of
share and search this thing is going straight down by 50% by the way unless Cloud takes off right because the other hedge that Google has is gcp and the tooling that they've built in gcp can enable and support and be integral to a lot of Alternatives and competitors to what ultimately might be searched so I think there's also a play
here in thinking about some of the hedges that Google has implicitly built into the business I'll just say one more thing on this structural point I kind of thought about this as when I started speaking to people internally about how this happened from a product perspective it felt a lot like when you talk to a lawyer as you guys know you're making a
business decision and there's some risk I mean think about Travis building Uber and the lawyer will say it is illegal you need a medallion license to do what you're doing in this City and Travis is like well you know what I'm going to take that risk Brian chesky and Airbnb he said you know what I'm going to take
that risk and the problem is that like a lawyer's job is to tell you what you can't do to identify all the Peril of your of Your Action and then you as an executive or a business leader or a manager your job is supposed to be to take that as one piece of input one piece of data that you then make the informed business decision about what's
the right way to build this product what's the right way to build this company and I'll take on some risk and I think one of the challenges structuring side of Google is that product leaders and other folks were never enabled to make the decision that there were these as saaks pointed out kind of like policing type organizations that were
allowed to come in and veto things and the vetoing or make unilateral decisions and those vetoing on whether it's waiting or or some you know training data set or output that ends up killing the opportunity for the smart business leader to say that doesn't make sense we can't do this is where this is where having founders in the organization
every day changes everything because the founders would say hey we we're here to index the world's information we're here to present the world's information we're not here to interpret it we're not here to win hearts and Minds we're not here for a political agenda but there's a group of people there who it's apparent
think that they're there to change the world that Google is a vehicle for them to make social changes in the world and you know that's art and there's other ways to do that and just paradoxically like Hamilton making the founding fathers diverse and doing art you know that can win Tony's in that context you could win tons of awards and a claim and
and make incredible beautiful art but on the other side like people are not looking for Google to do that they're looking for Google to give them the answer and the data and then these people are thinking it's our job to actually interpret the data for you as we kind of touched on last week so uh this I think look I think you guys are
really close to the bullseye here but I would just refine slightly what you're saying so here's how I think it happens I I don't think this is a rogue group I actually think this is a highly empowered group within Google I do agree with you yeah yeah I think what happens is Sundar says from the top that we're going to be on the Forefront of
diversity and inclusion because he personally believes that and that's the way the social winds are blowing and they think it's good for the company on some level okay to implement that Mantra or that platitude really HR hires a bunch of Dei experts okay lots of them I think the company has like this huge HR department and a lot of those people are
basically Fanatics I mean they're their chosen career yeah yeah they're trained marxists basically and so they're the commissars and they're sitting in all these meetings and again they're the ones taking notes and they're the ones who push the company in a certain direction but you have to then go back to senior leadership and say it's their
fault for letting this happen because they should have made a course correction they should have realized what was happening they should have realized that through a combination of bias and through this sort of like overly empowered HR team who are pulling a legal card I mean freeberg is right about that they're saying that our point
of view is the law which isn't true but they're basically pulling the legal card and pushing the whole organization a certain direction it was up to leadership to realize what was going on and make a correction and the the thing that you're seeing now is that in the face of what's happened the statement that we got really doesn't cut it funny
they use the word problematic yeah exactly they're describing it as a glitch or a bug it's not it's a much deeper problem and so therefore you give it gives no confidence that the solution is going to be pursued in as comprehensive manners as necessary yeah I think it's just a that that memo is a tip off that there is a 20,000 30,000
person riff and a reorganized and they're just going to keep cutting the de group and they've already meta and Google have cut the DI groups a bit I don't know if it's about as much about cutting as much as it is about empowering if you said to the product leaders you can make the decision Dei and responsible Ai and whatever other
groups they're going to inform you on their point of view but they're not going to tell you what your point that diag is pulling the legal card they're saying this is the law they're saying that say that's what needs to change right if you don't do things the way we tell you Google's going to be hit with a civil rights lawsuit that's what they're
saying oh well I mean let's see if leadership can overcome that threat but I think that's exactly the threat that is keeping the organization from resolving this problem or could keep the organization that but I also wouldn't underestimate the bias so you know everybody there not I shouldn't say everybody but it's a very liberal
culture right it's a monoculture so when you're swimming in that much bias it's hard to see right yeah yeah when everybody is left to Center I mean just look at something like political contributions right it's 90s something per are democratic I mean like high 90s so it's just a a liberal bubble basically and so right when everybody's
liberal it's very hard to see when you know the results are Way offc Center as well also if you if you give people this job like how are they what are they going to do every day freedberg if they've been given the job Dei and they've been given the job to do trust and safety they they're looking to fill their time in make an impact you got to
I think maybe have less of these people I honestly think you guys saw you know Shan Maguire is a partner at seoa and he used to be a member of the team at Google Ventures when it was called Google Ventures and he did a Twitter post did you guys see this yeah where he said when he was at Google he was told by his manager I'm not really supposed
to tell you this it could get me fired but you're one of the highest performing people here but I can't promote you right now because I have a quota my hands are tied you'll get the next slot please be patient I'm really sorry It ultimately LED sea to leave Google and uh you know the rest is history he's a partner at seoa now you're saying
because he's a white male because he's a white male yeah and so the you knowon yeah no I had the same thing happened to me on AOL when I was at AOL and shabbath was there at the same time the whole organization was white men from Virginia whatever and they gave me an SVP title and I said well I want the EVP one and they're like you know what we can't have
any more white males in that position right now we have to like get some more women and people of color in that position and they told me you'll have the same comp and bonus but we just can't give you the title jamat do you think these like race and gender driven quotas make sense for HR departments to try and enforce upon
managers to M to increase diversity I mean is that a good objective for an organization to have this is like a topic a lot of people I've heard kind of flip back and forth on I there is no company where I have majority control where I have an HR department you don't have an HR department no say more why I think that it's very important you
should go to a very respected lawyer at a thirdparty firm someone very visible an Eric CER type person and you should work with that law firm and retain them so that you have an escape valve if there are any kind of serious issues that need to be escalated so that you can get them into the hands of a dispassionate third party person who can then appropriately
inform the board the CEO and investigate so that that covers sort of all the bad things that can happen then there are buckets of I think good things one one important set of things is around benefits my perspective is that the team should build their own benefits package that they want they should understand the p&l of the company that they work
for they should be given a budget and in in my companies again what I do is I allow committees to form and I ask those committees to be diverse but what I mean by diverse is I want somebody who has a sick partner I want somebody who has a family I want somebody who's young and single so that the diversity of benefits
reflects what all these people need they go and talk to folks they come back and they choose on behalf of the whole company and there's a voting mechanism then when it comes to hiring I think what has to happen is that the person that for whom that person will end up working for it's the head of engineering it's the head of sales those are the
people that should be running the hiring processes I don't like to Outsource it to recruiters I don't like to Outsource it to HR so when you strip all of these jobs away HR doesn't have a role and what is left over is the very dark part of HR in most organizations which is the police person the police policeman right
the what what is Saks call the commiss that is why everybody hates HR I've never met a company where that is a successful role over long periods of time they are this conflict creating entity inside of an organization that slows organizations down so that allows me to empower individuals to actually design the benefits that
they want to hire the team that they want and I let them understand the p&l in a very clear transparent way and the results are what the results are you want more bonuses hire better people and then what I do is at the end of every year I talk about this distribution of talent and I make sure we are identifying the bottom five or 10% they
need to be managed up or they must be fired every year and it does not matter how big the company is you must manage up or out the bottom 5 to 10% and in some cases I'm talking about one person because it's a small company and in other cases I'm talking about 30 or 40 people so just hire the best person for the job no you eliminate HR yeah you
empower the team make the make allow them to make their own decisions measure it hold them accountable right so if you have a salesperson who just hires their I don't know 15 sorority sisters or fraternity Brothers whatever it is and it just becomes not a diverse group well hold on it is what it is that still may be
diverse this is my point like the the thing is that like there's different ways to sell there's different sales motions there's the sort of like elephant hunting kind of sales model there's the Dialing for Dollars thing so even those 15 sorority sisters the way you describe it could actually be diverse my point is that kind of superficial marking based on the mutable
traits will not yield a great organization instead it's you're empowered to hire whomever you want just know that at the end of the year we're going to measure them your bonus their bonus the company's performance all performance yeah performance I mean Frank slutman said this and he he got barbecued at some point he said I don't
have time to do this diversity stuff the best person by the way in in my companies like for example like when you do sock 2 compliance you have to generate these reports okay especially for some of our customers some of our companies that actually show the diversity of our team and when we measure them on the immutable traits
that whatever they represent as their gender whatever they represent as other dimensions we are incredibly incredibly diverse anyways but the way I've seen a startup that isn't diverse you know Silicon Valley attracts such a diverse mix of people you know what do we know about success factors for startups number one the ones that are successful have a
cultural meritocracy number two they're non-bureaucratic and they don't have too much GNA basically overhead in the company now all those things are cont contradicted by having a large HR team or especially a Dei organization right they add bureaucracy they add overhead and what's that Pips performance Improvement they cut into well Pips are
great I pip people all the time does it work I mean I I know some people are just like these Pips don't work if you're an unper performing member of the team and you've been identified in the bottom five or 10 percent we have a responsibility as management to coach you up or to get you to an organization where you're not in the bottom 5 or 10%
that's the right thing to do for people you do that by being very transparent and writing it down you are not good at these things you're underperforming in these things fix them or you will not be here that's a very fair thing to tell somebody yeah look how you want to implement your own meritocracy I think there's different ways for Founders to
do that the point is you want these companies to be a meritocracy you don't want advancement in the company to be based on factors other than skill Merit hard work things like that we know performance we know that's a bad bad path to go on I think a lot of Founders don't understand that Dei is not something they have to do they don't
have to have a Dei organization this has somehow become a thing it's it's not required and I think people are realizing like why would you do that why would you create this large bureaucracy in the company that undercuts the meritocracy that adds a lot of costs and that slows you down none of those things will help your company what you need to
have I think J laid out some really good best practices you should have an outside Law Firm that I would say is you could call it HR law but I would just call it employment law I would say like a non-ideological partner e an expert in employment law who sets up your company correctly and to whom you can take a complaint if if
an HR complaint gets raised through the chain of your company you do have to take it very seriously and that's be a proper investigation and that's probably best handled by an outside lawyer so get that out lawyer and then by the way always there's never a case where your coworker should know the intimate details of any of those and that's what
also creates this horribly rotten culture in HR where these people act like Gatekeepers of secret information salary information bonus information and then all of the other things oh you know did you know this person did this with it's terrible to have that inside of a company it should go to a dispassionate
third party person whose job it is to maintain confidential it and discretion yeah while investigating the truth yeah when HR is too powerful in a company that's a red flag at the end of the day HR should be an administrative function their job should be to get people on boarded sign their offer letter and their confidentiality and uh invention
an assignment agreement and set them up in payroll and get them benefits and that kind of stuff it should fundamentally be an administrative function and if it starts getting more powerful than that it means there's been a usurpation you don't even need people for that like you have software that does that now and it's all automated you
know you send them a link you go to your favorite you know HR site boom it's done yeah I don't think you need a lot of people doing this anything you want to add to this discussion freeberg as we as we move on to the next topic I think that unfortunately the term diversity Equity inclusion has been captured along as chth points out a
single Vector which is this immutable trait of your racial Identity or gender and I think the more important aspect for the success of a team for the success of an organization is to find diversity in the people that comes from different backgrounds different experiences different ways of thinking and so I I'm not a huge fan of race-based
metrics or gender based metrics driving I'm generally more oriented around be blind to those those those variables and focus much more on the variables that can actually influence the outcome of your organization yeah one of the great paradoxes of this as well is we are moving to a much more Multicultural mixed race Society anyway people filling
out fors a lot of our kids you know are are could pick two or three of the different boxes on a Dei form it's it's not going to make much of a difference in the coming decades all right issue two Google go splashy cach AES licensing deals for training data and it's now becoming a bit of a pattern Google we talked about I think just last week had
to deal with Reddit for $60 million that's reportedly per year today stack Overflow is now using its overflow API to train Gemini no word on the contract value I did get some back channel that it's a multi-year non-exclusive deal according to R's S1 they have already closed 200 million worth of AI licensing deals over the next two to three years
so you maybe it's going to be 75 million a year 100 million a year who knows how big that business can get we're going to talk about the S1 from Reddit in just a moment and uh this is on top of all the other licensing deals that have occurred AEL Springer in open AI you remember that one and opening eyes and talks
reportedly with CNN Fox and time to license their content that comes on the hills of that Blockbuster New York Times open AI lawsuit that we talked about I don't know 10 episodes ago and open AI lawyers are trying to get that one just to give you a little update on it they're trying to get that case dismissed saying that the New York Times
hacked chat GPT to get certain results and that the York Times took tens of thousands of tries to generate the results yada yada and they said here's the quote from the filing from open AI the allegations in the times complaint do not meet its famously rigorous journalistic standards both open Ai and Google and Gemini have been fly Guard
railing their systems as we talked about as well to stop copyright infringement like trying to make pictures of Darth Vader and that kind of stuff Jam you've talked a little bit about your Tac 2.0 framework maybe you could talk about what you see Happening Here with all these licensing deals and what it means for startups in the AI
space well just to maybe catch everybody up Tac is this thing called traffic acquisition cost and you can see it most importantly in Google's quarterly releases which is that what they realized very early on at the beginning of the search wars in the early 2000s is that they could pay people to offer Google search people would use it and then it would generate
so much money that they could give them a huge ref share and it would still make money so I remember Jason when you and I were at AOL this is the first time I met Omid we were flying back to California we were both in Dallas at the same time in like 2003 or four and that's when Omid did the first big search deal between AOL
and Google and it was it was I want to say hundreds of millions of dollars back then where Google pays you up front you have to Syndicate Google search and then they clean it up on the back end with some kind of rure so what's incredible is that that process has escalated to a point now where for example on the iPhone it's somewhere between 18 and 20
odd billion dollars a year is what now Google pays Apple so that's the traffic acquisition cost 1.0 R Tac 1.0 and I just said that we should call this Tac 2.0 except now what Google is doing is instead of paying for search they're actually paying for your data and saying give it to me so that I can train my models and make it better and I
think that that's an incredible thing both it's very smart for Google but also it's great for these businesses because it's an extremely high margin thing to do when you have a really good Corpus of of data that is very unique so in the case of Reddit that $60 million deal I didn't I I looked through the S1 to try to figure
out whether it was a multi- your deal or not it wasn't totally clear but the point is that you know Google's paying Reddit 60 million bucks and Jason you just said that they're they've done a couple more of these things that's incredible this Tac 2.0 thing is amazing so if you're an entrepreneur building a website or building an app that has
really unique training data or really unique data you'll be able to license and sell that and that'll be an incremental Revenue stream to everything you do in the near future that's amazing that's what T 2.0 is it's going to be incredible for the entire uh content and community- based Industries you think this could sustain content creation
where advertising has become very difficult sax I guess my question to toal would be do you think this is going to be available to small websites they'll somehow be some sort of program or because I mean Reddit is one of the biggest sources of content on the entire web right it's like a top five traffic site with tons and tons of user
generated content yes do you think like a small publication would be able to make these types of deals yeah and in fact I think like if you go back to search 1.0 that's exactly what these small companies were able to do which was in a more automated way they were able to basically partner and in that example what they would say is here
Google why don't you just run your ads on our page right and that was sort of in that web 1.0 world so Google had solutions for the largest companies on the internet all the way to the smallest and in this Tac 2.0 world I do think that that it works in that way as well the problem in the in that world if it's a small website that says here's my
training data the question is how do you attribute how much incremental value a model derived from it versus something else and so I think that that part has to get figured out and so you know what Google will be able to pay you will probably be pretty di minimouse bound is 60 million for Reddit then the average website's going to get a few hundred
bucks but that still may be a good start and when Google figures out how to monetize stuff or somebody else where then they can give you back some way to make money I think I think that there's a real monetization here I really do you took the other side of this but now that you see the market-based solution starting to emerge what do you think of this
market-based solution think it's a got legs well I'm not convinced that this looks like Tac in the traditional sense where you're basically buying a continuous stream of traffic and then you're helping to monetize that traffic that's a effectively what Google did in the ad syndication business and does today that business makes about 10
billion a quarter at Google and they're paying call it 70 to 80 cents on every dollar back out to the owners of that traffic the folks where that traffic is derived from I would say that this looks a lot more like the content licensing deals to build a proprietary audience which is effectively what Netflix did they they paid Studios for
Content Apple does this they have proprietary content that they pay producers to make and they put on Apple TV Amazon does this and so on this is a lot more like that where there are content creators out there whether that content is proprietary like the New York Times or user generated like Reddit and what they're trying to do is acquire
that content to build a better product on Google Search and I'm not sure how you get paid a continuous licensing stream for that content once you've trained the model the content gets old it gets stale at some point in a lot of cases like news and then eventually if you don't have a highquality continuous stream of content
it's not worth as much anymore to give you guys a sense humans generate in total well let me just give you some stats there's about a million pedabytes of data on the internet today and humans are generating about 2500 pedabytes of data new data uh per day right now remember I shared a couple weeks ago YouTube's generating about two pedabytes
of data uh per day half of all data generated is never used so this is like records and files and stuff that gets put on log files log files gets stored somewhere never accessed never used the majority of the rest of that data is not in the public domain it's not on the internet so there is a lot of data out there what some
people might call dark data to train on and I think that as the identification of better sources of training data and the value of training data right now we're in this kind of shotgun approach we're trying to blast out and you know Source lots of content lots of data just like over time Netflix got better at figuring out what content to buy and
what to pay for it and they're the best at it I think so too will Google and others figure out what data is actually particularly useful what it's worth and what to pay for it and so there's a lot of data out there to go and identify to mine to pay license fees to get access to whether those are continuous license
fees or one time is still TBD that's a key issue yeah so I think we're still a little bit early to know if this is like you know a continuous model like a tack type business or if these are sort of chunky type deals and we don't really know what the real value is yet and that all changes over time and remember the the the rate of data generation is
increasing so while we're generating 200 pedabytes of data per day as a species on the internet that number is going up every day and so every year all the old data becomes worth even less so this is all changing fairly dynamically and I think there's a lot still to be figured out on what the monetization model will be for Content creators and and how
that's going to change over time yeah I think it's a really good point some things will be like The Sopranos or Seinfeld or Simpsons where that library is worth fortune and people will pay a billion dollars a half billion dollars some no one no one's no one's paying a lot for old NFL games you know Nick founded by the way Reddit licensing deal
was 203 million over it says 2 to three years so let's assume it's call it three just to be so it's you know6 million a year it doesn't say whether the deal with Google is exclusive wow so they could do they could do that same licing deal multiple times that's interesting yeah none of these are exclusive it seems this is what I don't understand
why why don't you do head deals like with folks like Reddit where you actually do it exclusively like it seems like it's more valuable to spend a multiple of this number for for one of the big seven who have tens of billions of dollars of cash anyways and block the other players and block everybody else that just seems Reddit multiple gets
capped if I'm Reddit I don't want to do that deal yeah Reddit me I put it on the table Yeah because then my multiple is Capp like the the way I can monetize my content is now set and I'm done inv get bought investors are like oh you're worth five times eai you know that's it Reddit cor stack Overflow they're going
to just get taken out I this is I think this is going to be the new mod did around actually didn't cor raise uh 50 500 recently I think they're going to get taken out I I I I think these businesses will become too valuable because they do have ongoing content that used to run you started web blogs right and but think about the value of
that content today it's negligible like it was very valuable at the time and as time went on more content was being created a 100 times a thousand times 10,000 times more content that started to overshadow the value of that content at the time the acquisition was done it made a ton of sense but all of a sudden
two years later particularly with the rate at which data is growing on the Internet it's like does it make sense to buy any content anymore so you well on the other side of that is historical content could be worth a lot of money especially some could be so if you had the Charlie Rose archive as an example what is you know he's probably
interviewed Kissinger 10 times and he's interviewed Kissinger for you know 10 hours I've got two almost 2,000 episodes of podcasts I've done with startups over 13 years like yeah this weekend startups archive is going to be worth something at some point right I don't think it's worth what are old baseball games Worth right like I mean yeah they're
rewatchable and I don't think the data from them is particularly important so I I agree on that one but historical yeah we don't know but and I just question how much of reddit's content is actually like long-term valuable versus like they're covering a topic and they're talking about interesting stuff and then later it's a really really
excellent point yeah and we'll figure that out okay and that's why I think it's like it's the early days of knowing how to Value all this content particularly for llms and so we don't really know yet over the next year this will all start to become clearer but it's it's again same thing happened in music licensing yeah right but if if all
the content creators could kind of unionize then it might increase that's kind of like the yeah like music music industry has ASAP socialist I love it well I'm not I'm not advocating for this but the point I'm making is if they can't unionize then there's a lot there's just a huge number of vendors of content and so models will need to buy
some but as long as they can get some they don't need to have all and therefore it's basically highly competitive among suppliers and there's a very limited number of buyers so that tends this is why the news industry should have always had a federation because they could have just said to Google hey we're going to de-index
ourselves from the Google search engine and so you won't have the New York Times Washington Post LA Times you're just not going to have any of us unless you give us X Y and Z and they were just too stupid and not coordinated to do it yeah music industry the exact opposite you you try to do anything with the music industry they're going to come down on
you like a ton of bricks to this day I see what that's actually really interesting yeah if all the um old school Legacy newspapers and magazines magazin so on basically formed their own whatever Cel trade Association yeah that would have been powerful yeah I mean that's what Murdoch wanted Murdoch saw it clearly he
was like you know Google's the enemy here they're going to take all of our revenue and they're going to get all our customer names and we're not going to even know the names of our customers all right issue three clowner crushes customer queries with AI you may have seen this trending on X and Twitter and in the Press if you don't know Clara
they're a Swedish ftech company they do that buy now pay later stuff I think they were The Originators of that online and they put out a press release with some really eye popping claims AI assistants are now doing the work of 700 full-time agents at CL they moved issue resolving times from 11 minutes with humans to 2 minutes with
AI and customer satisfaction is on par with human agents and it said it's resol ions are more accurate than humans creating a 25% drop in repeat inquiries that tracks and so far their AI which they built with open AI has had 2.3 million conversations accounting for 2third of cler's customer support service chats cler estimates its AI agent will drive
wait for it a $40 million increase in profits this year we could talk a little bit more about cloner and their valuations but freeberg what what do you think this means if we're in year this is the start of year two of chat GPT as like a phenomenon let's say what do we think year three looks like I think the tech the techn pessimist point of view
is oh my God look at all these jobs that are getting lost I think the optimistic point of view is that that company has all of that excess Capital now to reinvest in doing other things that Capital doesn't just become profits that flow out the door and everyone's done with that money and that money just gets put away in a sock that money gets
reinvested and that money gets reinvested invested in higher order functioning work and that's really where there's an opportunity to move the workforce overall forward which is what I think is super exciting and um I'm super positive about we've seen this in every technological Evolution that's happened in human history from you know
the plow in agriculture to automobiles to Computing and to now ai that you know humans moved from manual labor to knowledge work to now ideally and hopefully more creative work and so I do think that it isn't just about eliminating jobs and making more money but it's about enabling the creation of entirely new class of work whether that's prompt
engineering or you know building entirely new businesses that simply can't exist today or perhaps even downscaling businesses where you no longer need to have a 10,000 person organization smaller organizations can be stood up as startups to start to replace large functioning organizations so I don't know I think it's a time of
great opportunity I know that some people would view it as being highly shocking I think it's inevitable that knowledge labor where the job of the human is simply the ingestion of data and then communicate an output of data seems like it will eventually be replaced by Computing somehow and this is happening now in an accelerated way
with these llms so I think that what we should focus on and think about is what are all the new businesses all the new jobs all the new opportunities that are just couldn't have existed 10 years ago that are now emerging that are very exciting as the workforce transitions sacked You by this techno utopian view of this all these jobs that are going to
obviously be retired are going to open up the opportunity for these humans to do even better work at clana or do you think it's just going to go straight to the bottom line well it sounds like they're able to eliminate a lot of Frontline customer support roles by using AI which is what I would expect yeah I think this is a
very natural application for AI you know it was already the case that you could pretty much find answers to questions by searching the FAQ things like this this this is an even better way of doing that so so look I I believe that this will be a big area for AI is saving on again I use the word Frontline customer support because the way that customer support is
typically organized is there's level one level two level three the more difficult queries or cases get escalated up the chain depending on how hard they are and I think the AI will do a really good job eliminating level one it'll start to eating to level two but you're probably going to need humans to deal with the more uh
complex cases now the question is where do those displaced humans go I think there's going to be new jobs new work that's always been the history of technological progress and one of the things you're already seeing is there's a whole bunch of new AI companies that are exploiting this technology and they need to hire people so I basically agree
with freeberg that you will Elevate people's work by automating away the less interesting parts of people's jobs and then creating more productivity and more opportunity by the just to use your just to use your example sacks so imagine if all the level one support people some chunk of them can now do level two support and so the customers
are going to get greater Hands-On care more customers will get access to a higher level of service the organization can afford to do that they'll be more competitive in the marketplace because customers feel better taken care of I just think that's how the organizations get leveled up as new technology kind of shows up like this it's a great point
and then those folks can have a much deeper level of interaction with with their customers than they are todaying question gets more complex and then people might get better at the software and they might discover new features that you might be able to redeploy those people if you look at coffee like I don't know was it 40 years
ago you went to order a cup of coffee it was decaf or regular coffee milk and sugar those are like those are your four choices and and now you go order coffee I don't know if you guys have used the Starbucks app or the you know I just had the sweet green CEO on the Pod and man you can the Fidelity and and the Nuance of what you want to order is absurd Jam
where do you think this is all heading because there is the issue of displacement how people how quickly people can re be redeployed and if we're seeing in year two customer support and developers getting 10x what other categories do you think we're going to see fall next I think the truth is that as you said the real world applicability
to AI was not last year so I think we're really in the first five or six weeks of the first year so you consider that year zero that's year zero that was sort of like the you know where everybody was running around building toy apps Pro of concept this is one of the first few times where you're seeing something in production where
there's measurable economic value and the important thing to note about that is that it's not just what it means for Clara but what it means for everybody else so if you look at everybody else for example here's Teleperformance which is a a French company that runs call centers they lost $1.7 billion of market cap when that tweak went out about 20%
of their market cap so this is this is the real practical implication Yes Clara replaced 700 people and they saved 40 million of Opex but teleport 4 months while they were just doing their everyday work lost 1.8 billion of their market cap at the exact same moment and so what does it mean I think that what Clara should do
is open source what they've built and the reason is that you want to give companies like Teleperformance a chance to retool themselves with the best possible technology so they they can actually preserve as many of the jobs as possible because at the limit if every single company is able to implement something that is as economically
efficient as what Clara did Teleperformance doesn't exist and there's 10 billion and 335,000 employees that will not have a job Y and so for Clara the reason to open source it is twofold one is they don't lose anything because you will still need to train it on your own data and so there's no disadvantage that Clara will have right
they're just saying look I built this on top of GPT here's what it looks like and that production code can be used by anybody else go for it but it has to run on your own data that's a very reasonable thing so I think it has the benefit of both a setting a technical Pace that can help them attract better employees and more highly qualified
people who find the scope of work even more interesting and B I think it's on the right side of history with all this AI stuff where it's allowing everybody to sort of benefit in a way that is the least destructive but I just wanted to show you that the destruction was quite quick and it was pretty severe and if two or three other big companies launch
these kinds of tweets after real measurable results Teleperformance will be a 1 billion doll company short in short order there's a third reason I I think it's a brilliant idea for clar to open source this this tool because it's not their business right this is just something they did as a as a productivity Improvement they get the
benefit back to them of the community working to advance that technology so they don't have to put more Engineers like advancing the ball on their customer support AI totally they can just re remerge in the changes that the open source Community comes up with and since they're not in the business of selling AI directly there's no reason
not to do it like jamas said so I think it's kind of brilliant yeah this is meta strategy by the way I mean z should be building this on meta's Open Source Products and Apple's Open Source Products right SX yeah well so what what meta said what Zuck said on the last meta call is the reason we open source everything is because we don't directly
sell AI we create products that AI makes better so by open sourcing this we allow the community to advance the ball and we get to reincorporate those changes so it's a very smart strategy for companies that aren't directly selling the AI now you know if you're if you're like Brett Taylor's new company Sierra obviously
you're not going to open source it because your whole business model is to create a proprietary solution yeah but then to chat's you know 8090 whatever he was talking about the with his you know incubator concept and you know these things it's a company it's a company okay sorry um is it 8090 or 980 I'm sorry 8090 yeah 8090 is there a third
word that comes off of it are just G to call it 890 just 8090 got it okay 80% of the features at a 90% discount so back to that like what does this mean if these things are getting to freeberg your point about the pace man the pace of these things is it going to improve 10% a year or 10% a month if it's improving 10% a month we're going to get
to 98% of queries done this year if it's doing 10% a year okay we're going to get to 99 or 98% of queries in four years in other words this is happening folks and it's happening at a blistering Pace by the way think of it's so not just Teleperformance which is a it was A10 billion now a $ 7.58 billion USD company
but think about zenes right zenes was a I think A8 to1 billion yeah it was A10 billion take private in the hands of PE the entire zenes workflow could be replaced by a handful of these open source agents where all of a sudden people can eliminate a lot of opacs I think the I think the thing to keep in mind here is where the world is going has always been
to try to lower cost and the original foundational principle of SAS was that there's these line items in on-prem software that are just extremely expensive over time very hard to justify right and so when people moved to SAS from on Prem they were looking for cost savings that was the initial thing now yes it's actually not cheaper anymore
but it's much more featur so you get a lot more value in SAS etc etc but the point of these AI agents and Bots and workflows is that it'll reintroduce the concept of cash of of cost Savings of this idea that you can have cheaper faster and better and the more that that stuff is open source my gosh I think it just makes it very hard for companies
that have Point products to survive yeah we I was talking to a friend of mine Josh MOA who was the city head of uber in New York and he launched his own note-taking app he's writing it himself and he's obsessed with this concept of building a billion dollar a unicorn company with one employee and this is something that a lot of people
have been talking about my friend Phil Kaplan from DH kid built a very large business in District a unicorn with a very like I think low single digit number of people this could be the future of you know efficiency you you could build if you catch fire with a really hot company that gets a million custom absolutely the future it's
absolutely the future and then if you think about our jobs in terms of capital allocation well how much Capital does that founder need do they need to dilute 10% 20% 30% they're not going to need to delute 60 70 80% a oneperson company should be able to spend less than a few hundred grand to get to product Market fit in the next few years yeah I mean
that's that's kind of what we're seeing just to go back to your question J like where does this go next yeah please I think it's it's it's really interesting to speculate about that so what Clara seems to be talking about are email-based customer support cases I think we're this going to go next is to phone 100% and these call centers use
what they're called ivrs these interactive voice response systems but they're very rigid it's a lot of pre-recorded messages and it says push one if your problem is this push two if your problem is this everyone hates those things yeah I think where it goes next is you'll call up the call center and you'll get a a voice that sounds
like a human just talk to you yeah and you won't even necess realize that you're talking to an AI because they're already these AI companies that can do generative voices any language any accent oh and they're fast now and they're fast and multi language think about that just localizing them across the globe you know you want to launch
your product in Japan by the way did you guys see there was a meta demo which I thought was really cool which was it was run on Lama 70b but it was a real-time translation tool where the person was speaking in hen Chinese and the and the other person was speaking in English and they were able to understand each other but saxs to your point when that person
calls for example B OFA now Spanish is not a language it's actually many dialects and many many many different accents right depending on which country you're from like the accent that you hear in Spain is totally different than the accent in El Salvador the accent in Chile or Argentina and so wouldn't it be
amazing where you you call your bva app it picks up your accent and your tonality and it responds with the person of that exact same accent and tonality that is incredible well I'll take it to another level you call it recognizes your number it knows what you're doing in the software it knows the problem you've had it knows the last three times
you called and how long you've been using the software and it anticipates like okay I know this person has a Windows machine and it's you know still 5 years old and it's like are you still using that same 5-year-old Windows machine yeah we know it's a bug with you know Windows whatever uh you should probably upgrade I mean it's going to
know the entire context of this and so it's going to just get it could be more efficient than a human could ever be the best customer support interaction I had was I called JP Morgan Chase because I had an old credit card that I had had for 20 years and I think that they had outsourced it to somewhere in the Caribbean and this woman picked up the
phone it was so cool jamat what is the problem man and I was like oh this is the best and I had this whole conversation with her for 15 20 minutes nothing to do with the phone uh nothing to do with my credit card rather it was great she's like I man you want to cancel your card I was like yes please no but you could do celebrities best
yeah celebrity voices yeah J Cal do the djt okay let's let's role play uh you're Donald Trump okay and I and I am JP Morgan hi Mr President chath you're huge you've got big spending I every time I go see chath go see yourth I go in amazing Mr Mr President I would like to cancel my credit card sir okay you don't
want to cancel it we've got a great a 3.9% but for jamas you know what he's my Sri Lankan friend how much do we love Sri Lankans okay huge and not jcal nasty nasty man jcal very nasty he acts like a dog a dog okay he's a dog some people say TDS how much do we love our sex Saxy poop great Mar Lago I go to Sax's house his house huge huge
house almost as big as Maraga not quite I gotta work on it because I haven't done it for years that's really good it's really good have you seen that guy there's a there's a new like Impressions guy who's amazing he does seen him he's on Howard Stern all the time right he does the Howard no not Shan Gillis this is another kid Matt freed friend yeah
yeah yeah does Howard back to Howard it's wa that video is good too hold on Donald on other Trump Impressions so like I'll tell you what Zack there are so many people that try to do it you see the failed Alec baldwi Baldwin comes out on SNL which used to be a lot funnier back in the day with chff but Baldwin goes like this he goes we've got a great
show I don't do that I never say boy boo this St coar he comes out like I know a do do dot a DOT do a dot dot dot a China I don't say the D and the last one is Jimmy failing fell and he touched my hair like a dog and Jimmy fa and he goes okay look like dog we're rolling okay I don't do these moves they're all wrong so that's a
incredible can let's see him doing uh how got see him do Howard Stern it's Next Level the other one he does that's incredible but subtle is Stanley Tucci how are you by the way Robin you look beautiful right thank you is this still you up Howard it's me up right yeah right because when I start talking to Robin after you leave I get crazy you
know right can we just talk about this can we talk right or wrong right right right right Howard left or right right uh right right right right right right right on red right right right right it's so great he is killing it I think we have our halftime act for the all in Summit 24 oh for sure oh my God yeah he'd be amazing I love Stanley Tucci by
the way he's great oh you got to see this kid Stanley Tui have have you guys watched the Stanley Tui on HBO where he cooking yeah where like he goes to Italy it's so great it's so great he does it on Tik Tok too he just randomly cooks something and he's like I'm going to make a frittata I have some over Yi and I'm
just going to I do watch him on Tik Tok Thanksgiving is a special time I'm in London celebrating so today I'm making St stuffing and also Sugo de car or as it's known gravy now the thing about stuffing is you might use a traditional white bread but in my household I use a homemade fatea because I'm Italian on both sides and nothing tastes better
than bread with a little M SAU it's a time for gratitude and giving thanks enjoy your holidays and thank you very much Felicity good that is really good he's so good he's so good all right listen I don't know how I keep the show going here but three two okay Issue four reddits S1 is kind of fun let's break it down everybody 2023 Revenue 84 million
up 21% year-over-year they're still losing money uh net loss 91 million in 2023 they lost 159 million in 2022 so they're cutting the loss free cash flows negative here's a chart of their quarterly revenue and cash flow so they're kind of bouncing along the break even Mark as you can see there in the chart they got
a wonderful gross margin because they don't pay to produce the content unlike the New York Times or Netflix and so an 86% gross margin up 2% year-over-year their daily active unique 76 million up 27% year-over year average revenue per user is incredibly low three bucks and 42 and their daily active unique users uh here you can see another chart
growing nicely quarter over quarter they got a billion two in cash most interesting probably uh and could be challenging to execute on is their direct share program they're going to carve out a bunch of shares in the IPO to sell to their most active mods those are the moderators the people who run the different channels or subreddits as
they're called what could go wrong what could go wrong wrong we've seen this movie before and uh but they're going to invite you since to participate on it on a rolling basis more unqualified retail buyer pool does not exist in the Reddit mods except maybe the Reddit participants W Street bat knows what they're doing yeah I think
they'll buy the uh I think they'll buy after the lock up comes up but let's just get started here I think you looked at the S1 a little bit freeberg and you had asked us to you asked me to put on the docket because you were you were digging into it anything stick out to you or thoughts on the business overall no I mean I wasn't pulling I just asked
if you guys had read it umy um I hey I think I made a funny joke read it accient get it I I'll let you guys go on for a minute go ahead go ahead tell me when you're ready it was a good pun too bad it was accidental no it was it was intend I'll give you credit it was we'll give it to you so I think the the thing about
Reddit if you could pull up the chart with the quarterly average daily active user data this was a business that the last couple of years everyone was like had flatlined because it was only growing 5% a year in terms of usage and then all of a sudden in the last two quarters so starting in late summer early fall of 23 so just six months ago
the usage started to climb pretty significantly growing 15 and most in the most recent quarter 27% year-over-year absent that growth story it's a really challenged business because a business without much growth gets value typically on a multiple of the cash flow that they're generating and you know there's less upside and all this kind of
optionality goes away that's kind of a key point I I don't know I think like for you to make an investment at a $5 billion valuation here you've really got to believe that the growth continues at this rate and it doesn't revert back to the mean growth rate of the last couple of years of basically 5 % which is roughly flatlined the other challenge
they have is that their AR only in that kind of $3 range which is like less than 10% of where Facebook is at and the data that Facebook collects on their users gives them the ability to do much better targeting on ads and therefore monetize Their audience much better than Reddit has been able to do to the order of over
10x and then if you look at the arpo number how much they've been able to grow that metric it's also you know been a little bit flatlined so this business I think is a real question mark I mean you could argue it's probably worth in the best best case in the2 to3 billion kind of valuation range and then you have to believe the bull case that the
growth continues or accelerates from here and they have a plan to address the arpo problem they have other paths for monetizing Their audience than what they're kind of doing today what do you guys think this thing's worth do you buy it if it goes out at three billion or five billion I think the first question which you nailed that of buysight
investor will ask is what happened in the last two quarters that was different than the last 15 quarters that's going to be a very important question and I think they're going to have to have a very buttoned up answer for that right and if they can point to very specific repeatable things I think that'll be good the thing that
they this IPO if it goes off in the next four weeks they won't have to wait but if it doesn't get off in the next four weeks they'll have to update the S1 probably with q1 and so you'll see whether this thing is a trend or whether it was a one-time thing do you know what it is well the growth in the logged out is probably
largely because typically if you use it on a [Music] phone it tries to force you to use the app right so that you can be in this logged in experience and if you just turn that off you can get a lot more logged out because Reddit gets tremendous rank Authority from Google so if you just if you just turn that off I think that you'll have a lot
of logged out customers and that will grow very quickly and so maybe it's a decision that they'd rather have the Topline number grow than have logged in users grow but the logged in user growth has still been pretty healthy it's basically doubled in the last three years so but to your point freeberg if they said or our business is really only
these 30 odd million logged in users it would be worth a lot less than saying 75 million I think it's I think you're right it's kind of like in the mid you know kind of two three four billion dollish range the the big problem is the arpu because these are not users that represent sort of Facebook's bread and butter kind of a $40 arpu
lives in a good suburb in the United States and is monetized like crazy I just don't think that's what these users are but you could see that as a challenge or opportunity because if their RP is only 10% of Facebooks there's a lot of Headroom there to grow it if those users become economically more valuable RP is actually down 2%
year over your sex the issue with this user base is they're incredibly sophisticated internet users who don't click on ads and are kind of anti- ads as opposed to you know the the general population on a Facebook or a generic service and it's Anonymous so you don't know who the user is which is how Facebook has such incredible demographic
targeting capabilities there's been a lot of conspiracy theories longc con theories that came up Sachs that we were talking about on group chat maybe you could summarize this long game that was played by Sam wman and the allegedly founders of Reddit to wrestle control of Reddit back from their previous corporate owner kest well this was a post by Yan who is
a former CEO of Reddit that was published back in I think 2015 and he kind of lays out what I think happened or I mean he says at the end just kidding but if he's the former CEO describing these events he must be describing something he knows about I would just think but in any event what happened is that Reddit was sold for only about $10
million a year after it launched so like really really small and I think that it kept growing and the founders realized maybe they made a mistake or that this was actually a bigger property and so they started scheming on how to get Connie Nas to spin it back out and so Yan lays out the steps they went through they
recruited a CEO who they kind of pre-agreed on then they had that CEO demand options specifically in Reddit from Ki Nast which meant that Ki Nast had to create a separate cap table for it and then once they had a separate cap table as a subsidiary of Cony Nast then they could sort of pressure to have like an outside investor bought in for the
expertise that just happened to be Sam Alman and his fund and you know eventually like step by step they worked it to the point where they got Connie asked to spin off the company and I guess this plan worked now it should be said that the largest shareholder in Reddit according to the S1 is Ki Nas or Ki Nas parent company so
no one's going to benefit more from this plan if you want to or scheme if you want to call it that than Connie n it was a smart thing for them to do to spin out Reddit to allow the employees to have options and then I would say to bring back the founder Steve Huffman as CEO several years ago so great it worked out for everybody you know who knows if
it was all premeditated so if they own 30% and it goes out for five billion they got 1.5 billion and they paid 10 million for it so that's a Web 2.0 1.0 2.0 no it's it launched in 2005 2.0 the same time as like web logs Inc and delicious and Flicker and all that that whole cohort of little web apps that used Ajax and
other things to you know the web was just getting faster and there were a lot of users well anyway congratulations it was it was smart for Cony Nas to do the spin out and give up 70% in order for to have 30% of what's going to be a multi-billion dollar IPO great outcome for everybody all right issue five five Apple doesn't have a fast car project
Titan is DBA dead before arrival apple as you know has been working on an electric vehicle for a decade self-driving as well they've invested billions in the project according to Bloomberg and apple was targeting 100K price point basically going after the model S plaid with FSD company had 2,000 employees working on this project it was
called Titan and they had designers from Austin Martin Lamborghini Porsche according to the report most of the team will be transferred to Apple's generative AI division we talked a little bit about Maggie their um generative AI image language model there's going to be some layoffs it's unclear how many what does building a car have to do with building an llm well
they were yeah so they weren't just building a car they were all in on self-driving and not having a steering wheel so I understand I'm just saying it doesn't make a lot of sense that 2,000 employees that were specialized in building a car all of a sudden now become the AI team it would be more like the full self-driving team is probably getting
those AI jobs and the rest are probably getting laid off with Incredible packages but what do you think sax I was always skeptical that Apple was even working on a car it's just a very different kind of product than anything else they make and so I never really treated it that seriously that they were going to make a car so I'm not I the
surprise to me is not that they canceled this but that the that it was even true that they're working on it in the first place yeah no it was it there were reports of them having test tracks and everything it was pretty well established and you could see that people from Tesla and other places had does it say why they actually killed it
no this is just a report and I the speculation is that they're going all in on AI they just see that as a much better future well I think it's more core to what they do I mean the car never seemed that core no and uh there were reports and elon's talked about it publicly so we're not speaking out of school here or anything but
that Elon and apple had and Tim Cook reportedly had talked or there have been overtures that maybe Tesla was going to get bought and Elon it's been pretty clear that during the model 3 roll out he was considering selling it to Apple that would have been a smart acquisition if they had done that can you imagine all the Apple showrooms having a Model S
in it or something or a model y I mean boom they would have just sold so many of them and having the Apple operating system on that display well wait was it before the Model S came out or the model 3 it was model 3 was the time I think they were talking seriously but remember like no one really believed in the model
3 till it came out and started selling like hot cakes the opposite they thought it was going to kill the company right all right everybody for the Rainman David Sachs chairman dictator chth p hoaa and consultant of science David freeberg I am the world's greatest moderator and we will see you next time byebye gr GR we let your winners ride Rainman
David and instead we open sourced it to the fans and they've just gone crazy with it love queen [Music] of Besties my dog taking driveways man oh man meet me we should all just get a room and just have one big huge orgy cuz they're all this useless it's like this like sexual tension that they just need to [Music] release we need to get [Music] merch